Wall Street - Technology shares flat

Shares in technology companies traded relatively unchanged in midsession trade made cautious by continued concerns about a conflict in Iraq, although shares in Intel rose on comments by its CEO and analyst comment on Cisco sent its shares tumbling, dealers said.

At 1.40 pm in New York trade, the Nasdaq composite slipped 5.19 points or 0.45% to 1,134.71. The index has so far traded in a narrow range of 1,125.76-1,145.79 after opening slightly down from Friday's close.

Volume came in at 783 million shares, as a total of 3,135 issues traded on the exchange. Declining issues sharply outpaced risers, with 2,170 of the total stocks traded so far Nasdaq stocks falling, 970 rising and 1 remaining unchanged.

The Nasdaq 100 index of leading non-financial issues managed a gain of 1.74 points or 0.21% to 817.14 and the Philadelphia semiconductor (Sox) index pared 1.45 points or 0.63% to 225.50.

The DJIA added 18.31 points or 0.24% to 7,546.71 and the S&P 500 edged fractionally lower by 0.42 points or 0.05% to 800.16.

There was a relative lack of strong corporate news in the technology sector, leaving investors to express their jitters about possible US military action against Iraq ahead of a scheduled speech by President Bush set for this evening, dealers said.

However, relatively upbeat comments from Intel's Craig Barrett helped push shares in the world's largest maker of computer chips higher. Barrett was quoted in the Financial Times as predicting a possible recovery in the computer sector by next year.

The telecoms sector, however, may not improve before early 2004, Barrett was quoted as saying.

Shares in Intel added $0.31 or 2.26% to 14.02. AMD, Intel's main rival, fell $0.11 or 3.13% to 3.40.

On the downside, shares in Cisco dropped after Goldman Sachs and Deutsche Bank reduced earnings estimates on the company, with both brokers citing a deteriorating trading environment. Cisco lost $0.36 or 3.81% to 9.10.

First Albany chief investment officer Hugh Johnson told AFX News that he sees little impetus to invest in technology in the current environment.

"The basic theme I keep hearing over and over again is that there's so much excess capacity in every tech space and there's no pricing power," Johnson said.

"So they're not only losing money, but there's really no light at the end of the tunnel."

The beleaguered industry is likely to undergo a wave of consolidation, with technology players with strong balance sheets swallowing their more-troubled peers, he said. Companies at the "highest-tier" are likely to take part in that M&A activity, according to Johnson.

Johnson, who has underweighted technology since Oct 2000, recommends investors look at defensive issues as a more attractive alternative to technology.

"We're talking big-time boring," he said, pointing to segments like consumer staples, food and household products. The CIO also likes areas including healthcare and some industrial issues.

And while some players may be enticed into technology stocks given their apparently rock-bottom prices of late, Johnson said the same argument could have been used at much higher levels.

"It's just not my style but some people want to take that risk," he said.

"When we get good days, we see huge movements in some tech stocks, but it's very speculative."

Oracle lost $0.23 or 2.80% to 7.97. The corporate software maker's CFO said in a Wall Street Journal interview that the European software segment is now being hit by the sharp decline that has taken its toll on the US for over a year.

However, he still believes the tech sector is close to hitting a bottom. The CFO reiterated the company's 2003 sales targets.

Microsoft added $0.77 or 1.76% to 44.54.

Shares in AOL Time Warner dropped $0.43 or 3.64% to 11.38 amid fresh reports of an SEC investigation into its sales accounting and amid continued earnings worries, dealers said.

Nortel came off earlier lows and added 1 cent or 2.0% to 51 cents as the market welcomed news of the sale of its ailing optical component business to Bookham Technology in a deal worth around $108 million. Nortel also set a $120.0 million supply agreement with Bookham.

Hardware makers were mixed with Gateway dropping 10 cents to 2.90 after UBS analyst Don Young widened his third quarter to end-September loss per share estimate to 15 cents from 13 and fourth quarter loss per share to 7 cents from a previous forecast of a 1 cent loss.

He attributed the move to the ongoing weak technology environment which has as yet not shown any sign of near-term improvement.

Other hardware stocks were faring better as HP rose 7 cents to 57.80 and IBM climbed $1.12 to 57.70.