US technology companies suffered another bashing yesterday following the release of lacklustre results. Investors have flailed the sector, causing the Nasdaq composite index to fall below levels last seen in October 1998.
At the close of yesterday`s session, the Nasdaq had plunged 54 points, or 4.2%, to 1 229, and the blue-chip Dow Jones index had fallen 82 points to 7 702. Both indices have only had one up session in the past month, as worries about corporate earnings and concerns over accounting scandals continue.
Some of the second-quarter results released yesterday by technology firms explain shareholders` concerns.
Illustrating the less-than-encouraging results was telecommunications manufacturer Lucent, which plans to cut 7 000 jobs over the next 12 months and reported its ninth straight quarterly loss. Its latest quarterly loss was $7.91 billion and its share price slid 21% to $1.65.
Long-distance phone carrier AT&T, the group from which Lucent emerged, had to take a $12.7 billion charge for the impairment of goodwill, although it says earnings improved to 7c per share. This beat Wall Street`s expectations and was higher than the 4c reported last year. Revenue for the quarter fell 6.2% to $12.1 billion. AT&T shares fell 8% to $8.80.
There was some relief that the world`s largest manufacturer of cellphone chips, Texas Instruments, managed to match expectations for sales in the second quarter. This helped the share price to tick up 0.3% to $23.48.
Semiconductor equipment makers continued to lead the slowdown in the overall telecommunications industry. Novellus had a dreadful quarter as it reported an 80% drop in earnings as sales fell sharply due to the slowdown in chip spending. The share price tumbled 9% to $26.75.
The contagion spread to the SA IT sector this morning with the index plunging 207 points, or 3.2%, to 6 050 by midday today.
A stockbroker says the losses were a function of the worries over the Nasdaq, but matters were not as bad as first thought. "We are seeing some bottom-picking coming in. SA IT shares are extremely cheap at the moment with price earnings ratios of less than 10, compared with some US shares still being above 30."
Local heavyweight IT shares that were down included Dimension Data, which fell 13c to 497c; Datatec shed 120c to 956c; and Comparex dipped 10c to 690c.
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