Nasdaq Drops 190 Points in Biggest Loss Since May as JDS Uniphase, Ciena Fall : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

10/25 16:46 Nasdaq Has Biggest Loss Since May as JDS Uniphase, Ciena Fall By Chelsea Emery

New York, Oct. 25 (Bloomberg) -- The Nasdaq Composite Index had its biggest loss in five months as JDS Uniphase Corp. and Ciena Corp. fell after Nortel Networks Corp. reported sales that disappointed fiber-optics equipment investors.

Each of the three stocks lost at least 20 percent of its market value, costing investors about $81 billion. JDS Uniphase had the 10th-busiest day ever for a stock traded in the U.S.

``We're in the final stages of knocking down the last big technology stocks,'' said Bill Meehan, chief market analyst at Cantor Fitzgerald & Co. ``We've already trashed the Internet stocks and then the Intels and Microsofts. Now we're down to the fiber-optics stocks.''

The Nasdaq slumped 190.20, or 5.6 percent, to 3229.59, its biggest loss since May 23 and third straight decline. The Standard & Poor's 500 Index dropped 33.23, or 2.4 percent, to 1364.90. The Dow Jones Industrial Average fell for the first time in five days, losing 66.59, or 0.6 percent, to 10,326.48, as AT&T Corp. declined.

Fiber-optic shares have been among the best performers this year while other Nasdaq mainstays have fallen. Nortel's report ``indicates we'll be facing a tougher economy and tougher environment for stocks to perform well,'' said Cathy Baker, manager of the RS Internet Age Fund.

Through yesterday, Nortel had gained 25 percent in 2000, JDS Uniphase 18 percent and Ciena more than 350 percent. The Nasdaq has now lost 21 percent this year, the S&P 500 7.1 percent and the Dow 10 percent.

Almost two stocks fell for every one that rose on the New York Stock Exchange. Almost 1.3 billion shares traded on the Big Board, 26 percent more than the three-month daily average.

Nortel's Decline

Nortel, the biggest maker of fiber-optic equipment, dropped $18.31, or 29 percent, to $45, losing almost $55 billion in market value and was the second most-active stock in U.S. trading, after JDS Uniphase, with more than 123 million shares changing hands.

The Brampton, Ontario, company said third-quarter sales rose to $7.3 billion, 4 percent less than the average estimate of analysts surveyed by First Call/Thomson Financial. Fiber-optic equipment sales rose 90 percent in the most recent quarter. Many analysts had expected them to double or more.

Companies that supply fiber-optic components to Nortel or compete with it also fell. JDS Uniphase dropped $24.06, or 25 percent, to $71, losing almost $19 billion in market value. SDL Inc., which has agreed to be bought by JDS Uniphase, lost $81.80 to $234.19.

More than 129 million JDS Uniphase shares traded.

Ciena slumped $27, or 20 percent, to $108.38, Corning Inc. dropped $16.63 to $76.88 and Sycamore Networks Inc. slid $16.80 to $65.50.

Canada Plunge

Nortel, which also trades in Canada, led the benchmark Toronto Stock Exchange 300 Index to an 8.1 percent plunge, its biggest loss since the stock-market crash in October 1987.

Largely because of the plunge in fiber-optics stocks, 12 companies with a market value of $3 billion or more saw their stock prices fall by 20 percent or more today.

Applied Micro Circuits Corp., a maker of communications chips that gets a fifth of its revenue from Nortel, plummeted $50.31, or 25 percent, to $148.

PMC-Sierra Inc. and Vitesse Semiconductor Corp. declined after Lehman Brothers Inc. analyst Arnab Chanda lowered their ratings, citing ``weakness in the optical businesses at Lucent (Technologies Inc.) and Nortel.'' PMC-Sierra dropped $37.75 to $161.13, Vitesse slid $11.50 to $56.

Maxim Integrated Products Inc. slumped $20.25, or 26 percent, to $57.19. Credit Suisse First Boston analyst Michael Masdea cut the stock to ``buy'' from ``strong buy,'' saying inventories are growing at the integrated-circuit maker.

ONI Drops

ONI Systems Corp., which makes equipment that sends information across fiber-optic networks, slid $9.64 to $69.48. Investors who bought stock in the company's secondary offering after the market closed yesterday are looking at an immediate loss on the investment: ONI sold 8 million shares at $74.50 each in a secondary stock offering.

Another fiber-optic equipment maker, Corvis Corp., which went public July 28 at $36 and soared as high as $108.06, sank $6.02 to $63.98.

AT&T Falls

AT&T slipped $3.50 to $23.38. The biggest U.S. long-distance phone and cable-television company said it expects fourth-quarter profit to be as much as 22 percent less than analysts forecast, according to AT&T spokesman Dan Lawler.

In addition, the company said third-quarter profit fell 15 percent on higher expenses, even as it topped estimates by 5 percent. AT&T also said it will split into four separate companies, confirming earlier reports.

Analyst Adam Quinton at Merrill Lynch cut the stock to ``accumulate'' from ``buy.''

WorldCom Inc. fell $1.69 to $25.25. ``There is a chance WorldCom will not meet forecasts'' when it reports third-quarter results tomorrow and that fourth quarter revenue growth estimates will likely have to be cut because of ``weakness'' in the company's voice telephone business, Quinton wrote in a note to clients.

Quinton cut the No. 2 U.S. long-distance telephone company to ``accumulate'' from ``buy.'' WorldCom shares are down 52 percent so far this year.

Drug and health-care stocks climbed as investors looked for companies whose earnings are expected to rise even if technology spending and the economy slow. Pfizer Inc. rose $1.94 to $44.94, Merck & Co. Inc. rose $1.88 to $87.31, and Bristol-Myers Squibb Co. climbed 81 cents to $62.63. Johnson & Johnson climbed $2.25 to $93.94.

Profit Roundup

Almost three-quarters of the S&P 500 companies have reported quarterly earnings, which have grown an average 19.3 percent from a year ago, according to First Call. Analysts expect 18.1 percent profit growth once all 500 companies have reported. They forecast 12.9 percent growth for the fourth quarter. Inc. gained $2.31 to $31.88. The online retailer had a third-quarter loss before merger costs that was narrower than expected while sales jumped 79 percent, beating forecasts. The company reduced shipping expenses by doubling the number of warehouses and getting better terms from suppliers.

``This may be a turning point in the fortunes for Amazon, especially if it convinces more people that they can break even,'' said Tim Chesterfield, a U.S. fund manager at Pavilion Asset Management, which has about $2.9 billion in assets. He doesn't own Amazon shares, which have fallen 61 percent this year.

Affymetrix Climbs

Affymetrix Inc. soared $16.05, or 31 percent, to $68.36 after the world's biggest maker of chips used in genetic research reported its first quarterly profit and predicted a fourth-quarter profit as well. The company earned $295,000, break-even per share earnings for the third quarter, compared with estimates for a loss of 12 cents a share.

Barra Inc. surged $9.44, or 21 percent, to $55.06. The company, which makes investment-management software, said quarterly profit more than doubled, topping forecasts, and revenue jumped 48 percent.

Clorox Co. advanced $2.06 to $43.19 after the maker of cleaning products, reported fiscal first-quarter profit that rose, topping estimates by a penny.

Halliburton Co. sank $4.56 to $37.06. The world's largest oilfield services company said late yesterday that third-quarter revenue at its engineering and construction business fell 21 percent. Analysts at ING Barings and Southwest Securities Inc. lowered ratings on Halliburton.

DuPont Falls

DuPont Co. slid 50 cents to $42.63. The world's largest chemical maker said a slowing economy and lower sales in the drug business would hurt fourth-quarter profit, reducing the year's per- share forecast. Additionally, DuPont said it earned 51 cents a share in the third quarter, in line with estimates.

Micromuse Inc. fell $15.88 to $187. While the software maker said its fiscal fourth-quarter net income rose slightly as sales surged on more contracts with companies including Samsung Electronics Co., the shares have more than doubled this year. The company also said it would split its shares 2 for 1.

-- Carl Jenkins (, October 25, 2000

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