On a day when the
hit a 52-week low, Internet stocks joined in, playing a spirited game of follow the loser.
TheStreet.com Internet Sector
index closed down 8.5%, part of a general selloff of technology stocks, but with a few divergent -- and negative -- themes of its own.
The biggest names in the Internet sector played right along, with e-tailer
closing down $2.97 or 10.6% to $25.03.
Dain Rauscher Wessels
raised its fourth-quarter revenue estimates for the site after the Thanksgiving weekend's sales showing.
But investors seemed to be reading another analyst's opinion, the one filed last week by
Scott Reamer, which cast some doubt on whether the e-tailing giant could reach the Street estimate of $1.05 billion in sales. Reamer published an update today saying he was still cautious about the stock, although he maintained his buy rating on it.
, dogged by persistent bad news about Internet advertising, fell with the rest of the sector $3.16, or 7.8% ,to $36.97.
Fellow Internet and advertising leader
also dropped today, after the
Federal Trade Commission
decided to delay a vote that would block a proposed merger with
. AOL closed down $3.41 or 7.7% to $40.56.
According to a
Wall Street Journal
report, the FTC is looking closely at the agreement AOL and Time Warner signed with Internet service provider
last week. According to the
, the FTC wants more time to check the contract, which it required as a way of showing the merger wouldn't shut off competitors' access to high-speed cable lines.
More worrisome than the immediate delay on the merger vote is the government's close attention to the case, said Reamer, who covers AOL.
"To the degree the government is intimating it is going to play a role in each and every contract that AOL and Time Warner sign, that is not good," Reamer said. His firm has no underwriting relationship with AOL or with Amazon.
EarthLink closed down 25 cents or 3.5% to $6.94. Internet service provider
, which is also negotiating an access deal with Amazon and Time Warner, closed up 6 cents or 2.5% to $2.56.
Not to be left out of the crying game, computer makers went down, especially after a negative report this morning from
Salomon Smith Barney
The report, from analyst Richard Gardner, suggested that retail inventories were higher than normal. He singled out
for having high retail inventories, writing that he believed Compaq's U.S. inventories are higher now than the five weeks the company reported in September, and that there is some risk to Compaq's December quarter revenue and earnings.
The note drew a response from Peter Blackmore, executive vice president for sales, who said the company was "comfortable with our channel inventory levels and are seeing supply constraints ease during the quarter."
Compaq closed down $1.71 or 6.9% to $23.10.
Gardner was skeptical that either
, which has recently discounted a PowerBook model and dual processor Power Macs, or
, which has discounted heavily as well, would make their targets for the December quarter. Apple closed down 67 cents or 3.5% to $18.03 and Dell closed down $2 or 8.2% to $22.44.
3:07 p.m. EST: Tech Equipment Shares Pounded
Tech hardware stocks kept sinking Tuesday, buried under wave after wave of bad news and lowered expectations. Pessimism over a slowing economy in general and concerns over slowing tech growth in particular spread from semiconductor equipment to opticals.
Semiconductor equipment makers were hit hard, led by
, after an analyst predicted the semiconductor equipment maker would be guiding down order and revenue numbers in a call after the close of market today.
analyst Shekhar Pramanick lowered his target price for the company to $55 from $85, expecting slowing growth next year.
Other news also brought down the equipment makers.
, which makes "visioning" machines used in production, announced its December orders would be below estimates and blamed a slowdown in the semiconductor and electronics industries. Also affecting the semi makers: news that
was cutting production of DRAM chips.
Neither the Cognex announcement nor the Hyundai news was major. But given the climate, it was enough to move sellers.
"People are taking every piece of bad news and using it as a data point to support a bear position," said
analyst Ted Berg.
The small bits of bad news added up to a big lump of hurt for equipment makers. Novellus was lately trading down $3.43 or 11% to $29.37. Industry leader
also was down $2.75 or 6.2% to $41.37.
also was trading down, $1.43 or 9% to $16.25.
Some of the specialty chips were smarting, too. Still smarting from a
Salomon Smith Barney
reduction in target price issued Monday,
was trading at a 52-week low, down $10.19, or 10.4% to $87.37. Broadcom, which makes chips for set-top boxes, was especially damaged by
announcement that it was stopping orders for cable infrastructure. Also tainted: communications chipmaker
, trading down $9.06 or 8.8% to $93.42.
Slower economic news gave optical and telecom equipment makers some lumps as well.
In a conference call Tuesday,
analyst Mike Ching cautioned investors about telecom equipment stocks. There has been a great deal of uncertainty surrounding capital expenditures by big telecom service providers in recent months.
Global capital expenditures should increase by only 1%, the Merrill Lynch team said. Ching was most cautious about
, which last week warned investors that it might not make its fourth-quarter guidance.
Warning that "things will get worse before they get better," Ching said that Lucent has not positioned itself well in new technology strategies and that it has suffered from a talent drain. The stock continued to drop today on the news, trading down $.75 cents or 4.5% to $16.
was also trading down $1.31 or 3.3% to $37.94.
, by contrast, was trading up $.75 or 1.5% to $52.
Other component makers also fell on the double whammy of a slowing overall economy and confirmation that telecom infrastructure spending would slow in the coming year. Among optical component makers,
was trading down 9.7% and and
New Focus on Networks
was trading down more than 16.1%.
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