It’s The Economy, Stupid! Tech Stocks Cower

The stock markets canit breakout of their funk while analysts and corporate managements continue to ratchet down investorsi hopes for earnings in 2001. Nor do investors seem to be in an investing mood while the presidential election continues to threaten to decay into chaos. Appleis stock hardly budged after yesterdayis 16% dive.

When Apple first warned that sales werenit going well back in September, a number of analysts rushed to assure their clients that the problem was strictly limited to Apple, which they argued is unrepresentative of the PC market as a whole. We now know that was a load of baloney.

Not a day has gone by in the last month without some tech firm or analyst stepping up to moderate earnings expectations. Today it was Microsoftis turn as Goldman Sachis Rick Sherlund reduced sales and earnings targets for Microsoft citing solid evidence of weak PC demand.

According to C/NET News, "Sherlund said he now expects December-quarter revenue to be lower by $125 million, knocking sales to the range of $6.77 million to $6.8 billion. The new number reflects an 11 percent rise year over year, compared with the previous target of 13 percent. Revenue estimates for the March and June quarters were cut as well, by $200 million and $150 million, respectively." MSFT traded lower by 3 9/16 to 53 1/8.

Motorola also warned that it will miss 4th quarter estimates and lowered expectations for 2001 due to falling semiconductor and personal communication sales. Reuters reported, "The company said quarterly sales are now expected to be $10 billion, off 5 percent from previous estimates, and earnings per share would be some 44 percent below previous guidance."

Shares of MOT actually rallied all day after opening $2 lower to end the trading session down only 3/8 at 17 7/16. Although thatis a new 52-week low for Motorola, one of the events traders look for in a bear market is for stocks to finally refuse to fall further on bad news. Could we be past the worst bearishness?

After the markets closed, Intel warned its Q4 revenues will be flat instead of the 4-8% revenue growth over Q3 that had been expected as "results of recent cancellations by large customers worldwide." Intel gained 9/16 to 32 5/16 during the session and was halted in extended hours trading on the news. If Intel can resist dipping to new 52-week lows tomorrow, stock traders will view that as an early indication of a bear market bottom.

Appleis stock traded flat, on volume of 7 million shares. The lack of high volume churn, common after such warnings, seems to indicate AAPL investors with weak stomachs bailed long ago.

In case you just got back from Tibet, Apple warned for the third time since September on Tuesday that they will miss lower earnings forecasts for fiscal Q1 which ends December 30 and reduced targets for all of 2001. At least some Mac heads have maintained a sense of humor.

Interestingly, an Upside.com article reports that International Data Corp, (IDC) released numbers showing the PC sales will grow almost 20% globally this quarter, but not in the weak U.S. PC market. Sales in Europe should grow 15.5%, while Asian sales are expected to gain 33.4% in the quarter. However, IDC projects global PC sales to slide from 18.8% in 2000 to 16.6% next year, warning that market saturation will temper growth.

Other analysts arenit nearly as optimistic as IDC. Dan Niles of Lehman Brothers told CNNfn:

"Appleis warning is due to a combination of things - half of them company specific and half driven by the macro economic environment. The key is that the hit is almost a 40 percent miss and thatis a lot. Thatis what people should look at. The magnitude of the miss gives you an idea of whatis going to happen with the PC market next year.

If thereis a lot of excess inventory there will have to be price cuts next year. There could be a bloodbath in pricing in the first part of next year if they donit move inventories over the holidays."

The Nasdaq lost 43 points (-1.57%) to close at 2752 on high volume of 1.7 billion shares.

The Dow shed 45 points (--0.43%) to close at 10618 on volume of 1.1 billion shares.

The S&P 500 lost 7.92 points (-0.59) to close at 1343.54.

In Apple related businesses: Akamai lost 2 1/2 to 29 3/4. Adobe sagged 4 3/16 to 63 dollars. IBM lost 1 3/8 to 95 3/8. Dell lost 9/16 to 17 7/16, but Gateway beat the trend climbing 0.33 to 17.15.

In one of the more important technology stories of the day, Sun Microsystems announced they plan to develop Java applications using the most powerful new paradigm on the Internet, peer-to-peer file sharing. Sun lost 1 7/16 to 42 13/16.

Hewlett Packardis CEO, Carly Fiorina, met with analysts yesterday but was able to completely smooth over the companyis poor performance of late. Bear Stearns hit HP with a downgrade from attractive to neutral. Hewlett Packard fell 3/4 to 31 1/4.

In economic news: Weekly jobless claims have been slowly creeping higher, although they fell a bit this week. Tomorrow morning, Wall Street will carefully analyze Novemberis unemployment data released by the U.S. Labor Department, which is expected to tick higher from 3.9% to 4.0% in confirmation of the slowing economy.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our updated Apple Stock Watch Special Report.

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