As it turns out, the glass half-empty approach toward tech stocks was the right one to take today. What news came out after the close of market wasn't good news for PC and chip stocks.
With two days of warnings, investors assumed that the news from PC maker
wasn't going to be especially good. The PC manufacturer closed down $1.50, or 4.84%, to $29.50, dragging down fellow PC makers
, which closed down 47 cents, or 2.6%, to $17.56;
, which closed down 40 cents, or 1.7%, to $22.70; and
, which closed down 63 cents, or 2.8%, at $21.81.
Then came Gateway's
announcement that much weaker-than-expected shopping for PCs would cause it to miss revenue estimates of $3.05 billion, for the quarter ending Dec. 31, by $500 million, making revenue flat to last year.
We always think we've seen the last shoe in this earnings season, but we never have," said analyst Daniel Kunstler of
J.P. Morgan Securities
Early warning from
Salomon Smith Barney
about possible inventory stockpiles hit the computer makers yesterday. And this morning,
analyst Steve Fortuna wrote that he expected Gateway to announce disappointing sales. But Fortuna left his earnings-per-share estimate of 63 cents intact. Gateway estimated earnings at 37 cents a share.
Investors assumed the worst for highflier
and fellow members of the storage industry. Brocade, which makes fiber switches for network-storage companies, announced that its earnings of 22 cents a share would top estimates of 20 cents by
First Call/Thomson Financial
. Brocade also announced a stock split. Nervous investors, though, brought the stock down $7.25, or 4.5%, to $153.75.
was down $6.31, or 7.9%, to $73.19, and its competitor
closed down $2.19, or 4.2%, to $50.
EMC is bringing out a new storage product that has caused some jitters for competitor Network Appliance, although its impact should have been priced into the stock by now. Investors seem to be targeting valuation.
"People are turning against the names with the high multiples. Storage is one of the last groups holding up," said analyst Kevin Hunt of
Thomas Weisel Partners
But investors did not anticipate the bad news with chipmaker
. The maker of programmable logic devices warned after market close that it would have flat sequential earnings because customers stockpiled inventory. But it closed up 3 cents, or 0.1%, to $25.94.
Fellow PLD maker
, which trades similarly, closed down $2.91, or 6.3%, to $43.
3:04 p.m.: Tech Cheer Turns to Gloom
Like someone who wakes up happy and finds the day gone horribly wrong, technology stocks started out the day on a modestly positive note, only to find themselves tripping into a funk over pieces of bad news.
Semiconductor stocks were wandering, looking for some reason to get cheerful and finding none. The
Philadelphia Stock Exchange Semiconductor Index
recently was down 1.8%.
"We're looking for positive data points and haven't found any, unfortunately," said one analyst, who asked not to be named.
was down $4.68, or 63.6%, to $2.69 after a downgrade by
. ChipPAC announced Wednesday that fourth-quarter revenue would be 22% below its previous estimates, due to weak orders from wireless phone and PC customers.
Similar concerns about reduced demand led to a downgrade of
-- like ChipPAC,a semiconductor packager and tester.
Deutsche Banc Alex. Brown
analyst Erika Klauer reduced her rating from strong buy to buy on worries of lower orders from wireless and PC makers.
Some of the bad karma may have spilled onto chip makers
, both of which make chips for consumer applications. Texas Instruments was trading down $1.50 or 3.7% to $39 after
Credit Suisse First Boston
analyst Charlie Glavin wrote that weakness in wireless orders may mean slower-than-expected growth for the first quarter of 2001. National was sliding less steeply, trading down recently 13 cents, or 0.6%, to $19.56.
One pocket of green came from the communications chipmakers, led by
Morgan Stanley Dean Witter
analyst Mark Edelstone raised the stock to a strong buy from outperform, noting it was attractively valued. Broadcom was trading up $5.44, or 6.4%, to $90.50.
Merrill Lynch analyst Joe Osha said checks on communication chips indicate no weakness in orders or revenue for the December quarter. The first sign of trouble for the communications-chip makers wouldn't show until March of the coming year, he wrote.
Fellow communications chipmaker
was also trading higher recently $4.39, or 4.5%, to $101.25. Glavin wrote that PMC's management yesterday repeated its guidance that the company would have sequential growth of 15% for the fourth quarter and denied rumors of "massive" order cancellations.
The news blew hot and cold down
TheStreet.com Internet Index
, which was down 2.4%.
analyst Robert Fagin reiterated a buy rating on
, saying the shares have been unfairly hurt by the perception that the telecom slowdown would affect its business. Inktomi, whose shares have dropped 69.4% since Oct. 24, was trading higher, up $1.19 or 4.9% to $25.44.
And a day after
Salomon Smith Barney's
note advising caution on PC stocks, came a revision on earnings estimates for PC seller
from Merrill's Steve Fortuna. Fortuna said the company probably will make remarks today or tomorrow about the quarter. Fortuna said he believed that Thanksgiving weekend PC sales, while better than pre-holiday weeks, "were not quite as strong as originally hoped for." Gateway was trading down $2.70, or 8.7%, to $28.30.