The Night Watch: Gateway, 3Com and Lam Warn -- and Are Punished

(Updated from 6:23 p.m. EST)

The hits keep on coming as Gateway (GTW Quote), 3Com (COMS Quote) and Lam Research (LRCX Quote) issued earnings warnings after the closing bell.

Gateway dropped 7.8% to $15.85 on Instinet after the company announced that it expects to break even on an operating basis in the first half of 2001, amid a slowdown in the PC sector. Consensus estimates had called for the personal computer manufacturer to earn 17 cents per share in its fiscal first quarter.

In the latest of a series of recent warnings, Gateway said it expects unit sales in the first quarter to be down slightly from the year-ago period. The PC maker estimated that it would take charges of between $150 million and $275 million in the quarter, including a previously announced estimate of $50 million for job cuts and other items. On a positive note, the company said it expects to return to profitability in the second half of 2001. Elsewhere in the PC sector, Dell (DELL Quote) slid 2.6% to $21.31 on Instinet.

3Com fell 13.7% to $7.88 on Instinet, on news that the networking equipment manufacturer expects earnings and revenues to be much lower than previously expected in its fiscal third quarter, due to weak economic conditions and a slowdown in demand in the telecom sector.

The company said it now expects revenue to fall between $625 million and $640 million, down from its previous forecast of $725 million to $750 million. 3Com also expects to report a pro forma operating loss of $235 million to $245 million, more than double its previous loss estimate of $80 million to $100 million. Palm (PALM Quote), 3Com's spinoff, shed 0.7% to $17.25 on Instinet.

Lam Research decreased 6.1% to $20.19 on Island after the semiconductor equipment manufacturer cautioned that it might miss its previous revenue forecast of $480 million to $490 million, citing weakness in the chip industry.

Lam said that revenue could fall as much as 15% from its earlier sales guidance. The revenue shortfall would impact third-quarter earnings, but the chipmaker did not provide any specifics. Lam previously estimated it would earn 48 cents per share in the third quarter, a penny better than consensus estimates. Among chipmakers, Applied Materials (AMAT Quote) lost 1.8% to $41.50 on Instinet.

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This extended-hours bloodletting comes after a down day for technology stocks in regular trading. The selloff was sparked after Federal Reserve chairman Alan Greenspan dashed Wall Street's hopes for an intermeeting interest rate cut.

In a revision of the Humphrey-Hawkins testimony that he gave to Congress earlier this month, Greenspan expressed more concern about the health of the economy, but not enough to warrant a reduction in the fed funds rate before the Fed's next official meeting on Mar. 20.

On the heels of today's market letdown, large-cap tech stocks showed little movement after hours. Cisco Systems (CSCO Quote) shed 0.5% to $23.56 on Instinet, while Sun Microsystems (SUNW Quote) and WorldCom (WCOM Quote) remained unchanged on the platform.

Elsewhere, shares of telecommunications provider Winstar (WCII Quote) gained 2.7% to $12.97 on Instinet, having lost 3.8% during the day. Robertson Stephens lowered its 2001 earnings estimate on the telecom company from $11.70 per share to $9.56 per share this morning, after the company posted a wider-than-expected fourth-quarter loss yesterday.

Looking ahead to tomorrow, the S&P 500 futures on Globex were down 0.3 points at 1238.9, about 3 points below fair value and suggesting a sluggish start for the broader market tomorrow. The Nasdaq 100 Securities were behind 13 to 1912, about 12 points below fair value and suggesting a weakish open for the Nasdaq tomorrow.

10 most active stocks on Instinet (6:30 p.m. EST)
Company	Price	Change	Session Volume
Cintas (CTAS Quote)	35.75	-0.27	1,424,496
Winstar Communications (WCII Quote)	12.97	+0.34	512,200
Nasdaq 100 Unit Trust (QQQ Quote)	47.26	-0.09	312,460
Intel ( INTC Quote)	28.56	--	301,164
Oracle ( ORCL Quote)	19.16	+0.16	209,107
Cisco ( CSCO Quote)	23.56	-0.13	206,879
Gateway ( GTW Quote)	15.85	-1.35	195,200
JDS Uniphase ( JDSU Quote)	26.38	-0.38	171,285
Sun Microsystems (SUNW Quote)	19.88	---	154,401
3Com (COMS Quote)	7.88	-1.25	149,666

This information is provided by Instinet, a wholly owned subsidiary of Reuters (RTRSY Quote). For further information, please contact Instinet at www.instinet.com.

10 most active stocks on Island ECN (7 p.m. EST)
Company	Price	Change	Session Volume
3Com (COMS Quote)	7.88	-1.25	147,613
Cintas (CTAS Quote)	36	-0.02	119,232
Cisco (CSCO Quote)	23.63	-0.06	101,109
JDS Uniphase (JDSU Quote)	26.38	-0.38	95,399
Nasdaq 100 ( QQQ Quote)	47.35	n.a.	93,177
Oracle ( ORCL Quote)	19.15	+0.15	83,772
Lam Research (LRCX Quote)	20.19	-1.31	74,255
Broadcom (BRCM Quote)	47.40	-1.85	71,681
Juniper Networks (JNPR Quote)	63.75	-0.81	71,367
Intel (INTC Quote)	28.50	-0.06	55,153

Island ECN offers trading, mainly in Nasdaq-listed stocks, from 7 a.m. to 8 p.m. EST.

Confused? TheStreet.com explains how the rules change when the sun goes down in Investing Basics: Night Owl, a section devoted to after-hours trading.