Tech Dips, Cisco Warns (Again), & Apple Drops 4%

| Apple Stock Watch

Tech stocks didnit do so well today, but they didnit take a beating either. The Nasdaq closed down some 51 points, but that includes a last minute rally that recovered a bit more than 20 points and brought the tech-laden Nasdaq back above the 1900 level. The Dow had a sharper last minute rally that brought it being some 60 points south of the border to 31 points in the black. The spark there was money that left tech stocks made its way into "safe haven" Blue Chip stocks. This is likely to be a volatile week as 40% of the S&P 500 will be reporting their March quarter results. According to a Reuters report:

"This week we have 200 out of 500 S&P companies reporting," said Michael Palazzi, managing director of Nasdaq sales and trading at CIBC World Markets Inc. "We had such a nice rally last week that, without further confirmation (that profit growth is picking up), people are quick to take profits.ii

The chip sector was particularly hammered today as Morgan Stanley Dean Witter reportedly issued a cautionary note to their clients on Intel and other semiconductor companies. The natural concern is that with falling PC sales, the people that make chips that power the PCs are going to be hit. Duh. Intelis stock took a hit on that news, and that helped fuel the mild sell off. According to a CBS Marketwatch report.

Santa Clara, Calif.-based Intel is expected to report quarterly results on Tuesday. Analysts surveyed by First Call/Thomson Financial expect the chip giant to earn, on average, 15 cents a share on sales of $6.58 billion.

This compares to an adjusted 71 cents a share earned on sales of $8 billion in the year-ago first quarter.

Volume for both indexes was very light as holdovers from the Passover and Easter holidays kept a lot of money on the sidelines.

Hereis the kicker: none of todayis news matters all that much. The reason for that is that Cisco issues yet another warning today after the markets closed. Unisys added to the mix with their own warning. Itis Ciscois warning that will dominate tomorrowis action, however, and the company had all sorts of interesting things to say. First of all, Cisco reported that current revenues were 30% lower sequentially. Revenues for the next quarter are expected to be 10% lower still. Better yet, the company is going to write off a staggering US$2.5 BILLION in unsold inventory, and that will leave another US$1.6 BILLION in inventory on hand. According to CNBC, the company will be tossing all that gear into a closet somewhere, perhaps for later internal use. Cisco will also be laying off some 8,500 employees, which is some 500 employees more than it had announced would be getting the pink slip in March.

<MINI-RANT>

Adding to the doom and gloom feeling from Cisco is CEO John Chamberis attempt to paint the economy as the bad guy in an attempt to make it look like Ciscois bad results were not its fault. According to a CBS Marketwatch report:

"A hundred-year flood can happen in your lifetime," said Cisco Chief Executive John Chambers during a conference call.

"The challenges in terms of projecting global business have never been more difficult," Chambers said. "Changes that used to occur over quarters are now occurring over months."

While this is true, on the face of it, it does not address the companyis own mistakes in tying all of its hopes and dreams (in the form of employee benefits and compensation) into the single concept of a rising stock price. Cisco had a higher value than Microsoft for a brief while last year, and this was built, in part, on a completely non-sustainable bubble of ever increasing stock valuation. That made it cheap for Cisco to higher employees because they received such (then) lucrative stock options, but it was never sustainable, just as the companyis growth was not sustainable. This has made their fall all that much more painful because it was engineered into their business plan from the beginning.

</MINI-RANT>

Cisco had closed down some 78 cents, but the stock was pummeled in after hours trading, after their announcement. This is likely to help create a nasty day tomorrow.

Apple released an update for Mac OS X, officially bringing Mac OS X to version 10.0.1. The new release greatly improves speed and stability, but the markets didnit notice. AAPL traded in very light volume today as it lost more than 4%. The dayis range was 20.86 - 22.40.

Apple closed at 21.44, a loss of 0.98 (-4.37%), on light volume of 5,092,800 shares trading hands.

The Nasdaq closed at 1961.43, up 62.48 (+3.29%), on volume of 1,908,170,000 shares trading hands.

The Dow closed at 10126.94, a gain of 113.47 (+1.13%), on volume of 1,089,639,000 shares trading hands.

The S&P 500 closed at 1183.50, up 17.61 (+1.51%).

Akamai closed at 8.4, down 0.66 (-7.28%), on light volume of 1,138,300 shares trading hands. Apple is a large shareholder of Akamai.

Adobe announced that the company handling its software packaging had filed for Chapter 11 bankruptcy. Adobe says that the packaging companyis work for Adobe would not be affected, but also warned that it was a potential risk. ADBE closed at 40.83, a loss of 0.23 (-0.56%), on strong volume of 9,086,000 shares trading hands.

IBM was one of our few winners today. The company is the only PC company other than Apple to not warn for the current quarter, and, coincidentally, will announce its earnings on Wednesday, the same day as Apple. IBM closed at 96.75, up 0.55 (+0.57%), on volume of 9,187,300 shares trading hands.

Motorola is being investigated by the SEC for possible violations of the Fair Disclosure rule (Reg FD). The companyis stock traded higher to close at 13.26, a gain of 0.36 (+2.79%), on strong volume of 20,060,100 shares trading hands.

Earthlink closed at 11.78, up a penny (+0.08%), on very light volume of 886,500 shares trading hands.

Gateway reports this Thursday. The stock closed at 15.65, a loss of 0.30 (-1.88%), on light volume of 1,261,900 shares trading hands.

Dell announced a new US$1049 laptop as the company steps up the pressure in its quest for market share. DELL closed at 27.11, a loss of 0.81 (-2.90%), on very light volume of 20,359,200 shares trading hands.

Intel closed at 26.3, down 1.82 (-6.47%), on strong volume of 59,345,200 shares trading hands.

Microsoft closed at 60.79, a loss of 1.39 (-2.24%), on volume of 32,928,100 shares trading hands.

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. You can also check out our Apple Financial Boards, a new moderated forum for Apple Investors and people who are interested in Appleis financial dealings.

No Comments

Log in to comment (TMO, Twitter or Facebook) or Register for a TMO account