Guilty by Association: Fallout Spreads After Nokia Warning
The wireless sector and its telecom and equipment brethren sank today under the weight of
Nokia's
(NOK) - Get Report
preopen
earnings warning, and market watchers said the cell phone maker's confession offers a foreboding glimpse of the coming months.
The Espoo, Finland, mobile phone giant, which lowered its second-quarter guidance because of flimsy market conditions, recently tumbled 19% to $23.28 in trading on the
New York Stock Exchange. The stock, hovering close to its 52-week low of $20.55 and sharply off the 52-week high of $62.50, closed Monday at $28.71. Meanwhile, wireless stocks across the board were
losing ground, with the
Philadelphia Stock Exchange Wireless Telecom Sector
off by 5%, while the
Dow Jones Wireless Communication Index
dropped 3.2%.
Sweden's
Ericsson
(ERICY)
, one of the most heavily-traded outfits on the
Nasdaq, lately tumbled 5.8% to $5.19, while
Motorola
(MOT)
slipped 8.3% to $13.63. Wireless service providers also took a hit.
Sprint PCS
(PCS)
was off 4% to $20.59, and
AT&T Wireless
(AWE)
dropped 2.8% to $15.72, but
Verizon
(VZ) - Get Report
gained 0.1% to $53.84.
"
Nokia's warning is one of the first major warnings since
Sun Microsystems'
(SUNW) - Get Report
warning a few weeks ago," said Giri Cherukiri, head trader at
Oak Brook Investments
. "It could foreshadow more earnings warnings from tech stocks and the hardware companies. Today's news is a sign that things aren't going to pick up in the immediate future."
Brett Gallagher, head of U.S. equities and deputy chief investment officer at
Julius Baer Investment Management
, an asset management and investment advisory firm, holds a similar view. "We did not believe that the corrections we've had thus far in the market fully reflect the reality," he said. "Investors are still pricing in quicker recovery than expected."
Among other names losing ground,
Nextel Communcations
(NXTL)
lately gave up 4.2% to $14.17, while cell phone technology maker
Qualcomm
(QCOM) - Get Report
lost 6.1% to $56.18.
France Telecom
(FTE)
, was off 2% to $49.29, after touching a 52-week low of $48.70 earlier today.
Deutsche Telecom
(DT) - Get Report
, meanwhile, slipped 1.2% to $19.91.
"Nokia is obviously the major story of the day, and everything related to Nokia has been taken down today, including the infrastructure players like Qualcomm," said Gallagher. "
But whether or not it's a surprise is another issue. Our view is that we're going to continue seeing negative surprises on the wireless side, but less so from people like Nokia and more so from the people providing infrastructure for Nokia, like chipmaker
Texas instruments
(TXN) - Get Report
," said Gallagher.
Texas Instruments recently shed 9% to $33.45. Communications chipmaker
Applied Micro Circuits
(AMCC)
lost 5.8% to $16.89, and integrated circuits developer
RF Micro Devices
(RFMD)
fell 9.3% to $23.95.