Tech Sinks on Weak Q4 Quarter Outlooks

Brittney Barrett |

Tech stocks were mixed on Thursday as some of the major companies in each sector released earnings that fell short of expectations. Outlooks were lower as lingering fears over demand for hard-drive production and consumer electronics was called into question.

Among the losers for the day was Polycom Inc. (PLCM). Shares of the video conferencing technology maker fell sharply lower after the company shared a third quarter outlook that sounded alarm for many of the analysts covering the stock.  The strength of Cisco (CSCO) in the video conferencing arena seemed to be among the main drivers for a series of downgrades made Polycom among the sectors worst performers.

Morgan Keegan analyst Tavis McCourt reduced his rating on the stock to Market Perform from Outperform, while slashing his price target to $22 from $25.

Jason Ader of William Blair made the same adjustment to the stock’s rating, citing both Cisco’s recent dominance and a demand for video that has been negatively impacted by the weak macro environment.

Another company that took a hard hit on the basis of their earnings and outlook was Lam Research Corp. (LAM). Shares of the company tumbled as speculation that hard-drive production would fall and lower demand for chips stoked investor anxiety.  Quarterly earnings at the company declined by 63 percent, pushing shares of LAM and other chipmakers lower for the day. Semi-conductors were weak across the board after the Lam earnings report. Intel (INTC) and NVIDIA (NVDA) both endured a sell-off during the session on the basis of the potential decline in demand.

Another major factor that was pushing down fourth quarter earnings outlooks in the sector was the current flooding in Thailand. An announcement from Western Digtial Corp. (WDC) that said to expected a major decline in December sales as a result of current production facility closings was deleterious not only for WDC but several of their customers. Both Dell (DELL) and the ailing Hewlett-Packard Co. (HPQ) were lower after the announcement.

Online retail empire, E-Bay (EBAY) also slid in spite of an earnings increase of 14 percent. A weak fourth quarter revenue forecast announced late Wednesday prompted an early morning sell off.  John Donahue, the Chief Executive of E-Bay cited the European debt crisis and global economic slowdown as potential obstacles for E-Bay in the coming quarter.

"We read the same newspaper headlines and we don't have a crystal ball on the economy," he said in a Reuter interview, “I don’t think it will be a great holiday, but we are putting our stake in the sand and saying we think it will be solid."

Like many other companies in the sector AT&T Inc. (T) also reported slower third-quarter growth. Ralph De La Vega, chief of the company’s wireless operations pinned fewer new consumers for the quarter on anticipation for the new i-Phone. Since the debut of the iPhone 4S, AT&T sales have been climbing and the company expects to have one of the strongest sales quarters in company history. Shares of the company were lower for the day, failing to gain momentum on the basis of the fourth quarter optimism.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
NRCIA National Research Corporation Class A Common Stock 17.00 0.70 4.29 8,512
INTC Intel Corporation 34.39 0.23 0.67 14,461,972
NVDA NVIDIA Corporation 91.88 3.43 3.88 15,057,138
CSCO Cisco Systems Inc. 29.53 0.28 0.96 20,865,842
HPQ HP Inc. 15.55 0.43 2.84 11,538,522
PLCM Polycom Inc. n/a n/a n/a 0
WDC Western Digital Corporation 62.09 -1.26 -1.99 6,865,574

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