Preopen Trading: No Clear Direction Emerges in Telco Aftermath

Telcos grabbed attention in international markets as well as preopen trading on Instinet with Nokia(NOK Quote) getting a bid of 49 1/2. It closed Thursday at 48 1/4.

Goldman Sachs overnight put Nokia and Ericsson (ERICY Quote) on its recommended list.

The movers in preopen trading were a mixed bag, with Unisys(UIS Quote) up 1/4 to 15, Eli Lilly(LLY Quote) down 1 1/2 to 101, Compaq(CPQ Quote) getting a bid at 25 and Pharmacia(PHA Quote) fetching 50 5/8.

The S&P 500 futures on Globex lately were up 3 to 1461, about matching fair value. Nasdaq 100 futures were up 20 to 3751.

Europe's major indices were showing some optimism going into the weekend, with France's CAC 40 up 1.5%, Germany's Xetra Dax up 0.2% and the U.K.'s FTSE 100 up 0.8%. Japan's Nikkei 225 lost 0.4% overnight, while Hong Kong's Hang Seng slipped 0.8% (see today's Asian Markets Update for more).

U.S. Stocks in Europe: Comments from Ericsson Put Telecom in the Spotlight

LONDON -- The latest bout of selling in the telecom sector, ushered in Thursday by the cautious words of Ericsson's (ERICY Quote) president about slowing growth in industry, have lent new meaning to the term "call waiting."

With questions over the spiraling costs of third-generation licenses continuing to mount, not to mention uncertainty over possible mergers, investors seem to be approaching these stocks with caution.

"Telecoms will be weaker until some of these issues are resolved," said John Hatherly, head of global analysis at M&G Group in London.

Investors will want to see the details of the German auction for next-generation mobile phone licenses, which will kick off at the end of July. With mobile operators either dropping out or consolidating their efforts to bid in consort, it is believed Germany may reduce the number of licenses on offer.

Investors will also want a better sense of how the high costs of these 3G licenses will impact profits going forward. Comments that Ericsson's president, Kurt Hellstrom, made to a Swedish newspaper suggests concern.

"I felt an auction of licenses would be sound, but the fees have become too high," he told the newspaper. "And of course growth in the mobile market risks slowing down as a consequence of these high fees." Ericsson will supply the infrastructure for Vodafone's (VOD Quote) 3G network in the UK.

Ericsson rebounded slightly this morning from the previous day's decline, trading up 50 European cents, or 2.48%, to 20.65 euros ($19.78) in Germany. Likewise, Nokia (NOK Quote) saw its shares rise 1.60 euros, or 3.14%, to 52.50 euros.

Then there is the uncertainty as to whom will partner with whom as the WorldCom (WCOM Quote)-Sprint (FON Quote) deal approaches its almost certain demise. Deutsche Telekom (DT Quote) has been talked about as a bidder for Sprint. And WorldCom's decision to bid for a 3G license jointly with Debitel, which is partly owned by Swisscom (SCM Quote), could pave the way for the U.S. telecom to takeover the Swiss parent.

Sprint traded up 2.50 euros, or 4.35%, to 60 euros this morning, while Deutsche Telekom shares were up 1.65 euros, or 2.80%, to 60.55 euros. WorldCom declined 20 European cents, or 0.43%, to 46 euros, while Swisscom was off 7 euros, or 1.88%, to 365 euros. AT&T (T Quote) was down 31 European cents, or 0.92%, to 33.30 euros.

Like many U.S.companies, these stocks are also listed on several foreign exchanges.

As for the broader market, investors are likely to tread lightly ahead of the July 4th holiday weekend. With Friday marking the end of the second quarter for many U.S. companies, investors will be waiting for earnings reports to begin trickling out.

"People are going to be watching these second-quarter figures very closely," said Hatherly, noting that the market has already seen a few profit warnings. Yesterday, computing services group Unisys (UIS Quote) warned that second-quarter revenue and earnings would be more than 50% below consensus estimates. Today, its shares traded off 70 European cents, or 4.27%, to 15.70 euros.

September S&P futures contracts traded up 3.8 points to 1,461.80 at 6:30 EST, or 0.85 points above fair value. At 7 a.m. EDT, the Nasdaq 100 futures were 24 points higher, indicating a gain at the open of trading of large cap technology companies.

Thursday's After-Hours Trading

By Angela Privin
Staff Reporter

Updated from 6:28 p.m.

Bid.com (BIDS Quote) is trying to go corporate. And why not? Consumers that buy things on Internet auction sites tend to be a bit...uh...frugal, but big corporations still know how to throw around cash. The online Canadian auction house is going after the big money by developing an online auto auction service for General Electric's(GE Quote) GE Capital Auto Financial Services as part of its effort to shift its clientele from consumers to companies.

Financial terms of the two-year agreement with GE Capital, which offers auto financing for dealers, manufacturers and consumers, were not released.

Right now, Bid.com conducts business-to-consumer auctions at its Web site, selling computer hardware and software, consumer electronics, toys, games, sporting goods, jewelry, memorabilia and travel and entertainment products.

In April, Bid.com struck a deal with GE Capital allowing GE to use Bid.com auction technology to dispose of its assets in exchange for up-front, monthly hosting and transaction fees.

Bid.com is also expanding into Europe by hooking up with a French computer services company that will offer auction services to its clients. Also, Ireland's Sunday Business Post said it would offer Bid.com's auction technology to companies looking to liquidate surplus inventories, reported Reuters.

Today, the Internet company spiked 13/32 or 20% and hopped another 19/32 tonight to 2 31/32 on 107,000 Island shares. On May 30, the company hit a low of 1 1/2, dropping from its year high of 10 1/16.

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CDnow(CDNW Quote) rose 11/32 to 3 3/16 after telling CNBC that it expects to close a merger or receive a cash infusion within a month.

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Chase H&Q today upgraded Sagent (SGNT Quote) to buy from market performer in expectation of a solid June quarter, matching or exceeding consensus estimates.

A kind word from an analyst sent the e-business software company more than 57% higher today, lifting it from its 52-week-low on June 16 of 5 15/16. It lately topped Island with 118,000 shares and a bounce of 11/16 to 14 3/8.

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Broadcom(BRCM Quote) traded higher before its big day. Friday, after the close, the communications chipmaker will replace GTE (GTE Quote) in the S&P 500. Earlier TheStreet.com wrote about the effect Broadcom's S&P debut will have on Friday's markets.

The California-based company ran up almost 9% today and continued to coast 2 5/16 higher at night to 207, after a brief dip earlier.

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Response USA(RSPN Quote) hit stock bottom Tuesday to a 52-week-low of 3/8. It edged up 1/16 on Wednesday, finished flat today and revisited its lows tonight. It was down 15/256 to 3/8 on 15,000 Island shares.

The New Jersey-based company makes personal response systems designed to electronically report emergencies requiring medical, fire and police assistance.

However, the company's stock has fallen and can't get up. TheStreet.com attempted to contact the company but there was no response.

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This morning, Value America(VUSA Quote), an Internet retailer of personal computers, said it reached an agreement with the Federal Trade Commission to create price transparency for PCs.

According to the FTC, the total cost of a computer could be nearly four times greater than the advertised price after hidden costs were added. But now, Value America has agreed to post real, out-of-pocket costs of computers that are sold along with three years of Internet service. Value America was one of three companies that struck that deal with the FTC.

This is a case of bad news in a nice package and investors were not impressed. The FTC assessed no penalties to the company but investors knocked its stock down more than 5% today. At night, bargain hunting prevailed as night owls forgave and bought, lifting Value America shares 1/16 to 1 1/8.

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Research in Motion(RIMM Quote) was frozen by its first-quarter financial results.

The figures were in line with consensus estimates, which were adjusted lower by a previous company warning. First-quarter revenue increased to $27.1 million, up 67% from the previous period a year ago. About half of the company's revenue came from the BlackBerry wireless email service, 25% from the sale of wireless handheld devices and the rest from software and radio modems.

Last year, the company produced a profit and today's flat performance, though expected, was disappointing. The company fell 1 7/8 to 37 on 62,000 Instinet shares.

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Does interactive television mean that when you shout at your television it shouts back?

Actually it means Internet wired television. And though it is not as fun as a TV you could chat with, it is quite popular with cable operators.

Liberate Technologies (LBRT Quote) makes software that installs Internet application on televisions and other information appliances. Tonight, the California-based company delivered better-than-expected fiscal fourth-quarter results due to increased demand from cable operators. Revenue increased by 78% and losses of 13 cents per share were smaller than the 20-cent loss projected by Wall Street analysts.

The company popped 1 11/16 to 25 1/2 on 13,000 Island shares.

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Compaq (CPQ Quote) responded to a negative research note out of Salomon Smith Barney by saying its inventories at third-party sellers such as retailers, have been low and that there have been no changes to standard price protection terms. A Compaq spokesman said the second-quarter has been very back-end loaded because of supply constraints early in the quarter. Back-end loaded means that the bulk of sales come in toward the end of the quarter.

During the trading session, Salomon Smith Barney released a research note from analyst Richard Gardner, who cut his near-term price target and rating on the stock citing concerns about second-quarter inventories. Gardner said he believes Compaq's channel inventories are the highest among PC vendors and said inventory build-up may have a negative near-term impact on PC margins. The stock was cut to neutral from buy, and its near-term price target slashed to 25 from 45.

Compaq fell 1 to 25 1/2 on more than 1 million Instinet shares.

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Xerox (XRX Quote) said it has been informed that the Securities and Exchange Commission began an investigation of accounting issues related to the company's Mexico business.

TheStreet.com/NYTimes.com joint newsroom wrote about the investigation in a separate story.

Xerox shares fell 1 to 18 9/16 on 95,000 Instinet shares.

10 most active stocks on Instinet (6:30 p.m. EDT)
Company	Price	Change	Session Volume
Compaq (CPQ Quote)	25 1/2	+1	1,019,100
Microsoft(MSFT Quote)	77 1/4	+1/16	202,918
Cisco (CSCO Quote)	61 3/16	0	121,372
Intel (INTC Quote)	132	+1/4	119,425
WorldCom (WCOM Quote)	44 1/16	0	98,400
Dell (DELL Quote)	48	-3/8	95,904
Xerox (XRX Quote)	18 9/16	-1	95,300
Oracle (ORCL Quote)	80 3/8	-1/2	83,749
Accord Networks (ACCD Quote)	8 13/16	-1/8	76,000
Research in Motion (RIMM Quote)	37	-1 7/8	62,150

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 (8:00 p.m. EDT)
Company	Price	Change	Session Volume
Sagent (SGNT Quote)	14 3/8	+11/16	128,565
Bid.com(BIDS Quote)	2 31/32	+19/32	107,338
Broadcom (BRCM Quote)	207	+2 5/16	29,902
Cisco (CSCO Quote)	61 1/2	+23/64	25,532
JDS Uniphase (JDSU Quote)	116 7/16	+1/16	22,728
Rambus (RMBS Quote)	101	+1/16	21,969
CDnow (CDNW Quote)	3 3/16	+11/32	20,373
Value America (VUSA Quote)	1 1/8	+1/16	19,306
Amazon.com(AMZN Quote)	36 7/8	-1/4	18,038
Citrix (CTXS Quote)	18 5/8	+3/16	16,152

Island ECN, owned by Datek Online, offers trading, mainly in Nasdaq-listed stocks, from 7 a.m. to 8 p.m. EDT.

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.