Tech stocks fall on worries of holiday spending
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By Sinead CarewNEW YORK (Reuters) - Bearish comments from U.S. technology companies fueled fears that the weak economy would hurt holiday season sales of mobile phones and other consumer electronics, driving shares sharply lower on Wednesday.Among the worst performers was Corning Inc , the world's largest maker of glass for flat-screen televisions, which slashed its third quarter outlook due to weaker than expected demand, sending shares down 12.6 percent.Wireless companies and chip makers also suffered as executives from Qualcomm Inc and Texas Instruments Inc gave cautious comments about the cellphone market and an analyst cut phone sales expectations for the year."There are lots of concern some of the economic weakness we have been afraid of in the first half of the year is finally starting to have some degree of consequence in the second half," said Stifel Nicolaus analyst Cody Acree.Dell Inc's weak results last week had raised concerns about demand for personal computers, and Acree said investors are now eyeing wireless as another risky area."The U.S. economy we know has been soft. That seems to have bled to some extent into Europe. Is it logical to think then that the Asian market would not have some impact?" Acree said. "It's easy to get concerned when you leave the back-to-school period and head into the holidays," he added. "These things change very rapidly but it's prudent to be more cautious."Qualcomm Chief Executive Paul Jacobs told CNBC in an interview that consumers in developed markets were taking longer to replace their cellphones, sending shares in the mobile chip company down 3.73 percent."We are seeing some evidence there's a lengthening of replacement cycles," he told CNBC in an interview, adding that consumers typically buy a new phone every year to every two years, depending on the region.At a Citi tech conference, TI's finance chief Kevin March called the mobile market uninspiring. The company's shares fell 3.9 percent even though he said it was on track to meet profit margin targets.CHIPS DOWNJPMorgan analyst Ehud Gelblum cut his forecast for current-quarter cellphone sales to 303 million units from 310 million units, and cut his estimate for fourth-quarter sales to 345 million from 355 million.He cited weakness at phone makers Samsung Electronics Co Ltd <005930.KS> and LG Electronics <066570.KS>, and said that it was likely to be most pronounced in mid-to-lower-tier phones compared with more expensive devices.The new forecast means the global market will grow 9.5 percent this year, instead of a previous estimate for 10.1 percent, Gelblum said in a research note on Wednesday. Nokia had recently raised its estimate for the global mobile market to 10 percent or more growth.Shares of Nokia fell 3.8 percent, shares of Blackberry maker Research in Motion fell 3 percent, and Motorola fell 1 percent."People are nervous about what happens to handset demand. That probably got stirred up by the Qualcomm comments," said Jefferies & Co analyst Bill Choi, adding that companies now ramping up production for a busy end-year shopping season could be left with inventories if demand is weak.Research firm Gartner said last week that replacement cycles were lengthening in Western Europe, leading to a fall in phone sales for the last two quarters.The Philadelphia semiconductor index <.SOXX> fell 4.2 percent, with Marvell Technology Group Ltd , which supplies chips for the iPhone and Blackberry, losing 11 percent. Chip giant Intel Corp lost 4.6 percent.Doug Freedman, an analyst at American Technology Research, said that Corning's warning also weighed on chip stocks."If Corning isn't building as much glass, that weakness pulls through to semiconductors," Freedman said, also citing "general malaise in the market" and economic concerns.(Additional reporting by Duncan Martell in San Francisco and Tarmo Virki in Helsinki; Editing by Phil Berlowitz)
(c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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