Profit Warnings Hit Hard

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Profit Warnings Hit Hard by Andy Patrizio 2:00 p.m. Dec. 15, 2000 PST

That thud you heard was an entire shoe rack dropping, as Microsoft, one of the last companies the market needed to issue a profit warning, did just that. Coming on the heels of warnings from Compaq, Apple and Intel, it should be no surprise, but it still creamed the market to close the week on a bad note.

Microsoft, a heavyweight on both the Dow and Nasdaq, warned that both revenue and earnings would fall short of projections due to a global slowdown, slower computer sales and less corporate spending. As a result, the Dow Jones industrial average plunged 240.03, or 2.25 percent, to 10,434.96, while the Nasdaq Composite Index dropped 74.09, or 2.72 percent, to 2,654.42. The Standard and Poor's 500 index fell 28.60, or 2.13 percent, to 1,312.33.

See also: Mind your own Business news There's no biz like E-Biz Check out: Wired News' Stocks Summary

The market was also spooked by warnings from FedEx and UPS, saying traffic was down, a bad sign during the Christmas season. Also damaging to tech stocks was a downgrade of storage maker EMC (EMC) by Bear Stearns citing weak corporate technology spending.

"I think people are concerned about the economy and remain concerned about the economy," said Bert Hochfeld, technology analyst with Josephthal, in New York. "I think the one hope to have a Santa Claus rally is to get some kind of rate relief on Tuesday." The Federal Reserve board will meet on Tuesday, and many investors are hoping for a rate cut.

While some analysts think moving straight from an inflationary stance to a rate cut, without shifting the bias to neutral first could signal a panic, Hochfeld said the Fed has to move fast. "People know the economy is weakening at a rate that is significantly greater than many people felt was the case two or three weeks ago," he said. "I think investors want to see something is done about it."

Software

Microsoft (MSFT) took a pounding after issuing its warning, falling 6 5/16 to 49 3/16, while Symantec (SYMC) fell 2 7/16 to 34 9/16, Electronic Arts (ERTS) dropped 2 3/16 and Computer Associates (CA) shed 1 3/8 to 24 1/4. Macromedia (MACR) soared 6 3/4 to 72 and Adobe (ADBE), which surpassed fourth quarter earnings expectations, soared 5 1/8 to 62 7/16.

Hardware

A lot of hardware companies fell right along with Microsoft, with IBM (IBM) taking a hit of 4 5/8 to 87 13/16, while Hewlett-Packard (HWP) dropped 1 7/8 to 31 5/8 and Compaq (CPQ) shed 1.35 to 17.35. Sun (SUNW) lost 1 1/4 to 30 7/16, VA Linux (LNUX) rose 11/16 to 12 and Gateway (GTW) picked up a modest 0.2 to 19.00.

Semiconductors

Intel (INTC) was off 2 11/16 to 32 7/16, Transmeta (TMTA) was down 2 1/8 to 30 1/2 and Rambus (RMBS) lost 1 11/16 to 45 3/16. AMD (AMD) lost 5/16 to 16 3/16 and Motorola (MOT) lost 3/4 to 19 7/16. Broadcom (BRCM) soared 6 1/8 to 123 3/8. PMC Sierra (PMCS) was up 1 7/16 to 103 7/16 and Micron (MU) picked up 15/16 to 35 7/8.

Consumer Internet

Yahoo (YHOO) was up 1 to 33, eBay (EBAY) rose 1 to 38 and Amazon (AMZN) picked up 3/16 to 22 7/8. On the down side, AOL (AOL) lost 1.04 to 48.96, Liberate (LBRT) fell 2 1/2 to 14 and CMGI (CMGI) was off 25/32 to 8 9/32 after downgrades by Robertson Stephens and Lazard Freres.

Networking

It was a bad day for this crowd, with Juniper (JNPR) taking a beating, off 7 3/8 to 128 7/8. Level 3 (LVLT) fell 1 1/2 to 34 3/4, Cisco (CSCO) lost 2 49/64 to 48 11/64 and JDS Uniphase (JDSU) was down 3 21/64 to 58 11/64. Ciena (CIEN) avoided the landslide to gain 3 51/64 to 100 47/64.

Telecommunications

Qualcomm (QCOM) took a drubbing, off 8 1/2 to 79 9/16, Verizon (VZ) lost 1 7/16 to 55 5/16 and AT&T (T) was down 1 to 21. Sprint (FON) lost 5/16 to 24 11/16 and MCI Worldcom (WCOM) dropped 3/8 to 17 7/16.

http://www.wired.com/news/lycos/0,1306,40704,00.html

-- Martin Thompson (mthom1927@aol.com), December 16, 2000


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