Tech stocks took another pistol-whipping Friday as investors mulled the fallout from a shooting war between Intel and Advanced Micro Devices for dominance of low-end chip sales.
While aggressive price cuts may be swell for consumers, they could obliterate the bottom lines of any number of hardware manufacturers.
The broader market showed a measure of resilience for much of the day, but headed south for good as a late-afternoon sell-off gathered steam. Investors chose to play it safe, locking in whatever gains they could find before scurrying off for the weekend.
The Dow Jones Industrial Average fell 0.26 points to close at 9304.24, and the Nasdaq Composite Index was 36.41 lower at 2373.66. The S&P 500 shed 9.09 to 1239.40.
Much of the Dow's earlier sense of confidence stemmed from a government report showing that the US unemployment rate in January remained at a 28-year low of 4.3 percent. Nonfarm payrolls in the month jumped by about 245,000.
The downside of such rosy indicators, of course, is that the Fed likely will move to pour some cold water on the economy by tightening monetary policy. Traders appear to be psychologically prepping for such an eventuality, gradually trying to factor an interest-rate hike into stock valuations.
In any case, sky-high valuations among tech and Internet outfits have everyone on edge, and the trend is clearly to drive these puppies down before Alan Greenspan decides to do it himself.
"We're at the stage when prices are so toppy, there's no margin for error," said Susan Crossley, an analyst with Van Kasper & Co. Intel (INTC) is a good deal less toppy now that Merrill Lynch's influential chip analyst, Thomas Kurlak, cut his 1999 earnings estimate for the company to US$4.45 a share from $4.60, saying he was concerned about cut-rate prices for the 400-MHz Celeron processor. Intel slid $2.56 to $127.56.
"Intel is obviously a bellwether for tech stocks in general," Crossley said. "When people get nervous about Intel, it can take the whole sector down."
For its part, AMD (AMD) tumbled 12 percent to $16.75 after warning that its price war with Intel may result in a first-quarter operating loss. The company had been expected to report profit of 13 cents a share. AMD's stock was downgraded by Donaldson, Lufkin & Jenrette to "market perform" from "buy."
Elsewhere in tech, Dell Computer (DELL) slipped $1.94 to $100.44, and International Business Machines (IBM) was down $3.56 at $166. Cisco Systems (CSCO) fell $4 to $101.25, and Applied Materials (AMAT) was $1.06 lower at $60.69.
Another dark day for ETrade Group (EGRP), which sagged 8.5 percent to $48.94 as its system crashed for a third straight day, once again denying a number of customers access to their online accounts. You want to bet it's going to be a Jolt-Cola kind of weekend around ETrade's offices?
Lycos (LCOS) was once again riding a wave of speculation as to its marriage plans. The portal advanced $7.63 to $137 following a story in The Industry Standard that NBC may buy as much as 35 percent of the company in exchange for a big chunk of change, plus lots of on-air promotions. Since NBC also owns 60 percent of CNET's Snap portal, the Standard theorized that Lycos and Snap would be merged if the potential deal goes through.
Speaking of juicy rumors, Chancellor Media (AMFM) rose 44 cents to $57.88 following a report in Inside Radio that America Online (AOL) is interested in acquiring the country's biggest operator of radio stations. Sounds far-fetched -- the sale price could be as high as $20 billion -- but in light of AOL's recent $388 million purchase of MovieFone, it's possible the world's biggest online service is keen to expand its horizons. AOL was down $3.88 at $165.13.
CBS (CBS) gained 44 cents to $36.25 after CEO Mel Karmazin said he's considering spinning off the network's Web properties into a separate company and offering a portion of the shares to the public. The public, needless to say, is salivating over such a possibility, although Karmazin said an IPO for "CBS.com" is still a ways off, if it ever happens at all.
Could all this talk of public offerings simply be a smokescreen? By coincidence, CBS also posted a fourth-quarter net loss of $1 million, compared with profit of more than $860 million a year ago. When you look past all the one-time charges and what not, however, the company could claim a profit of 2 cents a share, beating estimates by a penny.
LanVision Systems (LANV) surged 129 percent to $4 after announcing that The Health Alliance of Greater Cincinnati, which runs a bunch of hospitals, has inked a four-year contract to receive specialized health-care info via the Web. Terms of the deal were not disclosed.
Qwest Communications International (QWST), on the other hand, fell $3.06 to $57.44 even as it landed a $42 million contract to provide high-speed voice and data service for Kansas-based St. Andrews Telecommunications. MCI WorldCom (WCOM), meanwhile, gained 13 cents to $76.25, while AT&T (T) was down $2.94 at $88.50.
From the IPO front, Delphi Automotive Systems (DPH), the parts unit of General Motors, rose 8.5 percent to $18.44 on its first day of trading. The world's largest auto-parts maker sold 100 million shares initially priced at $17 apiece, making this one of the biggest IPOs ever.
FDX (FDX) finally came to terms with its FedEx pilots, who approved the company's first-ever labor contract granting them more pay, better flight schedules, and other such goodies. FDX rose 63 cents to $82.56.
Dole Food (DOL) inched 6 cents higher to $31.94 after reporting fourth-quarter results that clearly reflected huge crop losses in hurricane-battered Central America and uncharacteristically icy California. Mother Nature handed Dole a loss of 13 cents a share, excluding charges, which in any case was a penny better than expected.
Lastly, Pixar Animation Studios (PIXR) declined $2.63 to $40.63 after revealing that its quarterly profit had dropped 75 percent to 2 cents a share, which was still a marked improvement over the 3-cent loss analysts had been watching for.
Of course, Pixar still has a tsunami of money coming its way from "A Bug's Life," its Thanksgiving release, which so far has grossed about $155 million at the box office. Things should brighten for the company very soon.
