Tech warnings piling up

A succession of profits slides led by tech heavyweights Cisco and Philips, with warnings of worse to come, sent shudders across world stock markets on Tuesday.

New York stock markets fluctuated during the afternoon, opening lower, moving into positive territory and then retreating.

The Dow Jones Industrial Average was down about 0.2%, while the tech-dominated Nasdaq had shed 0.5% at 1610 GMT.

London's FTSE 100 index closed down 5.5 points at 5761, while the leading French and German share indexes also hovered below last week's closing level.

We see no signs that the slowdown in economic activity in certain parts of the world, particularly the US, is near its end

Philips

Cisco and Philips have seen profits tumble in what Cisco chief John Chambers described as "the fastest any industry our size has decelerated".

Cisco is cutting 8,500 jobs and says its sales are likely to fall 30% in the current three month period as the slowdown continues.

Dutch firm Philips Electronics, Europe's largest consumer electronics firm, reported an 82% fall in pre-tax profits and says it is cutting 7,000 jobs.

"We see no signs that the slowdown in economic activity in certain parts of the world, particularly the US, is near its end," he said.

Warnings stacking up

There was little let up in the flow of bad news as online broker Charles Schwab reported a 62% fall in profits, and telecoms group Sprint saw its some of its profits slide more than 70%.

Camera and film company Eastman Kodak also reported sharply lower profits and outlined a restructuring which will see about 3,500 jobs cut.

There was some good news from the health care products group Johnson and Johnson, which reported 14% jump in first-quarter earnings.

Similarly, US tobacco and food conglomerate Philip Morris announced a 4% rise in earnings for the same period.

However, there are also reports that mobile phone maker Ericsson is planning to cut anything upwards of 6,000 jobs. Motorola and Marconi both axed thousands of jobs last week.

The warnings provided a downbeat start to America's corporate earnings season, which is underway in earnest this week.

More than half of the 30 blue chips on the Dow will publish their reports for the first three months of 2001, among them Intel, Microsoft and IBM.

Last week we got our toes wet, but we get soaked this week when the floodgates open

First Call

Also awaited are earnings from heavy-hitters such as General Motors.

Analysts are expecting the grim news to continue.

"Last week we got our toes wet, but we get soaked this week when the floodgates open," said US financial research company First Call.

The company is expecting corporate profits for the first three months of 2001 to fall by more than 8.5% - the weakest in a decade.

The previous worst quarter for earnings was summer 1991, when profits fell 17.9%.

Banking sector

On Monday, it was the turn of the banks, with Citigroup, the largest financial services company in the US, posting a 7% fall in profits.

The bank blamed the US slowdown - specifically weaker revenues from advising companies on new stock offerings and investment losses - for the reduced earnings.

Bank of America also saw a drop in profits, of 16.5% to $1.87bn (£1.3bn).

Meanwhile, Continental Airlines, America's fifth largest airline, said on Monday that its first quarter earnings had plunged 36% as business travel purchases weakened amid the slowing economy.

With stock markets remaining close to their low points of recent years, analysts will be looking for any signs, however small, of a turnaround or more optimistic predictions for the next few months.

Technology stocks saw a rebound last week, with their second best weekly gain ever.