FTSE DOWN AS U.S NEWS HITS SENTIMENT
Copyright 2001 www.ananova.com

[ December 13th 2001 ]

UK technology slumped in morning deals, conspicuously underperforming the flat broader market, dragged down by a welter of negative news from US tech firms overnight, UK based information carrier Ananova reports today.

Overnight, the Nasdaq composite added 9.45 points to 2,011.38, while the sentiment in Asia was much weaker. The Nikkei 225 index closed at 10,433.45, a loss of 368.07 points, while the Hang Seng index finished the morning session down 169.84 points at 11,677.22.

Sentiment was hit hard in opening deals here on the back of a spate of disastrous news from the US tech sector after the close of trading in New York, not least of which was another round of huge job cuts at Applied Materials and rumours that Global Crossing is about to go out of business.

Bank debt in Global Crossing, the beleaguered Bermuda-based fibre-optic network, underwent a dramatic sell-off yesterday on rumours that one of its subsidiaries drew down around £200 million of a bank facility. The intention was to shield the money from a Chapter 11 bankruptcy filing, suggested some analysts.

Also souring proceedings overnight was another series of deep job cuts at chip equipment maker Applied Materials. The company said it would cut around 1,700 jobs, or 10% of its workforce, due to the continued slump in the chip market. In September, the company announced some 2,000 redundancies.

Logica was by far the biggest faller on the blue-chip shares after the IT services and software maker slashed its sales growth target for its Mobile Networks unit to 30% - 10 points lower than its previous forecast. Logica relies on the continued expansion in this division for the bulk of group revenue growth, so the warning that mobile revenue will be below forecast came as a real blow to company followers.

ABN Amro cut its rating to 'hold' from 'add' after the update, while UBS Warburg also turned more negative, cutting its full-year revenue estimates by 5%. While reaffirming the guidance it gave at its Nov 8 annual general meeting of confidence in delivering strong financial performance, Logica admitted that UK revenue growth has been weak, with strong public sector growth offset by declining revenues in telecoms. Logica dumped 119 pence to 711 while CMG, Logica's main rival both in UK IT services and short messaging service software, dipped 23 to 237.

In software, insurance specialist Innovation rose 2 to 327-1/2 after disclosing that its current trading continues to provide increased forward visibility of revenues and therefore it remains confident in the outcome for the full year to Sept 30 2002. In computer games software, Eidos extended yesterday's falls after Goldman Sachs cut its sales estimates by 15% and slashed its EBITDA forecast to break-even after the company's interim figures yesterday. Shares were down 4-1/4 to 176-1/4.

Meanwhile, Warthog slid 2-1/2 to 52-1/2 after warning that profits for the full year will be lower due to the expected delay by the publisher in the launch of Rally Championship on PlayStation 2. The comments came as the company reported a dip in first half profits, but gave an upbeat long-term outlook for the company and the video game industry as a whole.

UK chip issues were also much weaker in the wake of Applied Materials's latest job cuts, with ARM Holdings down 8-1/2 to 350, and Parthus falling 2-1/2 to 37. Telecoms equipment stocks also took a fall as the possible bankruptcy of Global Crossing sent a shiver through the sector. Marconi slumped 1.90 pence to 47.00 and Spirent fell 2-3/4 to 61-1/2.

In other news, Psion slipped 3 to 99 after admitting that weak macroeconomic conditions have affected Psion Teklogix revenues in North America. The wireless technology group, however, said it expects group revenues and operating profits to be in line with current market expectations.