MIDDAY MARKETS: Chips drag down Nasdaq

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Semiconductor stocks pulled the Nasdaq lower at midday, as a Salomon Smith Barney report said a recovery was nowhere in sight. The Nasdaq slid 57.03 points to 2,368.35, and the Dow Jones industrial average was up 5.82 points to 10,805.64.

The Inter@ctive Week @Net Index fell 6 points to 249.75.

Semiconductor stocks were taking a tumble. Intel (Nasdaq: INTC) shed $2.06 to $32.31, Micron Technology (NYSE: MU) dropped $2.80 to $39.75 and Advanced Micro (NYSE: AMD) was off 99 cents to $23.72. Expectations for a "V" bottom in the second half of the year may be "overly optimistic," according to Salomon Smith Barney. Analyst Jonathan Joseph sounded a dour note on the outlook for the semiconductor sector, stressing the "truly awful" fundamentals of the sector.

The communications chip sector was also a mess. Applied Micro (Nasdaq: AMCC) shed $4.44 to $39.38, and PMC-Sierra (Nasdaq: PMCS) dropped $4.44 to $48.06 after downgrades pointed out that the situation for communications chipmakers has worsened over the past few weeks.

Shares of Breakaway Solutions (Nasdaq: BWAY) marched up 3 cents to $1.16 after the company announced $33 million in equity financing from strategic investors

Portal Software (Nasdaq: PRSF) shot up 56 cents to $9.75 on news that Vodafone UK will use its Intranet software. Analysts said the deal validates Portal Software's technology and should boost revenue.

PeoplePC's (Nasdaq :PEOP), unchanged at $1.06, has seen its market value fall 89 percent since shares went public. Its operations lost almost $46 million in the latest quarter reported, and one of the two brokerage analysts following the stock just stopped rating it--but the company has added enterprise customers.

Cisco(Nasdaq: CSCO) fell $1.63 to $26.63, Oracle (Nasdaq: ORCL) lost 63 cents to $23.38 and Microsoft (Nasdaq: MSFT) fell $1 to $56.31.

Amazon (Nasdaq: AMZN) fell 56 cents to $13.13, AOL (NYSE: AOL) fell $1.37 to $46.99 and Yahoo (Nasdaq: YHOO) shed $4.06 to $27.25.