Tech Stocks Bounce

Baldwin Louie — Mon, 24 Sep 2001 15:00:00 -0700

Technology stocks bounced back Monday as downtrodden investors gingerly poked through last week's devalued market.

The Nasdaq Composite Index climbed 45.80 to 1468.90 in morning trading after plunging 16% last week. Morgan Stanley's high-tech index rose 12.80 to 374.30, and the Dow Jones Internet Index gained 2.10 to 41 points.

Shares of technology stocks hemorrhaged last week amid debilitated investor sentiment in the wake of the Sept. 11 terrorist attacks on New York's World Trade Center and the Pentagon in Arlington, Va. U.S. markets were closed for four sessions following the attacks and reopened Sept. 17, a week which saw the Nasdaq plummet 16% and the Dow Jones Industrial Average fall more than 14%.

Investors took a deep breath Monday morning before heading in to make purchases. Several tech bellwethers saw gains as investors hunted for bargains in what analysts are calling an oversold market.

Sun Microsystems rose 48 cents to $8.44, Cisco Systems climbed 53 cents to $ 12.62, while software maker BEA Systems gained 46 cents to $10.80, all on the Nasdaq Stock Market.

Microsoft gained 91 cents to $50.62 on Nasdaq. The software giant postponed the sale of its Xbox console by a week, declining to give reasons for the setback. The company also faces concerns for sales of its upcoming Windows XP operating system as consumer confidence slips.

JDS Uniphase rose 67 cents to $6.03 on Nasdaq after the company said it sees first-quarter sales of $325 million.

Compaq Computer rose 44 cents to $8.43 after Salomon Smith Barney upgraded the stock to "buy" from "neutral." Hewlett Packard, which announced its intent to buy former rival Compaq earlier this month in a deal so far met with skepticism from investors, gained 71 cents to $15.67. Both companies trade on the New York Stock Exchange.

Intuit fell $1.29 to $30.67 on Nasdaq. The company, which makes business- software products, said it agreed to buy OMware for up to about $42 million in stock and said it expects to meet its previous earnings guidance. Additionally, the company is unveiling new products for small businesses.

Verisign lost 21 cents to $38.09 on Nasdaq after the company, which controls Internet addresses, said it will purchase Illuminet for $1.2 billion in stock. Illuminet operates a system combining elements of the Internet and telephone networks. Illuminet dropped eight cents to $34.90 on Nasdaq.

Ask Jeeves rose five cents to 85 cents on Nasdaq. The company, which develops "real-language" Internet search technology, said it will now focus on software, offering a program for companies that want to operate their own information services.

Accrue Software gained a penny to 23 cents on Nasdaq after the company's shareholders approved several proposals authorizing a variety of reverse stock splits in the upcoming year.

Techs Fell 16% Last Week

Technology stocks continued their losing streak Friday, with the Nasdaq Composite Index racking up a 16% loss for the week following the terrorist attacks.

The Nasdaq Composite Index lost 47.74, or 3%, to close at 1423.19, after sliding 3.7% on Thursday. Morgan Stanley's high-tech index skidded 7.54 to 361.47, and the Dow Jones Internet Index shed 1.82 to 38.89.

Upbeat news from General Electric helped cushion the Dow industrial average's fall, but failed to lift the tech sector. GE said it still expects double-digit growth for 2001 as it trimmed its outlook in light of last week's terrorist attacks and the economic downturn (see article).

Techs declined after a tough week all across Wall Street as investors considered the threat of war and the economic repercussions of last week's terrorist attacks.

A wave of profit warnings, weakness in foreign markets and so-called triple witching, further destabilized the already shaky tech sector. Triple witching marks the simultaneous expiration of options, index options and futures contracts, which often results in volatility in the market.

Equity investors are still closely watching political developments. In an address to a joint session of Congress Thursday evening, President Bush demanded that the Taliban surrender Osama bin Laden, release imprisoned Americans, and give the U.S. full access to terrorist training camps. These demands aren't open to discussion, Mr. Bush said: "They will hand over the terrorists or they will share in their fate."

On Friday, Afghanistan's Taliban rulers said they won't give up Mr. bin Laden without evidence.

The fact that congressional Democrats and Republicans have stopped sparring and begun working together will be comforting to investors in the long run, "but at the moment there will be bloodletting," said Al Goldman, chief market strategist for A.G. Edwards & Sons.

"The market has been deeply oversold, and the prevalent mood is 'Why should I buy a stock,' which happens when you near an important bottom," Mr. Goldman said.

By any conventional measure of market sentiment, averages should be poised to find a bottom point, some market watchers said. Volatility is approaching the levels last seen in the global economic crisis of 1998. Meanwhile, put/call ratios have hit the levels established ahead of the Gulf War in 1991. However, last week's terrorist attack has wrought such havoc on economic conditions and corporate profits that conventional technical measures may not be a reliable indicator of what the market will do.

Palm tumbled 38 cents, or 18%, to $1.77 on the Nasdaq Stock Market after the company reported a fiscal first-quarter loss. The hand-held-computer maker said revenue tumbled 47% during the period, adding that it doesn't anticipate returning to an operating profit during its current quarter.

Microsoft fell $1.05 to $49.71 on Nasdaq after the software giant said it will delay the U.S. release of its Xbox video-game system a week. Separately, ABN Amro reduced its revenue and earnings forecasts the next two fiscal years as part of an industry-wide revision.

DoubleClick dropped 87 cents, or 12%, to $6.18 on Nasdaq, after the Internet- advertising firm lowered its third-quarter forecast, citing softness in online advertising and software sales resulting from the Sept. 11 terrorist attacks.

AOL Time Warner climbed 60 cents to $29.85 on the New York Stock Exchange. Merrill Lynch analyst Henry Blodget lowered his earnings forecast on the media giant. Separately, AOL is ending its long-distance phone deal with Talk America.

Sandisk declined $1.17, or 10%, to $10.82, after sliding 11% Thursday on Nasdaq. The memory-storage-products maker said it expects a third-quarter loss from operations of about 60 cents a share, wider than previous expectations for a loss of 10 cents to 15 cents a share.

Oni Systems plunged $3.38, or 40%, to $4.99 on Nasdaq. The networking- equipment maker also lowered its outlook, saying it now expects a third-quarter loss of between 17 cents and 21 cents a share on revenue of $40 million to $50 million. The firm previously had forecast revenue of $75 million to $80 million.

MicroStrategy dropped 12 cents, or 7%, to $1.54 on Nasdaq. The business- software maker plans to significantly reduce operations at its Strategy.com unit and eliminate the unit's sales, marketing and research and development efforts, according to a filing Friday with the Securities and Exchange Commission.

EMC slipped $1.47, or 12%, to $11.15 on the Big Board. The data-storage- products maker said it was highly unlikely that it will break even in the third quarter due to the economic slowdown, and that it plans to cut 10% of its work force by the end of the year as part of cost-reduction efforts that will be " sweeping in scope."

Liberate Technologies fell $1.73, or 14%, to $10.54 on Nasdaq. The software company bucked the downward earnings trend and topped Wall Street's earnings consensus by three cents a share. The company has projected a second-quarter pro-forma loss of nine cents a share to 10 cents a share, and a fiscal 2002 pro- forma loss of 32 cents a share to 34 cents a share.

Coorstek shed $3.12, or 12%, to $23.42 on Nasdaq after the chip-equipment maker said it expects to fall short of its prior third-quarter forecast. The company said it now projects a gross margin of about 10%, below the previous 16% estimate.

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Tech Stocks Bounce