Dell: struggling to grow beyond the box
Brooks Gray, Technology Business Research
The Dow Jones industrial average shed 231.30, or 2 percent, to 10,602.95, led by Intel, which lost $4.38, or about 11 percent, to $37. During the past 52 weeks, Intel has traded between $75.81 and $35.
Declining stocks outnumbered advancers by a ratio of 14-to-5 on the Nasdaq, which generated a volume of 1.78 billion shares. Volume on the New York Stock Exchange also stayed moderate at around 959 million shares, with 19 stocks declining for every nine that advanced.
The markets turned in a terrible week, posting declines across the board. The Nasdaq fell 12 percent from last week, while the S&P 500 lost 4 percent and the Dow shaved off nearly 2 percent.
The CNET tech index fell 140.52 to 2,405.73. Losers far outnumbered winners, with 90 of the 97 stocks in the index falling and 7 rising.
All of the 18 sectors tracked by CNET Investor headed south. PC hardware makers led the charge lower, falling 9 percent, followed by semiconductor and server hardware makers, which fell about 8 percent each.
"There's no question that the presidential election has had an effect on the market over the past few days," said Mark Bonahoe, managing director of institutional trading at U.S. Bancorp Piper Jaffray. "The market is just starving for a definitive answer once and for all."
In addition to the uncertainty about the outcome of the presidential election, analysts fretted over Dell's and Intel's future sales growth.
Bonahoe said the odd combination of political and earnings angst has driven investors to forget fundamentals. "Generally, trades made on emotion are not good trades," he said.
Other analysts agreed. "I don't see a fundamental reason to explain what stocks have been doing the past few days," said Phil Dow, a market strategist at Dain Rauscher Wessels. Dow pointed out that corporate earnings, while lower than previous quarters, have been strong on a historical basis, while economic productivity has made "once in a lifetime" gains.
Uncertainty has compelled traders to take any long-term bets off the table and become leery of any stock with a high price-to-earnings multiple, Dow said. But he remains optimistic and maintains faith in a few solid market maxims.
"As sure as fear and doubt are the main drivers of the market now, I think greed will come back," he said.
Dell, which Thursday met lowered expectations for its most recent quarter, saw its rating outlook fall to "buy" from "strong buy" at Banc of America Securities and C.E. Unterberg Towbin. Morgan Stanley Dean Witter cut its rating on Dell to "neutral" from "outperform."
The downgrades sent shares of Dell reeling. The stock fell $5.38, or nearly 19 percent, to $23. The company has traded between $59.68 and $22.06 in the past 52 weeks.
"Dell has either missed (earnings per share) or essentially lowered guidance in four of the last five quarters," analyst Gillian Munson of Morgan Stanley wrote in a report. "We think it will take some time for investors to get comfortable that we have reached the end of downward EPS estimate revisions."
Other PC-related tech stocks also stumbled Friday, caught in the Dell and Intel downdraft.
Shares of Compaq Computer fell $1.41 to $25.70; Sun Microsystems slipped $8.44 to $89.19; and Microsoft fell $3.50 to $67.38.
Apple Computer dropped $1.13 to $19.06; Gateway Computer lost $6.46, or almost 14 percent, to $39.74; IBM stumbled $6.44 to $93; and Hewlett-Packard fell $3.81 to $39.13.
"Available data indicates overall PC demand remained sluggish in October," Morgan Stanley analyst Mark Edelstone wrote in a report Friday morning.
The volatile Philadelphia semiconductor index fell 44.45, or about 7 percent, to 624.20, led by Intel. Chip equipment maker Novellus Systems fell $3 to $29.38, while chip designer Rambus lost $6.09 to $60.56.
Intel caught heat from forecasts of a slowdown in PC sales. Morgan Stanley cut the rating on the chipmaker to "neutral" from "outperform," trimming the company's 2000 earnings per share to $1.68 from $1.70.
Advanced Micro Devices, one of Intel's main rivals, bucked the trend, receiving an analyst upgrade after it said Thursday that it was on track to meet fourth-quarter sales targets. But the stock slipped 94 cents to $20.06. Chase Hambrecht & Quist raised the chipmaker's outlook to "buy" from "market perform."
Despite a muddling market and a sluggish stock price, Cisco Systems continued its buying spree Friday, announcing plans to acquire the Internet communications division of Active Voice in a deal worth $266 million. Cisco fell $3.19 to $50.06, while Active Voice rose $4.13, or about 28 percent, to $19.06.