Applied Micro Circuits Rises Despite Lowered Estimates by Morgan Stanley

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Updated from 9:13 a.m. EDTApplied Micro Circuits (AMCC) was up 2.8% in late morning even though Morgan Stanley widened its loss estimate for the optical communications chip maker.

Morgan Stanley said it expected a further 15% to 20% decline in capital spending among telecom carriers to hurt Applied Micro's results in the near-term. Morgan Stanley lowered its loss estimate for 2002 to 15 cents a share from 12 cents and reduced its earnings estimate for 2003 to 2 cents a share from 5 cents.

Morgan Stanley said its estimates assumed "meaningful expense reductions" that Applied Micro has so far "not expressed willingness to implement." The note said Morgan Stanley believes the current climate will trigger expense reductions.

Morgan Stanley's research note said the telecom spending reductions could also hurt other networking equipment companies, including Ciena (CIEN) - Get Report, Corvis (CORV) - Get Report, Nortel (NT) , ONI (ONIS) and Tellium (TELM) .