Sun, Jul 21, 2002 page10

• Infineon, Ericsson and Nokia decline

  • BLOOMBERG
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  European stocks tumbled Friday, sending the Dow Jones Stoxx 50 Index to its 10th weekly drop in 13, on concern the dollar's slump may hurt profit at exporters such as Infineon Tech-nologies AG and as companies including Ericsson AB raised more money from shareholders.

  The Stoxx 50 tumbled 5.4 percent to 2,642.54, erasing three days of gains. Nokia Oyj, which yesterday cut its forecast for the mobile-phone industry's sales this year, slid after Ericsson also lowered its estimate. The Stoxx 600 Index shed 4.4 percent to 225.61, led by banks including Barclays Plc.

  The dollar's slump to a 2 1/2-year low against the euro and dwindling demand have fueled concern about corporate debt, forcing companies such as Ericsson to sell shares when many investors are loath to buy them. The Stoxx 600 has fallen 25 percent this year, wiping more than 1.8 trillion euros (US$1.8 trillion) off the the value of its members.

  "It will take years for people to feel confident again." said Andy Nigg, who helps manage about SF20.1 billion (US$13.95 billion) in global assets at Vontobel Asset Management in Zurich. Share prices "have plunged, and anyone who isn't concerned is living in La-La Land."

  Benchmark indexes fell 4 percent or more in Europe's eight biggest share markets. Nine shares declined for every one that advanced in the Stoxx 600.

  Infineon, Europe's second-largest semiconductor company, fell 3.5 percent to 16.89 euros. The dollar's slump against the European currency cut sales by 30 million euros in the third quarter, the company said.

  A weaker dollar makes products from companies based in the 12 countries using the euro more expensive for US consumers. It also erodes the value of European companies' US sales when they're changed into euros. Infineon got about a quarter of its revenue in the US last year.

  Ericsson, the world's biggest maker of mobile-phone network equipment, slid 18 percent to 11.9 Swedish kronor. The company is selling US$3.3 billion of stock at 74 percent less than Thursday's closing price to raise money after five quarterly losses.

  The size of the discount shows that "investors need to be offered a lot of upward potential before they put money into Ericsson," said Lukas Daalder, head of research at Oyens & Van Eeghen in Amsterdam.

  Investor AB lost 4.1 percent to 70 Swedish kronor, and Industrivaerden AB shed 2.6 percent to 112 Swedish kronor. The holding companies, which together control two-thirds of Ericsson's voting rights, said they'll buy more shares than they had previously agreed to purchase.

  Cookson Group Plc, a supplier of materials and components for circuit boards to customers including Nokia, plunged 33 percent to 33 pence. The UK company said it will sell shares worth ?277.5 million (US$439 million) to cut debt.

  Tight fisted

  Ericsson and Cookson are turning to shareholders when other companies are having difficulty raising money via stock sales.

  Investec Plc, South Africa's fastest-growing bank, may have to cancel or trim its sale of 18 million shares, worth as much as 175 million pounds, after buyers balked at the asking price.

  "It's just the wrong time for an investment bank to try to raise capital," said Jacques Badenhorst, an analyst at JP Morgan in Johannesburg who rates Investec "buy."

  Nokia dropped 5.2 percent to 12.99 euros. The world's biggest mobile-phone maker yesterday lowered its forecast for industry sales to 400 million phones from 420 million. Ericsson said today it expects companies to sell as many or "slightly" fewer phones than last year's 390 million, below its prior forecast of 400 million to 420 million.

  Also weighing on shares, Microsoft Corp, the world's biggest software company, cut fiscal 2003 sales and earnings forecasts.

  The technology group was the biggest decliner in the Stoxx 600, shedding 6.3 percent as 35 of its 36 members fell.

  Epcos AG slumped 16 percent to 22.30 euros. The German electronics-components maker posted a quarterly loss and said it doesn't expect its business to improve this fiscal year.

  "We still have a long way to go" before faith in an earnings rebound is restored, said Michael Lengweiler, who manages 500 million euros in European shares at Bank Sarasin & Cie. He's avoiding insurance stocks.

  "I'm not that confident about a market recovery."

  Royal Dutch Petroleum Co. lost 2.1 percent to 45.50 euros, and Unilever NV fell 2.5 percent to 55.85 euros. After US exchanges close, the owner of 60 percent of Royal Dutch/Shell Group and the world's biggest food and soap maker will be dropped from the Standard & Poor's 500 Index.

  Royal Dutch has lost 21 percent, the fifth-biggest loss in the Stoxx 50, since S&P said the company would leave the S&P 500.

  Unilever shares have declined 17 percent. Royal Dutch has been a member of the S&P 500 since 1957, and Unilever has been in the index since 1961.

  Novartis AG fell 6.1 percent to 50.5 Swiss francs. Indian drugmaker Dr. Reddy's Laboratories Ltd. challenged a US patent held by Europe's third-largest pharmaceutical company for the antifungal medicine Lamisil, Novartis' fourth-best-selling drug.

  Vivendi Universal SA dropped 4.1 percent to 17.45 euros.

  The world's second-largest media company may postpone reporting its first-half earnings next week after changes in its top management, a spokesman said. The company was expected to report July 26 and hasn't set a new date.

  Edinburgh Fund Managers Group Plc fell 18 percent to 207.5 pence.

  The Scottish asset manager was fired by the board of its flagship trust because of lagging investment performance.

  Fitzhardinge Plc dropped 13 percent to 102.5 pence. The UK property-services company said full-year income will lag the previous year, citing "muted" demand from the financial-services and telecommunications industries.

  WCM Beteiligungs-und Grundbesitz AG climbed 5.5 percent to 3.48 euros. Investors Karl and Ingrid Ehlerding said they raised their stake in the German investment company in recent months, rejecting press reports they are selling shares.
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