Updated from 12:31 p.m.

There's yet more bad news for communications chipmakers, which have been hit by (surprise, surprise) continued weakness in communications and data-storage business.

Vitesse Semiconductor

(VTSS)

dropped the first warning, saying it expects second-quarter earnings to come in at 21 cents to 22 cents a share, lower than its previous forecast of 26 cents to 27 cents a share. The consensus estimate of analysts polled by earnings tracker

First Call/Thomson Financial

is currently 26 cents a share.

Vitesse also said it was revising downward its second-quarter revenue to a range of $150 million to $160 million from its current projection of $180 million to $190 million. The First Call estimate was $177.6 million.

In the past couple of weeks, we've seen

Broadcom

get battered from

negative analyst research notes due to news that its customer

3Com

(COMS)

issued a

warning. On Friday,

Advanced Micro Circuits

(AMCC)

got its earnings outlook cut by

Goldman Sachs

. And at the beginning of last week,

PMC-Sierra

(PMCS)

fell to a

52-week low on a trim from

Salomon Smith Barney

.

Vitesse closed up $1.25, or 3.3%, to $39.06; Broadcom was up 81 cents, of 1.8%, to $47.13; 3Com finished the day higher by 3 cents, or 0.4%, to $7.16; Advanced Micro Circuits was up 38 cents, or 1.3%, to $29.19; and PMC-Sierra was up $1.88, or 5.2%, to $37.94.

Cypress Semiconductor

(CY) - Get Report

said that first-quarter revenue and earnings will come in below previous forecasts, blaming "softening" business conditions and excess inventory held by its customers.

The chipmaker said first-quarter revenues would be 15% below the $370 million reported in the fourth quarter of 2000. Previously, the company said it expected a decline of 4% to 9%. In addition, changes Cypress is making to the way it accounts for certain inventory matters will result in a one-time revenue decline of 9%, bringing the total sequential revenue decline to 24%.

The estimated decline could drop revenue to about $281.2 million in the first quarter. In the year-ago period, Cypress, which is based in San Jose, Calif., had revenue of $264 million.

Cypress also said earnings for the first quarter are expected to be between 30 cents and 34 cents a share before goodwill, well below the 56-cents-a-share consensus estimate compiled by First Call/Thomson Financial. Cypress closed up 27 cents, or 1.4%, to $19.13.

Joining the warning brigade, fellow chipmaker

LSI Logic

(LSI) - Get Report

cautioned that first-quarter revenue and earnings would come in below forecast.

LSI blamed a sluggish economy and widespread inventory corrections in the communications and storage markets for the new revenue guidance it issued Monday, which called for first-quarter revenue to come in 30% below the fourth-quarter 2000 level. Prior guidance called for a 12% sequential revenue reduction.

With the new guidance, revenue should be about $526 million, down from $751 million in the previous quarter. The company, which is based in Milpitas, Calif., also estimated that its first-quarter earnings would be 3 cents a share before goodwill, down from a previous projection of 21 cents a share. In the year-ago quarter, LSI earned 26 cents a share. LSI closed up 51 cents, or 3.1%, to $16.82.

Mergers, acquisitions and joint ventures

Semiconductormaker

Advanced Micro Devices

(AMD) - Get Report

in another move into the corporate market, said this morning that PC maker

NEC

will use its

Athlon

and

Duron

microprocessors in one line of commercial desktop computers. The NEC

PowerMate

computers are targeted at governments and large businesses in Europe, starting in France, the U.K., Italy and the Netherlands. AMD closed up $1.39, or 6.4%, to $23.13.

Struggling online retailer

Amazon.com

(AMZN) - Get Report

is reportedly in talks with retailing giant

Wal-Mart

(WMT) - Get Report

to form an alliance.

The Sunday Times

of London said the two companies are in talks to form a strategic alliance that would make Amazon the e-commerce supplier of Wal-Mart. Amazon would gain access to Wal-Mart's stores, cash and a percentage of sales made through Wal-Mart's stores. The

Times

said Wal-Mart is not likely to take an equity stake in Amazon. It said an agreement could be announced within six weeks.

Amazon recently hit a new 52-week low after rumors circulated that it plans to file for Chapter 11 bankruptcy protection. Amazon

denied the rumors. It closed at $10 on Friday, well off its 52-week high of $75.25. Wal-Mart closed at $48.92. Its 52-week high is $64.93.

Walmart.com

, a majority owned affiliate of Wal-Mart, last week laid off 24 employees, or about 10% of its workforce, in an effort to conserve cash.

Amazon closed up $2.63, or 26.3%, to $12.63; Wal-Mart was down 55 cents, or 1.1%, to $48.37.

First Virginia Banks

announced it is acquiring

James River Bankshares

(JRBK)

for cash or stock valued at $107.1 million.

The news sent stocks of the Suffolk, Va., James River soaring 60.71% to a new 52-week high this morning. Lately the stock was off its highs, up $7.50, or 50.4%, to $22.38.

The acquisition, pending regulatory and shareholder approval, gives First Virginia a No. 1 or No. 2 market share in the city of Suffolk and the counties of Prince George and Sussex and significant increases in market share in Chesterfield, Fauquier and York counties. First Virginia Banks closed down $1.10, or 2.4%, to $45; James River was up $7.88, or 52.9%, to $22.75.

Lucent

(LU)

said it will supply high-capacity gateway switches for

Nextel's

(NXTL)

digital wireless network.

Terms of the deal were not disclosed.

Lucent, which makes telecom equipment and software, said it will deploy at least 10 of its switches into Nextel's iDen network. Installations will be completed by the end of the year. The switches will increase calling capacity and reduce equipment and operating costs.

This is the first agreement of its kind between Lucent, based in Murray Hill, N.J., and Nextel, based in Reston, Va. Lucent closed up 35 cents, or 2.9%, to $12.38; Nextel was up 81 cents, or 3.7%, to $22.88.

Sun Microsystems

(SUNW) - Get Report

has concluded a deal to supply

Canal Plus Technologies

, the TV technology unit of

Vivendi Universal

(V) - Get Report

, with software used in interactive set-top boxes for digital TV.

Sun will license its personal Java software and platforms, as well as invest in Canal Plus, the companies said. No financial details were disclosed. Sun closed up $1.31, or 6.7%, to $20.94; Vivendi closed up 74 cents, or 1.2%, to $63.14.

The

European Commission

approved

Vodafone's

(VOD) - Get Report

plan to buy

Eircell

, Ireland's leading mobile-phone company, for $4.2 million.

In a statement, the commission said that it found "the transaction would add to the Vodafone Group's European footprint, but did not raise any competitions concerns in the mobile telephony-services market, where the parties' activities do not overlap, or in any other related markets."

Also, the commission approved

Philips Electronics'

plans to pay $1.7 billion for

Agilent Technologies'

(A) - Get Report

Healthcare Solutions Group. The unit's portfolio has more than 400 health care products and services. Vodafone closed up $1.25, or 4.7%, to $27.75; Agilent was up 2 cents, or 0.1%, to $38.05.

After Friday's Close

PG&E

(PCG) - Get Report

closed a $1 billion loan agreement with

GE Capital Structured Finance Group

(GE) - Get Report

and

Lehman Brothers

(LEH)

to restructure its debt and pay obligations on which it has defaulted.

The loans are secured by the corporation's equity interest in its

PG&E National Energy Group

and enable it to pay outstanding debt obligations on which it has defaulted or would default in the near future. The agreement also provides the lenders with options that, if necessary, would allow them to acquire between 2% and 3% of the shares of PG&E National Energy Group. The term of the loan agreement, which prohibits the company from declaring or paying future stock dividends until the loans are repaid, is two years with an option by PG&E to extend it for an additional year.

Meanwhile,

Edison International

(EIX) - Get Report

said its struggling

Southern California Edison

unit missed $711 million more payments to suppliers.

PG&E closed up 25 cents, or 1.7%, to $14.75; GE was up 67 cents, or 1.5%, to $45.08; and Lehman was down 27 cents, or 0.4%, to $68.29; Edison was up 30 cents, or 2%, to $15.21.

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Earnings/revenue reports and previews

DiamondCluster

(DTPI)

today drastically slashed its revenue and earnings outlook for the fiscal fourth quarter, blaming an "abrupt deterioration in the North American economy."

Excluding the charge, the Chicago-based provider of e-business services estimates fourth-quarter earnings of 19 cents a share, down from the previous forecast of 30 cents to 32 cents a share. Twenty-three analysts surveyed by First Call were expecting the company to earn 31 cents a share. DiamondCluster also expects revenue between $73 million and $77 million, down from its previous guidance of $93 million to $97 million.

DiamondCluster closed down 56 cents, or 3.3%, to $16.38.

Kroger

(KR) - Get Report

said it would restate its earnings for 1998, 1999 and the first half of 2000 by "minor amounts" because of accounting practices at its

Ralphs Grocery

subsidiary that had been concealed from auditors and senior management.

The retail grocer also said it expected fiscal fourth-quarter earnings to match the consensus expectation of 48 cents a share, compared with 37 cents a share last year. The company anticipates revenue for the quarter to be $12.7 billion, a 12.9% gain over 1999's fourth-fiscal quarter.

With the restated figures, Kroger earned 59 cents a share in fiscal 1998, up from 57 cents, and 73 cents a share in fiscal 1999, down from 75 cents. In the first two quarters of fiscal 2000, the company earned 12 cents and 25 cents a share, respectively, a penny lower in each case than previously reported. Kroger closed down 62 cents, or 2.6%, to $23.70.

After Friday's Close

Cymer

(CYMI)

, a maker of laser sources that are used in semiconductor manufacturing, forecast that the consumables part of its business will be down 20% to 25% from the latest fourth quarter, citing continuing changes in market conditions. The company also said chipmakers aren't installing enough lithography equipment to reduce its inventories.

Cymer cut new system shipments to customers in this year's first quarter, and the company plans on taking actions to further lower costs.

The company now expects first-quarter results to fall below the fourth quarter of 2000. The company also projected that the full-year 2001 top line will come in below 2000's. Cymer closed up 81 cents, or 3.7%, to $22.94.

J.C. Penney

(JCP) - Get Report

said it expects its

same-store sales for the first half of 2001 to decline because of the slowing economy and the use of its new centralized merchandising operations. For the full year, total sales are expected to decline in the low single digits at its department store and catalog operations. That will include about $230 million in lost sales from closed stores. J.C. Penney closed up 16 cents, or 1.1%, to $15.06.

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Analyst actions

Some people can't see the forest for the trees lately, staring at a massive tech selloff and missing the overall picture.

Lehman Brothers

came out with some guidance this morning for investors who are looking for something new to look at. Peter Ruschmeier, an analyst covering the often-overlooked paper and forest products sector, told investors that he was bullish on wood, which has outperformed the market lately.

Pointing out that the

Philadelphia Stock Exchange Forest & Paper Products Index

, which tracks the sector, has outperformed the

S&P 500

by 62% since October, Ruschmeier said the good times could continue. Historically speaking, after overcoming a bear market, as paper stocks did at the end September 2000, a bull market in paper stocks should last 37 months, with outperformance of 37% a year.

"By almost any measure, paper companies have endured their worst bear market since the Great Depression," Ruschmeier wrote. "The most recent bear market in shares lasted from September of 1994 to September of 2000, for a total of 73 months."

Citing a rise in capital efficiency and a bottom in pricing, the analyst said valuations on many paper stocks are attractive. More specifically, Ruschmeier called

Weyerhaeuser

(WY) - Get Report

his favorite large-cap pick.

"We give Weyerhaeuser's management the highest rating of the large-cap companies in our universe," he wrote, suggesting that the company's timber interests warrant a higher valuation than other companies, since building products are among the first things to pick up when the economy improves.

Oh, and Ruschmeier was a fan of Weyerhaeuser's attempt to merge with

Willamette

(WLL) - Get Report

, saying that he thought it would go through and boost earnings and cash flow. Weyerhaeuser closed up $2.10, or 3.9%, to $56.45; Willamette was up 23 cents, or 0.5%, to $47; and the FPP index was up 2.4% today.

Sappi

(SPP)

,

Georgia-Pacific

(GP)

,

Mead

(MEA)

and

Louisiana-Pacific

(LPX) - Get Report

were also touted as strong buys along with Weyerhaeuser.

Sappi was called a "top pick," as American investors have been embracing the company and South African investors have been exiting it. With that selling pressure weakening, the analyst argued that Sappi would benefit, since it currently trades at 5.6 times earnings. Sappi closed up 27 cents, or 3.1%, to $8.97; Georgia-Pacific was up $1.14, or 3.8%, to $31.50; Mead was up $1.13, or 4.1%, to $28.46; and Louisiana-Pacific was up 4 cents, or 0.4%, to $10.24.

Upgrades

Capstone Turbine

(CPST) - Get Report

: UP to strong buy from buy at

Credit Suisse First Boston

. Capstone Turbine closed up $3.06, or 12.4%, to $27.75.

City National

(CYN)

: UP to strong buy from buy at Lehman Brothers. City National closed down 60 cents, or 1.6%, to $36.66.

Engelhard

(EC) - Get Report

: UP to strong buy from buy at Lehman Brothers. Engelhard closed up $1.17, or 4.8%, to $25.56.

Downgrades

Dover

(DOV) - Get Report

: DOWN to market perform from U.S. recommended for purchase list at

Goldman Sachs

. Dover closed up 5 cents, or 0.1%, to $39.64.

Federal-Mogul

(FMO) - Get Report

: DOWN to market underperform from market perform at Lehman Brothers. Federal-Mogul closed down 36 cents, or 11.2%, to $2.87.

Pivotal

(PVTL) - Get Report

: DOWN to market outperform from U.S. recommended for purchase list at Goldman Sachs. Pivotal closed down $1.19, or 8.4%, to $12.88.

Vignette

(VIGN)

: DOWN to hold from buy at

ING Barings

. Vignette closed down 81 cents, or 13.6%, to $5.16.

Initiations

KPMG Consulting

(KCIN)

: NEW market outperform at Goldman Sachs. KPMG closed down $1.50, or 7.9%, to $17.50.

Rent-A-Center

(RCII) - Get Report

: NEW buy at Lehman Brothers; price target: $52. Rent-A-Center closed up $1.38, or 3.3%, to $43.44.

Williams Energy Partners

(WEG)

: NEW strong buy at Lehman Brothers; price target: $33. Williams Energy Partners closed up 15 cents, or 0.5%, to $28.95.

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Offerings and stock actions

After Friday's Close

Greenwich Technology Partners

, which is a network infrastructure consulting and engineering company, withdrew its IPO again. Last year, the company withdrew a $55 million IPO.

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Miscellany

Ameritrade

(AMTD) - Get Report

named Joseph Moglia its chief executive. Moglia is a senior vice president of

Merrill Lynch

(MER)

and head of the investment performance and product group for its private client group. He oversees all investment products, as well as the firm's insurance business and 401(k) efforts.

Moglia will stay on at Merrill during a brief transition and will formally join Ameritrade later in the month. He replaces Joe Ricketts, Ameritrade's founder and chairman, who's been acting as CEO since August, when Tom Lewis resigned. Ameritrade closed down 59 cents, or 6.6%, to $8.34; Merrill Lynch was up 44 cents, or 0.7%, to $59.78.

Seeking its own caffeine jolt,

Coca-Cola

(KO) - Get Report

Sunday said its president has resigned and the company is revamping its management structure.

To improve sales, the beverage giant is creating four units -- Americas, Asia, Europe/Africa and new business ventures -- whose chiefs will report directly to CEO Doug Daft. The plans don't create a role for Jack Stahl, who will step down as president after 20 years with Coke.

Coke has been on a rip announcing a series of deals, each intended to help the Atlanta-based beverage giant boost sales. It is teaming up with

Walt Disney

(DIS) - Get Report

to jointly market kids' beverages under the

Disney brand. It is working with

Warner Brothers

as the sole

global marketing partner for the upcoming Harry Potter movie. And it announced plans with

Procter & Gamble

(PG) - Get Report

for a

stand-alone company that will sell juices, juice-based drinks, and snacks.

At the end of January, Coke met earnings expectations for the fourth-quarter and predicted it would have a strong 2001. Today, it left its current financial guidance in place. The company is on the rebound from recent losses. In the fourth quarter of 1999, it lost $45 million, or 31 cents a share. Coke closed down $2.35, or 4.5%, to $50.20; Walt Disney ended the trading day down 46 cents, or 1.5%, to $29.53; and Procter & Gamble closed up 51 cents, or 0.7%, to $70.16.

Hillenbrand Industries

(HB)

said its health care equipment unit, Hill-Rom, will cut about 3% of its workforce and take a first-quarter charge in a bid to streamline its organizational structure and boost productivity.

The funeral and health care services company expects a first-quarter charge of about $20 million, or 21 cents a share, and said its actions will reduce fixed expenses by $25 million to $30 million annually. The charge includes the writedown of certain assets linked with a small, non-care Hill-Rom product line that was underperforming expectations.

First Call analysts expect first-quarter earnings of 60 cents a share, compared with 55 cents a share in the year-ago period. Hillenbrand closed up 59 cents, or 1.2%, to $50.37.

After Friday's Close

Braun Consulting

(BRNC)

filled two posts with new executives, but the company said Jack Burke resigned as chief financial officer.

The company said Burke was leaving to pursue other opportunities but didn't offer any further information. Burke was on vacation this week and couldn't be reached for comment. Tom Schuler, the senior vice president of corporate development and investor relations, and Anne Zaczek, senior vice president of finance, will take over for Burke on an interim basis.

Braun, which is based in Chicago, also named Jim Oddo chief information officer and appointed Tom Williams the director of marketing. Braun closed down 25 cents, or 4.4%, to $5.50.

Linens 'n Things

(LIN) - Get Report

named Steven Silverstein its president. The stock ended the day down 72 cents, or 2.1%, to $34.25.

United Dominion Industries

(UDI)

, a machinery manufacturer, said it was in talks concerning a possible acquisition of the company. It did not disclose the names of possible acquirers.

In mid-December, the company said it broke off negotiations of a sale with unnamed parties because they couldn't agree on terms. United Dominion closed up $1.28, or 7.1%, to $19.43.

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