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Pulse: Nortel's Troubles Dished Out by Big Holders

It was a tough day for the optical company's stock. It's a bad time for bad news.
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For institutional investors, the timing of Nortel's (NT) announcement Tuesday of poorer-than-expected revenues may have made it an easy choice to bail on the networking giant and related optical stocks.

Large investors were the movers on Nortel -- most of the 123 million shares that changed hands Tuesday were in blocks of 10,000 or more,

reported. Nortel was down 29%. Also dropping were optical maker

JDS Uniphase


, which was down 25% and



, which is being acquired by JDS, which was down 26%.

One source of selling pressure for institutional investors: mutual funds have only two more days to sell funds for tax losses.

"It's a tough time, the last two days mutuals

have been selling

for tax purposes. It makes it a clear choice," said Mark Donahoe, managing director of institutional sales for

U.S. Bancorp Piper Jaffray


Adding additional pressure to sell is the fact that JDS is still well over its 52-week low of $34.62 -- so some large investors may be selling off for profit, Donahoe said.

With the bubble bursting in opticals, a lot of large investors are leaving but will return for a bargain, said Terry O'Brien, analyst with

Branch Cabell

. (Branch Cabell has done no underwriting for Nortel, JDS or SDL).

Some additional sales pressure may come in advance of JDS's earnings report tomorrow. Analysts are expecting earnings of 16 cents per share, according to

First Call/Thomson Financial

. Traditional pre-call investor jitters may have contributed, as could some nervousness over the merger with SDL, even though it appears free of problems, O'Brien said.

Nortel's remarks Tuesday about stockpiled inventories may also have contributed to the drop in JDS, once of Nortel's largest suppliers.

O'Brien maintains his strong-buy recommendation on Nortel, saying he doesn't see the optical market slowing down. Nortel¿s comments about stockpiled products reflected more on installation problems than on a slowing of the market, O'Brien said.