Midday Report: Nasdaq Tumbles Below 2,000

Technology stocks were falling again at midday Monday, dragging the Nasdaq Composite Index below the 2,000 level for the first time since December 1998.

Job cuts at networking giant Cisco (Nasdaq: CSCO) and profit warnings from cell phone maker Ericsson (Nasdaq: ERICY) and Silicon Storage Technology (Nasdaq: SSTI) fueled the decline.

At midday, the Nasdaq index was down 102.22 at 1,950.56, led by drops in Cisco, Sun Microsystems (Nasdaq: SUNW), Oracle (Nasdaq: ORCL) and Intel (Nasdaq: INTC).

On December 3, 1998, the Nasdaq closed at 1,954.33. It crossed the 2,000 barrier the next day and the 3,000 barrier less than a year later.

Cisco Downgraded

Cisco, down US$1.90 at $18.73, confirmed reports that it would lay off workers, sparking a round of analyst downgrades Monday morning.

The company said it would cut 2,500 to 3,000 temporary and contract workers, along with 3,000 to 5,000 full-time jobs, and take a $300 million to $400 million charge to this year’s earnings.

President and chief executive officer John Chambers blamed a weakening economy and slowdown in capital spending that he said could last beyond the first half of the year.

Analysts at UBS Securities, Robertson Stephens and First Albany were all reported to have downgraded Cisco following the news.

Dow, S&P Lower

Other stock-market measures were also lower, with the Dow Jones Industrial Average down 237.30 at 10,407.32, and the Standard & Poor’s 500 stock index 34.51 lower at 1,198.91.

Ericsson, down $1.72 at $6.66, said business is worse than it previously thought, and that it expects to report a loss for the quarter ending in March. The company had expected breakeven results.

Silicon Storage Technology fell $1.69 to $8.81 after issuing a similar warning. The company, which makes semiconductor parts, said revenue, gross margin and per-share results for the current will be “significantly lower than previously expected,” as the economic slump continues to constrain demand for its products.

Webvan Gets a Lift

The E-Commerce Times Index was down 5.28 percent at midday, with Webvan (Nasdaq: WBVN) the only issue that was not falling.

Webvan was unchanged at 22 cents, wiping out a morning gain, after rival e-grocer Peapod said it was no longer serving San Francisco, transferring its business in that city to Webvan.

eBay (Nasdaq: EBAY) was down $1.81 at $32.19, even after a piece of good news. The online auctioneer announced an alliance with Microsoft to collaborate on e-commerce and expand each other’s presence on the Web.

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