TMT shares take a battering after Lucent and Motorola profit alerts

Click to follow
The Independent Online

Profit warnings from the US giants Lucent and Motorola yesterday prompted a global sell-off of internet, telecom and computer stocks as phone equipment makers joined the list of hi-tech firms warning that recent earnings growth is unsustainable.

Profit warnings from the US giants Lucent and Motorola yesterday prompted a global sell-off of internet, telecom and computer stocks as phone equipment makers joined the list of hi-tech firms warning that recent earnings growth is unsustainable.

"The falls continue a correction of technology shares which began earlier this year," said Nigel Thomas, a fund manager at ABN Amro in London. "It began with internet and telecoms and has now spread to software and hardware companies."

London's benchmark FTSE 100 index fell 130 to 6117.6, a four-month low, with Vodafone slumping 14.5p to 234.5p, leaving it near 12-month lows. Its market capitalisation of £144.3bn leaves it just ahead of BP Amoco as the UK's largest company. Just four shares on the techMARK 100 index recorded gains. The hi-tech index closed down 178 points at 3,440.11. Bookham Technology, which makes computer chips that increases phone network capacity, was the worst hit blue chip, falling 404p to 2,460p.

Marconi, the country's biggest maker of phone equipment, fell 57p to 839p, with the decline coming as the company plans a Nasdaq listing. Logica, the services group, lost 167p to 1,980p, while Energis, the UK's biggest carrier of internet traffic, fell 49p to 395p and BTslipped 31p to 696.5p.

"US stocks sneezed and global and UK stocks caught a cold," said Tim Dainton, a fund manager at Gartmore Investment Management.

Continental bourses also suffer, with shares in phone-equipment makers Alcatel, Nokia and Ericsson falling. Banks, such as Crédit Suisse Group, recorded declines on investor concern about telecoms companies' debt exposure. France Telecom plunged 6.69 per cent to 96.20 euros and warned that talks with Equant, the telecoms equipment maker, were unlikely to result in any deal "under current market conditions". Deutsche Telekom and internet stock SAP pushed Germany's DAX index down 128.8 to 6544.3.

The rout began on Wall Street after Lucent Technologies, the biggest telecom software and service provider in the world, surprised investors with its third profits warning this year. The company said it expected fourth-quarter profits to fall to 17-18 cents per share in the fourth quarter, down from 24 cents a year earlier. Lucent blamed slowing sales in its optical systems business and circuit switches, and an increase in reserves for bad debts.

Motorola said it expects fourth-quarter and 2001 profits to fall short of expectations because of slowing sales of semiconductors and falling margins in its mobile phone business. Yahoo!, the internet media giant, also warned of a slowdown in sales' growth, despite posting higher third-quarter sales and profits after New York closed last night.

In the US, the hi-tech dominated Nasdaq Composite index yesterday fell to a 12 month low in early trade, although by late afternoon it had regained some ground to trade up 12.02 at 3252.6. The blue-chip Dow Jones index recovered from a 173 point fall to trade at 10,452, down 72 points.

The Lucent and Motorola announcements come after a series of sales warnings from Apple Computer, Dell Computer and Intel, which resulted in a sell-off of their shares.

Comments