Tech Stocks Continue Slide After News of Cisco Cutbacks

NEW YORK -- Technology stocks continued to slide Monday. The Nasdaq Composite Index dipped below 2000 for the first time since Dec. 16, 1998, after falling 115.95 points Friday. The Nasdaq fell 87.40 to 1965.38 in Monday morning trading. Morgan Stanley's high-tech 35 index slid 23 to 554.80.The market was still smarting from an earnings warning last week from tech bellwether Intel, plus Friday's announcement by networking giant Cisco Systems that it would cut up to 17% of its work force by July to cap costs as its telecommunications and dot-com customers put the brakes on their equipment spending. Wall Street analysts responded to Cisco's cost-cutting move by again lowering their earning estimates, showing concern that Cisco will lower its own earnings outlook, citing the continued economic slowdown. Cisco shed $1.94, or 9.4%, to $18.69 on the Nasdaq Stock Market after closing Friday at $20.63, down $2.19. A year earlier, the stock traded at $82. "Weak capital spending conditions with weak economic conditions are likely to weigh upon shares," Salomon Smith Barney analyst B. Alexander Henderson said in regard to Cisco. The brokerage cut its price target on the stock to $45 from $65. UBS Warburg adjusted its revenue and earnings outlook for the leading maker of Internet networking gear but kept a "buy" rating on the stock, while lowering the price target to $25 from $30. UBS is now calling for 1% revenue growth in fiscal 2002, with earnings per share pegged at 61 cents, down from UBS's previous estimate of 73 cents a share. The investment house also lowered its earnings view for fiscal 2001 to 57 cents from 62 cents. Credit Suisse First Boston reduced its expectations for Cisco's fiscal 2001 earnings, trimming its estimate to 53 cents a share from 60 cents a share. Among other decliners, Ciena was off $8.25 to $56.88 after Salomon Smith Barney cut its price target to $100 from $145 on the maker of telecommunications equipment. The sector also took a hit on bearish comments from Susan Kalla, an equity analyst at BlueStone Capital Securities, which appeared in Barron's. Ms. Kalla warned that the telecom market is suffering from overcapacity and collapsing prices. Other players in the sector also traded lower Monday. Juniper Networks was off $4.06 to $50.81 and Sycamore Networks was off $1.09 to $13.03, both on Nasdaq. Semiconductor issues continued to slide following Intel's earnings warning. Intel was off 88 cents to $28.56 on Nasdaq, and rival Advanced Micro Devices was down 53 cents to $22.77 on the New York Stock Exchange. PMC-Sierra lost 88 cents to $35.06 and Applied Micro Circuits was down $2.02 to $24.42 on Nasdaq after Salomon Smith Barney brought down price targets on the chip makers. Elsewhere, Microsoft lost $2.81 to $53.88 on Nasdaq. The software giant Monday announced a broad alliance with eBay calling for the companies to support each others' Internet technologies and services. EBay shed 34 cents to $33.64 on Nasdaq.

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Tech Stocks Continue Slide After News of Cisco Cutbacks

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