Weekly Market Recap: Telecom Edition
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Upraised noses, outstretched arms and a trip across the pond.
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(InfoWorld) - The first week of September, the unofficial start of the new season, has been hectic for IT investors. Analysts are scrambling to parse through news from networking giants Cisco Systems Inc., Alcatel SA and Lucent Technologies Inc., and a board fracas at Hewlett-Packard Co. caused the company to come under the scrutiny of the U.S. Securities and Exchange Commission as well as the California State Attorney General. The big question for Wall Street analysts and institutional investors attending the Cisco Systems Inc. analyst day in New York Wednesday was whether the vendor could sustain its revenue and profit momentum. Executives lead by Chief Executive Officer John Chambers said that by incorporating data, voice, video and mobile capabilities -- its so-called "quadruple play" -- across all its product lines, Cisco can take advantage of converging networks in the service provider, enterprise, commercial and consumer markets. The company reiterated its forecast of 10 percent to 15 percent growth for the next three to five years. But more importantly, in wide-ranging give-and-take with the Wall Street community, company executives appeared very confident about specific details that backed up the forecast. "They were very bullish," noted Mark Sue, an analyst with RBC Capital Markets. Sue said that two good signs were the company's confidence that it could keep its tax rate down to current levels (hovering around 25 percent) and Chief Financial Officer Dennis Powell's statement that the company would pay out a dividend at some point. The company did not get an uptick after the meeting, even though some analysts said they thought shares have a lot of potential to move upward. Part of the problem may be that Cisco was caught in the general market depression this week, as a result of reports of slowing housing sales. Cisco (CSCO) closed at US$21.54 Thursday, down $0.15. Meanwhile Alcatel SA and Lucent Technologies Inc. shareholders approved the merger of the two networking vendors Thursday. The merger is seen as part of a trend toward consolidation in the networking and telecom markets. There is intense competition in the growth areas of the mature enterprise market -- such as VOIP -- while Chinese manufacturers are putting pressure on the Western networking giants on the low end. IT investors are taking a wait-and-see approach to Alcatel-Lucent. On Thursday, Lucent (LU) shares closed at $2.25, down by $0.02, while Alcatel shares (ALA) closed at $11.77, down by $0.24. On his part, Cisco's Chambers sees his greatest competition coming from Asia, not Paris or New Jersey. A board disagreement at HP, meanwhile, is a sign of the times. An internal investigation by HP to see which members of its board of directors leaked information to the press resulted in several board members leaving earlier this year. One departed board member, Silicon Valley venture capitalist Thomas Perkins, has accused HP of using possibly illegal means to conduct its investigation, sparking newly revealed government inquiries. However it ends, the squabble is seen to signify the end of an era when board members were all good friends of the chief executive. The leaks stemmed back to the time when the board started having critical discussions of ex-CEO Carly Fiorina. Though current CEO Mark Hurd appears to be well on the way to a healthy reorganization of the company, the board infighting could be a distraction. HP (HPQ) shares closed at $35.42 Thursday, down by $0.42.
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The stock market surged last week on robust earnings from technology companies.
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A look back at an eventful week in the investment banking world.
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Plus: Yahoo profit falls ... Toshiba earnings dip, chip outlook dims...Verizon boosted by wireless, fiber.
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Plus: Adobe earnings, outlook top Street...TiVo swings to a loss...HP profit gains on cost cuts, cheaper components.
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Plus: Write-downs widen DirecTV's loss...Time Warner net income slips...Cell phone unit shores up Verizon.
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Plus: Gateway trims loss in third quarter...EDS delays earnings...Amazon outlook disappoints...PeopleSoft exceeds targets.
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Plus: Linux demand lifts Red Hat profit...Strong sales of phones, other gadgets boost PalmOne profit...Lawson expects quarterly loss.
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A look at some of this weekâs major business events coming this week.
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A slew of third-quarter earnings reports dominated technology and telecommunications stocks last week. Much of the news was positive, with key players posting impressive earnings growth, but the December quarter outlook remained unclear for some.
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roundup Plus: The company also expects to meet or exceed analyst estimates...Salesforce.com reports subscriber surge...RealNetworks signs up Red Flag Linux.
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European bourses posted their biggest weekly gains since June after stronger-than-expected data from the US allayed fears of recession in the world&#39;s largest economy. Strong durable goods orders and new home sales showed the US economy was holding up well amid recent market volatility.
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NEW YORK, July 16 -- The Dow Jones industrial average hit a new record close Monday as news of a potential telecom deal involving Verizon nudged the average closer to 14,000. Overall, stocks were mixed as investors contemplated the market's huge gains last week.
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Mixed economic news and forecasts of weak IT spending for at least the beginning of next year caused IT investor confidence to waver this week, though upbeat analyst presentations from Cisco and AT&amp;T and online e-commerce figures brought some cheer to the holiday season.
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Plus: EMC issues sunny report...IBM net income inches higher, despite legal bill...Nokia sees lower profit but strong sales.
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These top stocks had big price cuts in the past month.