NEW YORK (CNNfn) - Juniper Networks led a broad selloff in the U.S. technology sector Friday after the communications equipment maker warned it would miss profit expectations for the second quarter.
Shares of Juniper (JNPR: down $8.61 to $38.02, Research, Estimates), which makes equipment used to route data over the Internet, fell more than 18 percent after it warned of a substantial second-quarter profit shortfall and said it would cut up to 9 percent of its work force.
Data-networking and telecom equipment makers have been among the hardest hit over the past year as businesses, especially in the United States and Europe, have either deferred or canceled their new-equipment orders in the face of slowing and uncertain economies.
Other networking and telecom equipment makers that headed lower included: Cisco Systems (SCO: up $0.20 to $44.00, Research, Estimates), the top supplier of Internet routers and switches; Redback Networks (RBAK: down $1.16 to $14.01, Research, Estimates), which also competes in that area; and Ciena Systems (CIEN: down $5.70 to $56.14, Research, Estimates), which specializes in fiber-optic networking equipment.
Shares of 3Com, which makes products such as modems and network interface cards, also sagged following a revenue warning. The company said after Thursday's close that it expects to report revenue ranging between $450 million and $475 million for its quarter ended June 1. Wall Street had expected revenue of $575 million.
3Com also said it will discontinue its line of consumer cable and digital subscriber line (DSL) modems, part of an effort to shed unprofitable businesses.
The American Stock Exchange's networking index fell 18.75 points to 421.29, a 4.3 percent decline on the day.
Adaptec (ADPT: up $0.09 to $9.36, Research, Estimates), which makes data-storage products, said sales in the current quarter should be "flat to slightly up" from the previous quarter, where previously it had expected five to ten percent sequential growth.
Chips crumble
The broad losses and warnings sent jitters through other sectors and overshadowed encouraging news from chip leader Intel.
After Thursday's close, Intel, the No. 1 supplier of PC microprocessors, stood by its previous financial guidance when it provided a mid-quarter financial update for Wall Street. Although Intel executives said they expect the numbers to be on the low end of their estimated range, they said they see signs of stabilization in the PC processor business and expect a stronger second half of the year.
At the same time, the company said sales of chips for networking and communications, a much smaller part of its overall business, remain sluggish.
Intel's core microprocessor business has been pressured in recent quarters by a sharp drop in demand for PCs, especially in the United States, which resulted in a glut of inventory in the electronics supply chain.
Ahead of Intel's financial update, some industry analysts were worried that the company would warn of a revenue shortfall. Some of the more bullish Intel watchers interpreted Thursday's comments as a signal that a recovery in the industry may soon be at hand.
Even so, Intel (INTC: down $0.47 to $30.67, Research, Estimates) shares faltered, shedding 1.5 percent. They were the most actively traded on the Nasdaq composite, which fell 48.93 points to 2,215.07, a 2.2 percent decline on the day.
Merrill Lynch analyst Joe Osha, who was one of the more pessimistic ahead of the mid-quarter update, told his clients Friday that the investor's desire to own its shares and relief that Intel didn't warn of a shortfall should sustain upward movement in the stock for a month or two. However, he advised them to take profits into the rally.
"Valuation for the stock appears significantly high for a company with a sustainable earnings growth rate of 10 percent to 15 percent," Osha said in a research note. "We have difficulty imagining any second-half recovery that could raise earnings, and investor expectations, to a level sufficient to keep the stock moving up."
Drew Peck of SG Cowen made similar comments Friday, saying that Intel faces pressures beyond any near term industry weakness.
"While semiconductor demand may be stabilizing (at low levels), there is little opportunity for an earnings rebound in the absence of major product cycle," Peck told his clients Friday. "Pentium 4 is not generating that kind of excitement."
Stocks in the broader chip sector moved lower as well, driving the Philadelphia Stock Exchange's semiconductor index, or Soxx, 21.33 points lower to 675.70, a 3 percent decline on the day.
Among the stocks pressuring the Soxx was Lattice Semiconductor (LSCC: down $0.98 to $24.92, Research, Estimates), a leading supplier of programmable logic devices, or PLDs. Its shares slipped after it said late Thursday said it expects to report a 30 percent drop, plus or minus a few percentage points, for the quarter ending in June from the prior quarter's $111.1 million.
Prior to the warning, analysts polled by earnings tracker First Call had generally expected the company to log sales of $91.8 million in the June quarter, suggesting a 17.4 percent decline.
A warning from communications chip maker Transwitch (TXCC: down $2.46 to $12.40, Research, Estimates) also cast a pall on the chip sector. Its shares tumbled after it said it expects to log a loss ranging between 10 cents and 12 cents per share for the quarter ending in June. Analysts previously had expected the company to report a profit of 5 cents per share, according to a First Call survey. 
|
