Pulse: Nortel Catches a Break but Other Techs Punished

Tech investors went to the table today with earnings on the brain, and they weren't in the frame of mind to listen to soothing reassurances from anyone.

One exception was communications giant Nortel(NT Quote). After announcing this morning that it was comfortable with forecasts for this year and next, the company closed higher. Stock of the world's largest fiber-optic network maker has dropped 42.3% in value since it warned about slowing demand in late October. After reassuring investors today, the company's stock closed up $2.94, or 6.4%, to $38.75.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 18.44 -4.55% 387.04 TSC E-Commerce 0.89 -4.23% 20.14 TSC E-Finance 1.39 -4.26% 31.26 Nasdaq 94.26 -3.34% 2728.51

But fiber-optic cable maker Corning(GLW Quote), which this morning reassured investors its earnings would meet top-line estimates for the quarter and for next year, dropped anyway. After starting out positive, Corning turned south, closing down $2.44, or 3.4%, to $70.

Analysts had predicted that Oracle (ORCL Quote) would meet or beat its financial projections. After rising in the morning, Oracle fell before it announced that it had beaten estimates by a penny a share. Oracle shares had been up 7.3% for the month, but the software giant slipped in the afternoon, closing down 88 cents, or 3.1%, to $27.50.

Much-battered Internet incubator CMGI(CMGI Quote) dropped during the day, before announcing that it had beaten earnings estimates for the quarter. Before the announcement, though, CMGI dropped 56 cents, or 5.8%, to $9.06.

After enduring the water torture of ongoing earnings warnings for the past several weeks, the Philadelphia Stock Exchange Computer Box Maker Index struggled into the green Thursday, closing up 0.8%. Sun Microsystems(SUNW Quote), badly beaten in the past few days over growth concerns, slipped again today. A research report from Sanford Bernstein indicated there may be a problem with the rollout of the company's UltraSparc III servers. Sun closed down 6 cents, or 0.2%, to $31.69.

Another warning that came from flat-panel display manufacturer Silicon Image(SIMG Quote) resulted in three downgrades and the loss of a third of the share's value.

Yesterday, Silicon Image announced that its fourth-quarter revenue would be down 8% to 10% from last quarter. Its earlier estimates had been that revenue would grow 10% to 12%. The reason: slow demand for its displays from PC makers and others. Prudential Securities, and C.E. Unterberg Towbin downgraded the stock, which closed down $2.88, or 33.3%, to $5.75.

The Philadelphia Stock Exchange Semiconductor Index skidded again today, dropping 1%. Communications chipmaker Broadcom(BRCM Quote) fell prey to profit taking. Broadcom, which rose 19.2% in the past week, dropped 15% today.

3:13 p.m. ET: AOL, Time-Warner Rise on Merger OK

With the gracious speeches made and the last chad left dangling, tech stocks were able to concentrate on the important stuff that drives the market these days -- worries about earnings, a slowing economy and, in focus today, mergers.

"I think the presidential rally came and went and no one knew it, " said Peter Coolidge, managing director of trading at Brean, Murray Foster Securities. The overall sentiment is weakness and frustration and that we're in for tougher times."

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 15.67 -3.86% 389.83 TSC E-Commerce 0.68 -3.14% 20.37 TSC E-Finance 1.31 -4.01% 31.34 Nasdaq 50.7 -1.77% 2772.7

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AOL, Time Warner and the Road Ahead

The Federal Trade Commission this morning approved the long-awaited merger of Internet giant America Online(AOL Quote) and media powerhouse Time Warner (TWX Quote). The deal was approved unanimously after the two companies agreed to last-minute concessions that give Internet service providers more access to the Time-Warner cable network. AOL was up $1.05 or 2.8%, to $49.50. Time Warner was up $1.15, or 1.6%, to $73.75.

But Intermedia(ICIX Quote) investors weren't reacting well to a Delaware judge's ruling that cleared objections to the merger between WorldCom (WCOM Quote) and Intermedia, a voice and data company. Late Wednesday, a judge declined to block WorldCom's merger with Intermedia as requested by minority shareholders of Digex(DIGX Quote), which is controlled by Intermedia.

Shares of Intermedia were being slammed, recently down $4.91, or 40%, to $7.34.

Those looking for a positive push were hoping they'd find some strength in Oracle(ORCL Quote), which will release its latest earnings report today after the closing bell. In a research note today Lehman Brothers analyst Neil Herman wrote that he expected a solid showing from the software giant and wouldn't be surprised if it beat Street estimates of 10 cents a share by a penny.

Investors shared this mild optimism. In recent trading, Oracle was trading up 63 cents, or 2.2%, to $29.

They also liked Corning's(GLW Quote) reassurances this morning that it would make the higher end of estimates for the quarter and for the year. The fiber-optic cable maker was trading up $1.44, or 2%, to $71.

Coolidge noted that semiconductor companies were trading more strongly than much of the market, probably due to money rotating around the sectors. The chip sector, after all, has been on a roller coaster. Today, the Philadelphia Stock Exchange Semiconductor Index, which tracks the sector, was trading up 2.1%. It dropped 12.3% during the first three sessions this week.

Despite a downgrade from influential analyst Dan Niles of Lehman, Micron Technology(MU Quote) was trading up $1.25, or 3.6%, to $35.63. Micron, trading far off its 52-week high of 97.50, has fallen on worries about demand for computers and weak prices for DRAM chips. It has lost 15.9% in the last three weeks.

Niles also reduced financial estimates for German chipmaker Infineon Technologies(IFX Quote) based on weakness in the DRAM market. Infineon was trading down $2, or 4.5%, to $42.56.

Semiconductor equipment makers, still smarting from multiple downgrades yesterday, were a seasonal red and green. Industry leader Applied Materials(AMAT Quote) was trading down 0.15%, while KLA-Tencor(KLAC Quote) was up 2.1% and Novellus(NVLS Quote) was rising 3.1%.

Software, though, was taking some lumps. Adobe Systems (ADBE Quote) was trading down after Morgan Stanley Dean Witter reduced its rating on the software maker to neutral from outperform. That's before Adobe announces earnings after the close today. Analyst Rebecca Runkle wrote that the downgrade was based on the slowing economy and Adobe's high valuation.

Adobe was trading down $8.78, or 13.3%, to $57.41.

Short-term concerns led to a downgrade of e-commerce software producer BroadVision(BVSN Quote). ABN-AMRO analyst Jackson Spears lowered the rating from add to buy, noting that there is increasing price pressure in some deals that might threaten margins in coming quarters.

BroadVision was trading down 56 cents, or 2.6%, to $21.50.