NEW YORK (CNNfn) - Lucent Technologies had a bad morning Wednesday, as analysts lined up to downgrade it after a warning that it would not meet fourth-quarter earnings expectations.
ABN Amro said analyst Kenneth Leon cut his rating on Lucent (LU: Research, Estimates) to a "hold" from an "outperform."
Leon's downgrade was the result of Tuesday's earnings warning -- the company's third such warning this year -- and the lack of visibility for earnings improvement in fiscal 2001.
"Product mix shift has weakened margins substantially," Leon wrote in a press release. "We strongly believe weakness in optical systems sales is tied to lower demand for Lucent products, not current market conditions which are robust for companies like Nortel Networks (NT: Research, Estimates)"
Credit Suisse First Boston analysts James Parmelee and Marc Cabi also downgraded Lucent to a "buy" from a "strong buy," reflecting the long-term nature of a turnaround.
"There are no near-term catalysts suggesting an improvement in Lucent's share performance," the CSFB analysts wrote in a research note. "We believe the company will remain in turnaround mode through mid-2001."
Lehman Brothers reiterated its "neutral" rating on Lucent.
"Owning Lucent shares for the next few months, even at what we are expecting to be near fire sale prices, is not likely to be rewarding in any way," Lehman said in a report.
Merrill Lynch cut its 2000 earnings estimate for Lucent to $1 a share from $1.10 and its 2001 estimate to $1.13 a share from $1.33.
"The growth in Lucent's optical systems revenue has been the biggest disappointment," Merrill Lynch analyst Michael Ching said.
Morgan Stanley Dean Witter cut its rating on Lucent to "outperform" from "strong buy" and set a price target of $40.
Paine Webber cut its 2000 earnings estimate for Lucent to $1.01 a share from $1.18, but kept its "buy" rating and $75 price target on the company.
"In our view, Lucent's problems in optical reflect poor execution, but do not signal a slowdown in the underlying industry spending in optical," Paine Webber analyst Walter Piecyk said.
SG Cowen kept its "buy" rating on Lucent, but cut its 2000 estimate to $1.02 a share from $1.12 and its 2001 estimate to 94 cents from $1.31.
Goldman Sachs, on the other hand, advised its clients not to sell Lucent, saying its valuation is "amazingly low" and it's likely to outperform. However, analyst Mary Henry cut her fiscal 2001 earnings outlook to $1 from $1.33.
Shares in Lucent fell were sharply lower in pre-opening trade. Lucent, one of the most widely held U.S. stocks, fell $9.38 to $22.
Not quite shouting Yahoo!
CSFB was not so kind to Yahoo! (YHOO: Research, Estimates), initiating coverage of the Internet portal with a "hold" rating and a six-to-12-month price target of $100.
"Despite posting a high-quality September quarter and beating consensus numbers, Yahoo's guidance continues to be cautious due to a challenging near-term business environment," CSFB analyst Jamie Kiggen wrote in a research note.
Yahoo's ultimate outperformance over time remains unchanged, but in the near-term the stock is likely to perform in line with the broader tech sector, Kiggen wrote.
"Our $100 target still suggests good upside potential if the stock settles at a level significantly lower than yesterday's (Tuesday's) close," she wrote. "So investors should view our 'hold' rating as one under daily review."
Shares of Yahoo, which announced earnings Tuesday that beat Wall Street estimates, tumbled $16.19 to $66.50.
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Lehman Brothers reiterated its "neutral" rating for Yahoo and cut its 2000 earnings estimate for the company to 40 cents a share from 45 cents.
"A cautious near-term outlook will likely keep pressure on the stock," Lehman said in a report.
SG Cowen slashed Yahoo to "neutral" from "strong buy," saying an Internet "spending drag is likely to continue for a few more quarters."
WR Hambrecht reiterated its "buy" rating for Yahoo and slightly raised its 2000 earnings estimates for Yahoo to 48 cents a share from 47 cents and its 2001 estimates to 59 cents a share from 57 cents.
"The fact remains that Yahoo is still in the middle of a fairly nasty 'storm.'" Hambrecht said in its report. "We continue to moderate our stance based on value considerations and apparent softness in the online ad market."
Merrill Lynch left its 2001 earnings estimate for Yahoo unchanged at 59 cents a share and raised its 2001 revenue estimate to $1.45 billion from $1.41 billion.
Merrill Lynch analyst Henry Blodget noted Yahoo posted a strong quarter in a tough environment, exceeding consensus in most key metrics.
Blodget said he expected the challenging environment for online advertising to continue into the second quarter of 2001, three to six months longer than he had originally expected.
Blodget said he continued to believe Yahoo would make a good long-term investment, but the stock would essentially trade sideways because of the challenging advertising environment.
Paine Webber left Yahoo alone, keeping its "buy" rating, its $185 price target and its earnings estimates -- 48 cents a share in 2000 and 58 cents a share in 2001 -- unchanged.
Defending Altera, Xilinx
CSFB also reiterated its "buy" rating on Altera (ALTR: Research, Estimates) and its "strong buy" rating on Xilinx (XLNX: Research, Estimates). The semiconductor equipment companies had a miserable Tuesday, each stock falling more than 20 percent, after Lehman Brothers and Salomon Smith Barney downgraded them.
"Given yesterday's precipitous price declines, owing to competitor downgrades, we believe it is beneficial to reiterate our position regarding Altera and Xilinx and the programmable logic sector as a whole," CSFB analyst Tim Mahon said in a report. "We view the current pricing weakness as an excellent buying opportunity."
SG Cowen also reaffirmed its "buy" ratings for Altera and Xilinx, saying the companies hold two-thirds of the market share for programmable logic devices. Cowen said the companies should maintain profitability, but will have little room for margin expansion.
Ringing endorsement for Phone.com
ABN Amro started Phone.com (PHCM: Research, Estimates), a software provider for the delivery of Internet service to wireless telephones, with a "buy" rating and a 12-month price target of $145.
 "We believe Phone.com represents an investment proxy for the exploding wireless data market since (it) supplies a complete suite of Web-enabling software and services to wireless providers," analyst Keith Bachman said in a research note.
Bachman said Phone.com holds a market share lead by serving 77 wireless providers, with subscribers totaling over 50 percent of the global wireless market.
Bachman said that, with a pending merger with Software.com (SWCM: Research, Estimates), Phone.com will be able to broaden its product line to include messaging software and to expand its customer base to Internet service providers and cable companies.
Motorola earnings underwhelm
Lehman Brothers was unenthusiastic about Tuesday's earnings report from Motorola (MOT: Research, Estimates). The world's No. 2 wireless-phone maker reported earnings after the closing bell that met Wall Street estimates.
Lehman said it was concerned with weaker-than-expected handset sales and orders and cut its 2000 earnings estimate for Motorola to $1 a share from $1.05 a share. Lehman reiterated its "buy" rating on the company.
SG Cowen analyst John Butler initiated coverage of four companies. He started fiber-optics company Ciena (CIEN: Research, Estimates) with a "strong buy" rating and a price target of $150; another fiber-optics company, JDS Uniphase (JDSU: Research, Estimates), with a "strong buy" rating and a $135 price target; networking company ADC Telecommunications (ADCT: Research, Estimates) with a "buy" rating and a $35 target; and communications company Tellabs (TLAB: Research, Estimates) with a "buy" rating and a $60 target.
SG Cowen also reiterated its "strong buy" rating for Abbott Laboratories (ABT: Research, Estimates) and raised its price target on the drug maker to $60 from $56.
Paine Webber slashed another pharmaceutical company, Biogen (BGEN: Research, Estimates) because of lower-than-expected sales of its Avonex product. While keeping an "attractive" rating on the company, Paine Webber analyst Elise Wang cut its price target to $68 from $78, her 2000 earnings estimate to $1.74 from $1.78 and her 2001 estimate to $1.95 from $2.02.
Rating managed care
Lehman Brothers raised the 12-month price targets on four managed care companies, citing stronger industry prices, improved cost-management tools and a more favorable legal environment.
Lehman raised the 12-month price target for Humana (HUM: Research, Estimates) to $13 a share from $9.50, based on 17 times the estimated 2001 earnings of 75 cents per share.
Lehman said it raised the target because of "shares basically doubling since June 30 based on some improvement in operations." Lehman also said Humana had higher-than-expected cash flow in the June quarter, pared some assets and markets, and showed a "moderation of technology-related capital expenditures."
Lehman raised its target for WellPoint Health Networks (WLP: Research, Estimates) to $120 from $100, based on 20 times the estimated 2001 earnings of $6 per share.
Lehman said WellPoint stock has risen 35 percent since June 30, prompting an increase in the target price.
Lehman also said its earnings estimate on WellPoint of $1.28 a share for the current quarter -- 2 cents below the Wall Street consensus -- could be beaten by 4 to 6 cents.
Lehman raised its target for Cigna (CI: Research, Estimates) to $130 from $120, based on 17 times potential earnings per share of $7.70 for 2001.
Lehman raised its target for UnitedHealth Group (UNH: Research, Estimates) to $120 from $105 based on a price to earnings multiple of 25 and potential 2001 earnings per share of $4.80.
Merrill Lynch boosted its earnings estimates for Trigon Healthcare (TGH: Research, Estimates), raising its third-quarter estimate to 93 cents a share from 80 cents; its fourth-quarter estimate to 86 cents from 81 cents; and its 2000 estimate to $3.29 from $3.10.
Trigon said its third- and fourth-quarter earnings would beat Wall Street expectations and based this prediction on higher-than-expected investment income and lower-than-expected expenses. 
-- compiled by Mark Gongloff from staff and wire reports
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