This mixed info could be why we have seen a tug of war this morning...
No Such Luck
By Michael DeSenne
September 13, 2002
INVESTORS COUNTING ON positive economic data to bring them a bit of good luck on this Friday the 13th were disappointed, as warnings from a Dow component and a fallen telecom giant dampened enthusiasm for equities. In early morning action, the Dow Jones Industrial Average was 114 points lower to 8264. The Standard & Poor's 500 index fell 8 to 879, and the Nasdaq Composite shed just 2 points to 1278.
Before the opening bell, the government reported a rise of 0.8% in August retail sales, better than economists had expected. Even excluding automobile sales, which have been propped up by generous incentives from car makers, August retail sales gained 0.4%. Also, the producer price index was unchanged, signaling little to worry about on the inflation front. Core producer prices slipped 0.1%. But after the start of regular trading, the University of Michigan released a disappointing reading on consumer sentiment. The mid-September number was 86.2, down from 87.6 in August.
In corporate news, Lucent Technologies (LU), citing continuing market softness and ongoing uncertainty in customer spending, warned that fiscal fourth-quarter results would be well below third-quarter levels. The troubled telecom-equipment maker forecast a 20% to 25% drop from third-quarter revenue of $2.95 billion, putting sales between $2.21 billion and $2.36 billion. Analysts had expected revenue of $2.87 billion for the three months ending in late September. Lucent anticipated a fourth-quarter pro-forma loss from continuing operations of about 45 cents a share, wider than the third quarter's comparable loss of 16 cents a share. Analysts had expected a fourth-quarter loss of 16 cents.
As for head count, Lucent said it would update investors on any further layoffs when it reported quarterly results on Oct. 23. Lucent employs about 50,000 workers, but already planned to trim that figure by 5,000 before year's end. In 2000, at the top of the telecom boom, Lucent's work force numbered 155,000. The company has projected staffing levels closer to 40,000 sometime in 2003 as it strives to slash costs and return to profitability. Lucent shares fell 8%.
Honeywell International (HON), one of the 30 Dow industrials, warned as well that its third-quarter earnings would fall short of analysts' expectations. The large manufacturer late Thursday said it now expected third-quarter earnings, before items, of 50 cents to 52 cents a share. Analysts had been looking for profits in the neighborhood of 60 cents a share. For the full year, Honeywell now anticipated per-share earnings between $2 and $2.05, well shy of the prior forecast of $2.27. In 2001, earnings excluding items were $2.05 a share on revenue of about $23.7 billion.
"Our businesses are running well; unfortunately it is a very difficult environment," said Chairman and Chief Executive Dave Cote in a prepared statement. "Aggressive cost actions and productivity initiatives will enable the company to hold earnings flat despite a 7% decline in 2002 sales." Honeywell's stock slid 14%.
Business was better at Motorola (MOT). Despite recent warnings out of chip rivals Philips Electronics (PHG) and National Semiconductor (NSM), Motorola said it was sticking to its guns on guidance. The company projected third-quarter earnings of five cents a share, excluding items, on sales of $6.7 billion. In the fourth quarter, Motorola expected operating profits of 14 cents a share on revenue of $7.5 billion.
"We have removed ourselves from some of the more commodity-type chips," said Chief Operating Officer Mike Zafirovski during a conference call late Thursday. "Our presence in the [personal-computer] market is now significantly less than some of our competitors." Motorola shares were off 1%.
Adobe Systems (ADBE) kept its word by posting earnings, excluding items, of 22 cents a share, in line with its lowered forecast. Still, that was down from 28 cents a year earlier. The software maker said late Thursday that net income came in at $47.2 million, or 19 cents a share, for its fiscal third-quarter ended Aug. 30, up from $40.3 million, or 16 cents, last year. Revenue fell to $284.9 million from $292.1 million. Looking ahead, Adobe forecast fourth-quarter profits, before any items, in the range of 21 cents to 25 cents a share, on revenue of $285 million to $300 million. Analysts' expectations were about 22 cents a share. Adobe stock added 11%.
From the legal file, a federal judge in New York blocked an effort by nearly 4,000 plaintiffs to secure class-action status for lawsuits against Pfizer (PFE) over the diabetes drug Rezulin. According to Friday's Wall Street Journal, the court ruled that the differing circumstances of each case made the creation of a single class impossible. The decision was viewed as a victory for the drug maker. Rezulin was taken off the market in March 2000 in the wake of deaths and liver problems linked to the drug. Pfizer shares inched 1% lower.
Bond prices ticked higher. The yield on the 10-year Treasury fell to 3.94%, from 3.96% late Thursday. The two-year note was recently yielding 2.07%, down a basis point. |
