Pulse: Telcos, Chips Take Tech Down

Weakness in the broader market has helped hold back technology stocks. But with the Dow gaining 77 points today, you couldn't use that excuse for losses in tech.

The Nasdaq finished down 68.57, or 1.8%, at 3828.87. TheStreet.com Internet Sector index ended down 12.38, or 1.6%, at 777.04. Weakness in telecom and semiconductor stocks was a drag on the tech sector.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 12.38 -1.6% 777.04 TSC E-Commerce 0.58 -1.3% 45.04 TSC E-Finance 1 1/32 -2.2% 46 1/4 Nasdaq 68.57 -1.8% 3828.87

There were some notable losers. priceline.com (PCLN Quote) closed down $1.88, or 8%, at $21.56 on news that the company will be featured in a CBS report on customers who allegedly are dissatisfied with priceline's service, according to The Wall Street Journal. The show, 48 Hours, will be televised tonight.

Sticking with traditional Internet plays, eBay (EBAY Quote) closed down $5.38, or 7%, at $71.19. Traders were most likely taking profits after the stock ran up 17% yesterday during the online auctioneer's analysts' meeting. The stock was downgraded by Credit Suisse First Boston after it met the firm's $72 price target yesterday, though along with the downgrade, the analyst increased his price target to $90.

Among the day's gainers, Foundry Networks (FDRY Quote) added $2.78, or 5%, at $61.28. Gains came on news that Yahoo! (YHOO Quote) will use Foundry's routers to reduce bottlenecks on its GeoCities Web community.

Among other infrastructure plays, Sycamore Networks (SCMR Quote) closed up $7.91, or 7.5%, at $113.41. Salomon Smith Barney initiated coverage of the stock with a buy rating and a $165 price target. Juniper Networks (JNPR Quote) closed down $8.31, or 4%, at $211.13 in what likely was profit-taking.

1:59 p.m.: Tech Fighting to Get Out of Red

Call it a stalemate. Technology stocks were weaker at midday, but not overly so as investors attempted to figure out whether a temporary bottom was in place.

The Nasdaq was down 53 to 3844 in recent trading. TheStreet.com Internet Sector index was off 11 to 778. There was no particular catalyst for the selling, just ongoing indecision about the market, upcoming earnings and seasonal factors that suggest weakness in the market in September and October.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 11.25 -1.43% 778.17 TSC E-Commerce 0.99 -2.17% 44.63 TSC E-Finance 1.22 -2.58% 43.06 Nasdaq 49.3 -1.26% 3847.2

While the market has held up well after last week's selloff, there may still be further weakness ahead.

In his morning note, Robert Dickey, director of technical research with Dain Rauscher Wessels, indicated that the 3850 level was a key one for the market that broke last week and he still expected a correction low with a "rounded bottom and possibly may be of the more climactic variety," but it most likely won't happen for another two to three weeks.

Among the day's winners, Foundry Networks (FDRY Quote) was up 5.1% to $61.50. Foundry, which provides end-to-end switching and routing systems, announced a deal with Yahoo! (YHOO Quote), which will use Foundry's routers to reduce bottlenecks on its GeoCities Web community.

Also, E.piphany (EPNY Quote) was up 3.6% to $82.25. The company said that DaimlerChrysler(DCX Quote) had purchased software from E.piphany to better understand and interact with the auto makers vehicle owners. Credit Suisse First Boston analyst Brent Thill indicated in a note that this was a very competitive win for E.piphany over a number of eBusiness vendors, including Siebel Systems (SEBL Quote). Siebel was up 0.9% to $101.00 in recent trading. Thill maintained a strong buy rating and $138 price target on E.piphany.

Liberate Technologies (LBRT Quote) was up 3.3% to $29.63 on news that AT&T Broadband had chose to deploy Liberate interactive television software in its test of set-top boxes this year.

On the downside, eBay (EBAY Quote) continued to see profit-taking from yesterday's 17% gain. It was down 7.9% to $70.63.

11:09 a.m. EDT: Salomon Bullish on Optical Stocks

Market strategists like to point out that when the market does not rally on good news, it's an indication that all is not well. That's pretty much what's going on today.

Stocks were trading lower today despite lower crude oil prices and a recovery in the euro. High crude prices and weakness in the euro have been blamed for much of the selling of late, but more so in the broader market than technology stocks. The Nasdaq was down 33 to 3864.4 in recent trading. TheStreet.com Internet Sector index was down 8.43 to 781.27.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 8.43 -1.03% 781.27 TSC E-Commerce 0.70 -1.53% 44.92 TSC E-Finance 1.06 -2.25% 46.07 Nasdaq 33.0 -0.85% 3864.4

eBay (EBAY Quote), which rallied 17% yesterday as investors liked what they heard at the company's analysts' day, was down $5.31 or 6.9% to $71.25 today. Our own Katherine Hobson went behind the scenes to get you the lowdown on the meeting.

Despite yesterday's positive announcement, Credit Suisse First Boston analyst Heath Terry downgraded the stock to buy from strong buy after yesterday's rally sent the stock past the $72 price target he had set in July.

"Given this, the immediacy we felt investors should have had towards buying EBAY is now somewhat diminished," he wrote in a research note. And while he downgraded the online auctioneer's shares, he indicated he felt there was upside to the stock based on his analysis of management's revenue and operating targets. He raised his price target on the stock to $90.

Merrill Lynch's Henry Blodget also published a research note on the company. Writing about what people sell on the site, he said: "Although concern about slowing growth in listings will likely continue to cause near-term volatility, we continue to regard eBay as a good long-term investment. If the company achieves its 5-year goals, we believe the stock could return 20%-30% per year over the period."

America Online (AOL Quote) was trading near unchanged despite reports from The Washington Post that the staff of the Federal Trade Commission had recommended that the agency approve its merger with Time-Warner (TWX Quote) as long as the companies agree to conditions for Internet access.

On the heels of the frenzy over telecommunications equipment stocks this summer, Salomon Smith Barney initiated coverage of several names this morning, issuing buys on all the stocks. Analysts began coverage of SDL (SDLI Quote) with an outperform rating and a $410 price target, which is in line with the implied acquisition price from JDS Uniphase (JDSU Quote); Corning (GLW Quote) with a buy rating and $490 price target; JDS Uniphase with a buy rating and $155 price target; ONI Systems (ONIS Quote) with a buy rating and $155 price target (this was Salomon's favorite pick among the next-generation optical names); Ciena (CIEN Quote) with a buy rating and $175 price target; Sycamore Networks (SCMR Quote) with a buy rating and $165 price target; and Corvis (CORV Quote) with a buy rating and $115 price target.

SDL was trading 0.5% lower, with JDS off by 1.5%. Corning was up 0.3%, while ONI was 0.4% lower. Sycamore was up a whopping 9.5%, and Ciena and Corvis were up 0.4% and 2.1%, respectively.