Once again, weakness in a tech stock took down the entire Nasdaq -- this time courtesy of a single stock target price cut by one analyst. The only problem is the company that had its estimates reduced was Cisco, one of the major technology leaders.
As Cisco goes, so goes the Nasdaq. The Dow Jones industrial average rallied 245.15, or 2.31 percent, to 10835.77, while the Nasdaq Composite Index, hemorrhaged 87.03, or 2.65 percent, to 3191.33. The Standard and Poor's 500 index gained 19.07, or 1.38 percent, to 1398.65.
Lehman Brothers analyst Tim Luke lowered his 12-month price target for Cisco to a range of $60 to $65 from $90 over concern that Internet companies will slow down spending on technology. At the same time, Luke said Cisco's near-term outlook "appears good," and he expects "strong" results when the company reports its first fiscal quarter on November 6.
Josephthal technology analyst Bert Hochfeld felt this represents talking out of both sides of one’s mouth. "They were worth $90 on Friday and now they are worth $60 when they have a good quarter coming up, does that make sense?" he asked. "I don't think Cisco has as much to be ashamed of as people misjudging or misunderstanding their business, which I think is on fire."
Hochfeld thinks analysts are playing reverse Henry Blodget, the Merrill Lynch analyst who put extremely high prices on stocks, such as $400 on Amazon.com. "Everyone thought the more outrageous the price, the happier they would be," he said. "Now the lower the price target, the more savvy the analyst has. Neither was very satisfying."
Networking
Cisco sank and this whole sector swallowed a lot of water, particularly high valuation stocks. Juniper (JNPR) plunged 14 5/8 to 166 3/8, Ciena (CIEN) dropped 13 11/16 to 90 11/16 and Corning (GLW) fell 5 to 71. JDS Uniphase (JDSU) was off 5 15/16 to 71 5/16 and Cisco (CSCO) was down 2 5/8 to 48 1/16, reaching a new low for the company. Tellabs (TLAB) avoided the mess to rise 3 1/2 to 48 1/4.
Business Internet
Business Internet stocks often have their fortune tied to networking companies, and vice versa, so this sector was whacked. VeriSign (VRSN) continued its free fall, down another 10 7/16 to 116 7/8. I2 (ITWO) plunged 10 13/16 to 156 11/16, Ariba (ARBA) was down 8 1/4 to 112 3/16 and CommerceOne (CMRC) was down 6 11/16 to 56 7/8.
Semiconductors
Some strange activity took place in this group. BroadCom (BRCM) lost big, down 14 3/8 to 212 11/16. PMC-Sierra (PMCS) plunged 12 11/16 to 152 3/4, Rambus (RMBS) was off 3 3/4 to 53 7/16 and Intel (INTC) lost 1 3/8 to 45. On the plus side, Micron (MU) jumped 2 1/2 to 32 3/4, National Semiconductor (NSM) rose 1 3/4 to 24 1/16 and LSI Logic (LSI) gained 1 3/16 to 30 7/8.
Communications
Mixed results occurred in this sector. Qualcom (QCOM) dropped 6 3/4 to 68 1/8, Nortel Networks (NT) slipped 2 9/16 to 40 and Covad (COVD) was down 9/16. On the up side, Verizon (VZ) rose 2 5/16 to 55 3/8, MCI Worldcom (WCOM) gained 2 13/16 to 24 7/8 and AT&T (T) rose 11/16 to 22 5/8.
Software
This sector was also mixed. Adobe (ADBE) plunged 5 3/16 to 69 5/8, Oracle (ORCL) lost 2 9/16 to 31 5/8 and Electronic Arts (ERTS) was off 1 13/16 to 48 1/16. Microsoft (MSFT) continues to do well after its site was broken into, gaining another 1 3/8 to 69 1/16. BroadVision (BVSN) was up 3/4 to 27 7/16 and Citrix (CTXS) rose 5/8 to 21 9/16.
Hardware
This sector did a little better than the rest. Hewlett-Packard (HWP) rose 2 1/4 to 45 13/16, Palm (PALM) jumped 1 7/16 to 53 7/8, Apple (AAPL) was up 3/4 to 19 5/16 and Dell (DELL) was up 7/8 to 28 13/16. VA Linux (LNUX) dropped 2 to 24 7/8, IBM (IBM) lost 7/16 to 93 1/4 and Lexmark (LXK) lost 7/16 to 38.
