Tech Issues Soar on Some Upbeat News
A little bit of good news went a long way in the technology sector Thursday.
A number of companies announced that their first-quarter business was either better than expected or didn’t get worse, and the result was a huge wave of buying of battered tech shares.
Though analysts said the reports don’t assure that orders for tech equipment are on the verge of rebounding across the board, it was a sharp turn from early in the week, when a barrage of earnings warnings deepened fears of long-term tech downturn.
The first positive news came late Wednesday, when Dell Computer said it is standing by its revenue and profit forecasts for the current quarter, which ends May 4.
Dell, the top producer of desktop and laptop computers in the United States, said in a short statement that it still expects to report about $8 billion in revenue and earnings of 17 cents a share.
Though those numbers are well below what analysts had estimated at the start of the year, the fact that business hasn’t deteriorated further cheered Wall Street.
“This is the first bit of reassurance we’ve seen from a company like this for a long time,” said James Dewhurst, a director at ING Barings Charterhouse in London.
Dell shares surged $3 to close at $25.19 on Nasdaq--though that only lifted the stock back to where it was a week ago.
On Thursday, a handful of other tech and telecom firms, including wireless phone giant Sprint PCS, Internet software firm BEA Systems and optical networking firm ONI Systems, issued upbeat reports about order rates or earnings.
“Hopefully, this will be a catalyst” for stocks to move higher, said Barry Berman, head trader for brokerage Robert W. Baird & Co. in Milwaukee. But, he added, “I’m not sure how much good news you need. You just need to get through this first-quarter reporting period and see a stop in the daily battering of bad news.”
The tech sector also got a boost after Lehman Bros. analyst Holly Becker, who has advised investors to steer clear of Yahoo Inc. shares for nine months, raised her rating on the most-used Internet search site to “buy.”
“We are now convinced that the worst is over, and the risk-reward on the shares is favorable for investors with a longer-term time horizon,” Becker said in a report.
Yahoo rocketed $2.81, or nearly 23%, to close at $15.25.
Still, there is little reason to think that the wave of negative earnings warnings from the technology sector is over, said Charles L. Hill, research director at earnings tracker First Call/Thomson Financial.
With the first-quarter “confession season” almost over, there have been 782 negative pre-announcements from tech companies so far--double the record set last quarter, Hill said.
“If we get positive guidance from some more big companies, sure, then maybe we’ve got something,” Hill said. But he cautioned investors against reading too much into the Dell report.
Indeed, after trading ended a number of other tech companies announced that first-quarter results will be below expectations--including Agilent Technologies, Sycamore Networks and Extreme Networks.
Hill believes the glimmer of light on earnings isn’t in the tech sector but in the consumer-cyclical sector--makers of autos, household furnishings and apparel, for example.
While analysts have been slashing tech company first-quarter estimates in the last month, they haven’t been doing the same to consumer-cyclical companies’ estimates overall.
Why focus on consumer cyclicals? Said Hill: “Either consumer spending is going to stay strong and keep the economy going, or the tech sector is going to continue to deteriorate and pull us into recession.”
Nonetheless, for tech investors fearful that the bottom is falling out of the business, Thursday’s company reports provided more hope.
Among the companies giving upbeat reports:
* Sprint PCS, the wireless-telephone unit of Sprint Corp., said it added more than 1 million customers in the first quarter, ahead of analysts’ forecasts of 700,000 to 750,000 new users. The company said it attracted new subscribers and kept more existing customers. Sprint PCS also expects to report a “strong gain” in cash flow when it releases first-quarter results on April 17.
The stock jumped $2.81 to $19.75 on the New York Stock Exchange.
* BEA Systems shares surged $6.44 to $27.13 on Nasdaq after company founder Bill Coleman reaffirmed the electronic-commerce software maker’s earnings forecast at a private lunch hosted by Morgan Stanley Dean Witter.
Coleman said the company still expects to have sales of $1.2 billion and earn 39 cents to 41 cents a share for the fiscal year ending Jan. 31, 2002, a spokesman said.
That makes BEA one of the few U.S. software companies to maintain financial forecasts. Early this week, e-commerce firms Ariba and I2 Technologies had warned of sales shortfalls.
* ONI Systems stock leaped $4.50 to $21.13 on Nasdaq after the maker of fiber-optic communication equipment said Qwest Communications International expanded a previous contract.
Qwest expanded an August contract with ONI, spokesman Larry Loper said. Qwest is buying more optical switches and electrical circuits from ONI as the Denver-based company builds a network in the U.S. for sending voice, data and video at high speeds.
* After regular trading ended, BMC Software, a major provider of enterprise systems software, said it expects to report fourth-quarter revenue of fiscal year 2001 in a range of $412 million to $422 million. Those estimates were “above the upper range of the guidance provided in January,” the firm noted.
But as with so many other tech firms, BMC also announced that it is cutting jobs to try to keep earnings on track. The firm said it will cut 6% of its work force.
BMC’s shares rose $4.22 to $23.30 on the NYSE before the announcement.
*
Bloomberg News was used in compiling this report.
* MAIN STORY: A1
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Tech Stocks Zoom ...
Battered technology and telecom shares rallied Thursday amid some signs that the industry’s downturn is stabilizing. Among the big gainers:
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Thursday Thursday Pctg. Stock close change change Juniper Networks $37.16 +$7.97 +27.3% ONI Systems 21.13 +4.50 +27.1 Yahoo 15.25 +2.81 +22.6 Siebel Systems 28.76 +4.88 +20.4 JDS Uniphase 16.19 +2.45 +17.9 Teradyne 31.25 +4.50 +16.8 Sprint PCS 19.75 +2.81 +16.6 Dell Computer 25.19 +3.00 +13.5 Microsoft 56.75 +4.81 +9.3 Cisco Systems 14.94 +1.25 +9.1 Nasdaq compos. 1,785.00 +146.20 +8.9 S&P; 500 1,151.44 +48.19 +4.4
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... But Nasdaq Has a Long Climb Back
Nasdaq composite index closes, monthly through March ...
Thursday close: 1,785.00, up 146.20
Sources: Reuters, Times research
Bear Traps
Thursday’s rally doesn’t necessarily mean happy days are here again on Wall Street. Since Labor Day, the stock market has rarely followed big gains with a sustained rally.
Dow Jones industrial average*
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Gain/loss over next Date Close Point gain three trading sessions Dec. 5 10,898.72 338.62 -185.81 Jan. 3 10,945.75 299.60 -324.40 March 27 9,947.54 260.01 -68.76 Oct. 30 10,835.77 245.15 44.74 Oct. 27 10,590.62 210.50 308.85 Dec. 18 10,645.42 210.46 -158.13 Feb. 26 10,642.53 200.63 -192.39 Sept. 28 10,824.06 195.70 -104.32 Dec. 2 10,560.10 186.56 57.26 March 26 9,687.53 182.75 111.53
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Nasdaq composite index*
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Gain/loss over next Date Close Point gain three trading sessions Jan. 3 2,616.69 324.83 -220.77 Dec. 5 2,889.80 274.05 27.63 Oct. 19 3,418.60 247.04 1.19 Oct. 13 3,316.77 242.09 -145.21 Oct. 31 3,369.63 178.23 81.95 Dec. 22 2,517.02 176.90 40.74 Nov. 14 3,138.27 171.55 -111.08 Dec. 8 2,917.43 164.77 -94.66 Nov. 24 2,904.38 149.04 -197.45 Sept. 19 3,865.64 139.12 -61.88
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* Rankings based on 10 biggest point gains since Sept. 5
Sources: Bloomberg News, Times research
