Wall Street Technology shares close sharply lower on profit-taking

SAN FRANCISCO (AFX) - Prices of technology shares closed sharply lower, with investors choosing to take some profits after a six-day winning run on the Nasdaq composite, dealers said. 

At the 4.00 pm close, the Nasdaq composite slipped 70.06 points, or 2.9 pct, to 2,243.79. Volume came in at 1.85 bln shares, with 1,454 issues closing higher, 2,412 declining, and 372 remaining unchanged.

The Nasdaq 100 lost 82.06 points to 1,960.87 and the Philadelphia semiconductor index (SOX) dropped 34.51 to 660.23.

In the broader market, the DJIA was 149.8 down at 11,107.3 while the S&P 500 index shed 19.99 to 1,289.39.

Analysts said today's losses were hardly surprising given that the Nasdaq composite has surged 11 pct over the last 6 days.

"It was kind of inevitable that we saw losses today following the rally of recent which has pushed up valuations in the sector," said a dealer.

The losses were led by chip equipment stocks, which fell after the latest batch of industry data showed that demand for capital equipment among chip makers continued to fall last month.

According to the latest SEMI report, the April book-to-bill ratio, which measures the relationship between orders and shippings, hit a 10-year low of 0.42 from a revised 0.59 in March.

Analysts said improving orders are a harbinger of improved revenues.

In April, global semiconductor equipment orders totaled 711.8 mln usd and shipments slipping to 1.68 bln. 

Those hardest hit by the news were chip equipment groups, with Applied Materials down 3.65 usd to 52.94 and KLA Tencor 3.56 weaker to 55.52.

Chipmakers fell in sympathy with Intel down 0.73 at 28.80, and Advanced Micro Devices 1.33 weaker at 32.66. 

Micron outperformed the rest of the chip sector, falling 0.56 to 40.26, after it was added to Goldman Sachs' 'recommended list', with the brokerage arguing that the memory-maker will be the chief beneficiary of an expected 2002 rebound in DRAM prices.

In computer hardware, Sun Microsystems fell 1.05 to 21.71 after Goldman Sachs said the group is unlikely to see business pick-up over the short term.

In a note to clients issued after a meeting with company executives, Goldman's Laura Conigliaro said she does not expect Sun to "hint at any reason for upside" when it gives its mid-quarter update next Tuesday.

In software, Oracle dropped 0.74 to 16.84 as Merrill Lynch reduced its estimates for the company's fourth-quarter profits, and said Oracle's recovery will lag that of its rivals. 

In the harware sector, Dell added 1.04 to 26.98, after Goldman Sachs and Merrill Lynch made some bullish comments on the stock.

In a note to clients, Goldman analyst Joe Moore added the PC maker to his 'Recommend List' and said Dell is set up for a "very strong" earnings recovery once the computer market picks up.

Elsewhere, Merrill's Joe Osha added Dell to his 'Focus One' list, saying the computer maker has "outstanding" long-term prospects.

Osha reiterated his 'buy' rating and price target of 32 usd.

Compaq was given a "market outperformer" rating in initial coverage by Goldman Sachs analysts, who said the hardware maker is undervalued on a price-to-sales basis.

Although Compaq faces a number of strategic issues in the near term, the stock is likely to prosper once the U.S. economy begins to recover, Goldman argued.

The stock lost 0.33 to 17.38.

In the internet sector, Merrill Lynch has raised its price target on AOL Time Warner Inc following the announcement yesterday that the group's flagship internet service provider business is hiking subscription charges in the U.S.

AOL slid 0.87 to 55.28.

Elsewhere, Lucent Technologies succumbed to profit-taking and speculation that its proposed acquisition by Alcatel would pose U.S. security regulatory issues.

Lucent fell 0.24 to 9.66.

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