Semiconductors and the Internet services sectors tugged on the

Nasdaq

today, which settled 115.03, or 3.4%, lower at 3240.53.

TheStreet.com Internet Sector Index

also settled 18.97, or 3.08%, lower at 597.32 in tandem with

Yahoo!

(YHOO)

which felt pressure in front of its post close

third-quarter results .

Semiconductors reacted to the simultaneous

downgrade of

Xilinx

(XLNX) - Get Report

and

Altera

(ALTR) - Get Report

by analysts at

Salomon Smith Barney

and

Lehman Brothers

(check below for details).

The semiconductors' stroke of bad luck dominated the tech news today but

Lucent Technologies

(LU)

was another big

loser. The telecom-equipment maker said it expects next quarter's profits to be lower than expected. Lucent today said the company expects to earn between 17 to 18 cents per share. Analysts had expected earnings of 27 cents a share, according to

First Call/Thomson Financial

. Lower earnings are due to lower revenue from its optical-networking business, decline in the sale of traditional voice products and potential bad loans to service provider customers.

This is the second earnings shortfall for Lucent, which has been in the midst of major restructuring.

2:37 p.m.: Semiconductor Stocks Slammed as Analysts Fire Big Guns

Xilinx

(XLNX) - Get Report

and

Altera

(ALTR) - Get Report

were hurtling lower and spreading trouble to the semiconductor sector after

Salomon Smith Barney

and

Lehman Brothers

downgraded the chipmakers on concerns about semiconductor demand.

TST Recommends

"Revenue growth rates for the next two quarters are likely to slow noticeably" as the chips become more available and as customers balance inventory levels, Lehman Brothers

analyst Dan Niles wrote in a report to clients. He downgraded both companies to neutral from outperform. Salomon Smith Barney analyst Clark Westmont slashed both companies to outperform from buy.

Altera was down 22.3% and Xilinx was down 20.7%, even though both companies put out statements meant to reassure investors that their growth remains robust.

The whole semiconductor sector took the analysts' remarks personally, as the

Philadelphia Stock Exchange Semiconductor Index

plunged 10.3%, led by such bellwethers as

Intel

(INTC) - Get Report

and

Micron Technology

(MU) - Get Report

, which fell 3.4% and 7.4%, respectively.

In past quarters Xilinx and Altera have enjoyed demand that outstripped supply, plumping their stock prices 74% and 65% this year, respectively.

Niles added that the increased shipment of chips will not hurt financial results for the most recent quarters, but may affect estimates for the next two quarters.

Remember the telephone? You used to use it before they invented email and instant messenger. Well, in the most exciting pairing since peanut butter met chocolate, popular portal

Yahoo!

(YHOO)

and Internet telecom company

Net2Phone

(NTOP)

have started a

service that lets computer users make free phone calls over the Web. Yahoo! will also offer a service that will read voice mail, email and other information, such as stock quotes and news headlines, over the phone to registered users.

Net2Phone has been distributing its PC2Phone software application free through the Internet and through strategic partnerships since 1996, but partnering with one of the most recognized brand names in cyberspace has given it the star power to really take off. Yesterday Net2Phone hit a 52-week high of $19.56, and it was powering $1.63 higher to $22.19 today.

The market's eyes, however, are glued on Yahoo! not for its ambitious expansionist policies but for its third-quarter financial results. Last year it posted profits of 7 cents a share, but those were different times, when investors had boundless confidence in the buoyant tech sector.

This just in: The tech sector is no longer buoyant. Today

TheStreet.com Internet Sector

index, the

DOT, has traded as low as 598.22 today. The levels the DOT has hit in the last few sessions haven't been seen in more than a year, and the

Nasdaq Composite Index is little healthier.

So caution lately continued to rule as traders applied pressure in front of Yahoo!'s after-hours announcement. Wall Street expects the portal to produce a profit of 12 cents a share, same as last quarter. Hopefully the company's will imitate

Napoleon's

knack for conquest instead mimicking the French dictator's stature, by falling short.

Analysts at

Jefferies

have high hopes for tonight's results, reiterating their buy rating on Yahoo! with a price target of $200. The stock lately was off $1.25 to $84.50.

"The dot-com advertising slowdown, exacerbated by the

priceline.com

(PCLN)

preannouncement, has recently weighed on shares of Yahoo!," said a Jefferies morning research note. "We expect third-quarter results to meet or exceed our estimates, allaying some of the fears about an advertising slowdown."