Investors Drink Lucent's Lemonade

Jul 25 2001

Brace yourself – not because stocks have found buyers for the first time in days, but because Lehman Brothers analyst Steve Levy has taken the dare of all dares. The day after the telecom equipment maker Lucent Technologies reported another quarter of losses and charges, sold its fiber-optic cable-production unit on the cheap, and announced that it might cut another 20 percent of its remaining 104,000 employees, Levy upgraded Lucent to a "strong buy."

Levy acknowledges that he may be "very early" with the call, but he says Lucent is positioned to come back ... eventually. On Wednesday morning, Lucent was up 29 cents, or 4.5 percent, to $6.72.

The Lucent upgrade, though, was not the only factor that drove buying. Surprising earnings from major telco SBC, still-solid existing home sales, and an overall feeling of oversold conditions gave the markets a healthier look.

As of 11:30 a.m. EDT, the Nasdaq Composite gained 9.53, or 0.5 percent, to 1968.77. The Dow Jones Industrial Average was up 60.34, or 0.59 percent, to 10301.46, with Home Depot, SBC, AT&T and Boeing outpacing other stocks. The Standard & Poor's 500 gained 5.3, or 0.45 percent, to 1176.95. And The Industry Standard 100 gained 2.15, or 0.63 percent, to 341.36.

San Antonio-based SBC Communications gained $1.45, or 3.55 percent, to $42.25. The No. 2 local phone company in the U.S. reported an 8 percent year-over-year increase in second-quarter profits, excluding extraordinary charges. With earnings of 61 cents per share, the company beat First Call consensus of 57 cents. Verizon and BellSouth were up about 2 percent on the news.

The former parent of the three - Ma Bell herself - was up 57 cents, or 2.9 percent, to $20.03. The Wall Street Journal is reporting that AOL Time Warner is in talks to challenge Comcast's bid for AT&T Broadband. AOL dipped 0.42 percent to $42.52. Comcast gained 1.45 percent to $35.60.

Another AOL Time Warner competitor, USA Networks, was up 15 cents, or 0.57 percent, to $26.30. The company, headed by media mogul Barry Diller and partly owned by Vivendi Universal, showed significant improvement in narrowing its loses from a year ago.

USA Networks' Ticketmaster was up $1.96, or 15.12 percent, to $14.92, after topping cash earnings expectations. Also in the USA family, Hotel Reservations Network was up to $51.50 after starting the week at $48. That company reported a solid quarter Monday morning.

Despite a loss and layoffs, online media play CNET Networks was up 78 cents, or 8.1 percent, to $10.43. Software firm PeopleSoft was also on the move, up $2.15, or 6.3 percent, to $36.39 after beating estimates. Infospace was not as successful this morning, falling 96 cents, or 28.83 percent, to $2.37. The company turned a pro forma profit for the quarter but said things look less rosy for the rest of the year.

Sinking in heavy trading were storage infrastructure player QLogic and marketplace software maker I2 Technologies. QLogic dipped 16 percent to $34.24 as the company lowered its outlook. I2 lost $1.10, or 10.7 percent, to $9.19 on little news.

Cisco and Sun Microsystems were up 2.4 percent while JDS Uniphase dropped 4.4 percent ahead of Thursday's earnings call. Oracle and Siebel were both higher.

On the Big Board, Lucent spinoff Agere Systems dropped 12.3 percent to $5.35. The company lost $1.1 billion for the quarter and lowered its outlook. Liberty Media dropped 1 percent to $15. Nortel gained 4 percent to $7.54 and Global Crossing was up 6.9 percent to $7.56.