European techs battered

September 5, 2001 Posted: 1608 GMT

LONDON (CNN) -- Europe's key bourses closed sharply lower on Wednesday, with tech shares taking a beating amid fears of a prolonged downturn in demand.

Investors ran for cover following a warning by Europe's largest software company, SAP (FSAP) of Germany, that the information technology (IT) industry might already be in recession, and that there was no sign of a turnaround.

French telecom equipment maker Alcatel also added to the gloom after issuing a thinly-veiled warning that it may not make an operating profit in 2001.

London's FTSE 100 fell 1.2 percent at 5,316.0, while the CAC 40 in Paris lost 2.2 percent to reach 4,571.56. The electronically-traded Xetra Dax fell 2.5 percent to close at 5,079.20 in Frankfurt.

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Europe's tech selloff came a day after U.S. investors gave a cool reaction to Hewlett-Packard's $25 billion buyout of rival Compaq failed to inspire investors, sending U.S. markets lower on Tuesday.

Europe's No. 4 telecom equipment maker, Alcatel (PCGE), was the worst performer on the CAC 40 in Paris, sliding 11.5 percent after its chief, Serge Tchuruk, said the group was aiming for an operating profit this year, but warned this would be a challenge in current market conditions.

Tchuruk's remarks appeared more cautious than comments made by the company in late July, rattling investors.

Just a day earlier, Sweden's Ericsson, a key rival to Alcatel, had also issued a gloomy outlook for 2002, and beleaguered British telecom equipment company Marconi ousted both its chief executive and chairman and issued another profit warning.

Ericsson and Finland's Nokia, the world's largest mobile-phone maker, both dropped almost 8 percent.

Telecoms in the doghouse

Marconi (MONI) was the main decliner in London extending the previous session's losses, tumbling 28.3 percent. The company issued another profit warning, as well as departed company with its chairman and chief executive, and noted 2,000 additional job losses.

Cable TV operator TeleWest Communications(TWT) dropped 15 percent. Spirent (SPT), a maker of telecom testing equipment, lost 6.8 percent, and Britain's No. 1 electronic goods retailer, Dixons Group (DXNS), dropped 7.8 percent, after reporting a decline in same store sales.

Colt Telecom Group (CTM), a provider of business telecom services, was off 12.7 percent while data services company Energis (EGS) fell 6.5 percent.

In Paris, France Telecom (PFTE) slid 7.3 percent, even after it forecast it would increase underlying earnings at an average annual rate of 15 percent in the coming years.

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The continent's biggest computer services group, Cap Gemini (PCAP), fell 6.2 percent. STMicroelectronics (PSTM), Europe's largest chipmaker, was down more than 5 percent.

In Frankfurt, chipmaker Infineon Technologies (FIFX) topped the list of losers, falling 6.8 percent.

Engineering and communications conglomerate Siemens (FSIE) dropped 5.4 percent and SAP (FSAP) was down 5.3 percent following its warning.

Deutsche Telekom (FDTE) was 3.2 percent lower and Epcos (FEPC), the biggest electronic component maker on the continent, fell more than 3 percent.

Shares in Italy's Olivetti, which owns Telecom Italia, plunged more than 15 percent amid concerns the company and its parent, Pirelli, may issue shares and bonds worth as much as $15 billion to reduce its debts. Telecom Italia, Italy's dominant phone company, dropped 8.3 percent and Pirelli lost 8.1 percent.

IT index slumps

The information technology, computer and telecom sectors were the chief losers on the pan-European FTSE Eurotop 300 index, dragging it 1.4 percent lower. The IT sub-index alone lost 7.3 percent.

In Amsterdam, the AEX index lost 1.7 percent and the SMI in Zurich was off 0.8 percent. Milan's MIB30 fell 3.2 percent.

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