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Tech Stocks Plunge on Motorola's Downbeat Sales Forecast

Strategic Insights

— 1 min read

High-tech stocks suffered their worst decline in a month after Motorola Inc. cut its estimate for industry sales growth, sparking concerns about the profitability of major Canadian companies that have significant exposure to the Asia-Pacific region. The Dow Jones industrial average fell 76.73 points, or 0.9 per cent, to 8,956.50, while the Nasdaq composite index dropped 30.43 points to 1,798.71, their worst decline since March 5. In Toronto, the Toronto Stock Exchange 300 composite index fell 66.03 points, or 0.9 per cent, to 7,579.79, its steepest slide since falling 1.7 per cent on Jan. 22.

Key Takeaways:

  • The Dow Jones industrial average fell 76.73 points, or 0.9 per cent, to 8,956.50, marking the worst decline in a month.
  • The Nasdaq composite index dropped 30.43 points to 1,798.71, their worst decline since March 5.
  • The Toronto Stock Exchange 300 composite index fell 66.03 points, or 0.9 per cent, to 7,579.79, its steepest slide since falling 1.7 per cent on Jan. 22.
  • Motorola cut its estimate for industry sales growth by about half, citing poor economic conditions in Asia.
  • The maker of computer chips and wireless phone equipment also said first-quarter earnings plunged 50 per cent and warned that product prices in Asia would fall further.
  • Semiconductors companies like Intel and Microsoft fell along with Motorola, as the news raised concerns about the profitability of major Canadian companies with significant exposure to Asia.
  • Northern Telecom, a major Canadian telecom equipment maker, attributed 7 per cent of sales to Asia in 1997, while Newbridge reported 18 per cent of total sales to the region.

Statistics:

  • The Dow Jones industrial average fell 76.73 points, or 0.9 per cent, to 8,956.50.
  • The Nasdaq composite index dropped 30.43 points to 1,798.71, a decline of 1.7 per cent.
  • The Toronto Stock Exchange 300 composite index fell 66.03 points, or 0.9 per cent, to 7,579.79.
  • Motorola's first-quarter earnings plummeted 50 per cent.
  • Northern Telecom attributed 7 per cent of sales to Asia in 1997.
  • Newbridge Networks reported 18 per cent of total sales to Asia.

Sources:

  • Bloomberg News
  • ScotiaMcLeod Inc.
  • Motorola Inc.
  • Northern Telecom Ltd.
  • Newbridge Networks Corp.
  • BCE (Bell Canada Enterprises)

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