Tech stocks continued to plunge in mid-afternoon trading Friday as investors mulled the fall out from a shooting war between Intel and Advanced Micro Devices for dominance of low-end chip sales. While aggressive price cuts may be swell for consumers, they could obliterate the bottom lines of any number of hardware manufacturers.
The broader market was weak but showing more strength than a day earlier, when share prices dropped across the board. Much of Friday's trading was confined to a narrow range, with many stocks flitting in and out of positive territory.
The Dow Jones Industrial Average rose 17.51 points to 9322.01, while the Nasdaq Composite Index was 43.95 lower at 2366.12. The S&P 500 shed 8.70 to 1239.79.
Much of the Dow's renewed sense of confidence (relatively speaking) stemmed from a government report showing that the US unemployment rate in January remained at a 28-year low of 4.3 percent. Nonfarm payrolls in the month jumped by about 245,000.
The downside of such rosy indicators, of course, is that the Fed will move to pour some cold water on the economy by tightening monetary policy. Traders appear to be psychologically prepping for such an eventuality, gradually trying to factor an interest-rate hike into stock valuations.
In any case, sky-high valuations among tech and Internet outfits have everyone on edge, and the trend is clearly to drive these puppies down before Alan Greenspan decides to do it himself.
"We're at the stage when prices are so toppy, there's no margin for error," said Susan Crossley, an analyst with Van Kasper & Co.
Intel (INTC) isn't quite so toppy anymore after Merrill Lynch's influential chip analyst, Thomas Kurlak, cut his 1999 earnings estimate for the company to US$4.45 a share from $4.60, saying he was concerned about cut-rate prices for the 400 megahertz Celeron processor. Intel slid $6.44 to $123.69.
For its part, AMD (AMD) tumbled 13 percent to $16.56 after warning that its price war with Intel may result in a first-quarter operating loss. The company had been expected to report profit of 13 cents a share. AMD's stock was downgraded by Donaldson, Lufkin & Jenrette to "market perform" from "buy."
On the Internet front, Lycos (LCOS) was once again riding a wave of speculation as to its marriage plans. The portal advanced $2.63 to $132 following a story in The Industry Standard that NBC may buy as much as 35 percent of the company in exchange for a big chunk of change, plus lots of on-air promotions. Since NBC also owns 60 percent of CNET's Snap portal, the Standard theorized that Lycos and Snap would be merged if the potential deal goes through.
Who knows? Lycos, which is now in the process of acquiring Wired News' parent company, has said it's talking to all sorts of potential partners. NBC is as likely a suitor as any, but then so are other often-mentioned names like Time Warner, News Corp., and Microsoft. At this point, take your pick.
CBS (CBS) gained 13 cents to $35.94 after CEO Mel Karmazin said he's considering spinning off the network's Web properties into a separate company and offering a portion of the shares to the public. The public, needless to say, is salivating over such a possibility, even though Karmazin said an IPO for "CBS.com" is still a ways off, if it ever happens at all.
Could all this talk of public offerings simply be a smokescreen? By coincidence, CBS also posted a fourth-quarter net loss of $1 million, compared with profit of more than $860 million a year ago. When you look past all the one-time charges and whatnot, however, the company could claim a profit of 2 cents a share, beating estimates by a penny.
Lastly, Delphi Automotive Systems (DPH), the parts unit of General Motors, rose 9.6 percent to $18.63 on its first day of trading. The world's largest auto-parts maker sold 100 million shares initially priced at $17 apiece, making this one of the biggest IPOs ever.
A 9.6 percent increase ...
Seems kind of wimpy in light of the triple-digit gains typically scored by Internet firms making their market debut. Guess we're getting spoiled.
