Blue Nile Plunges 20%

123jump.com Staff
08 Feb, 2006
New York City

Early gains in market are supported by investors faith in Cisco earnings, pepsiCo meeting analyst projection of 65 cents and fall in oil and gold prices. Markets in Asia close lower and in Europe trade mixed at mid-day session. Market awaits weekly petroleum inventory report. Blue nile plunges 20% on lower than expected earnings, lowered earnings guidance and higher marketing costs. GM decline 3.5%. Energy stocks lead decliners and brokerage stocks lead gainers in the morning trading.

Market Update

After rough patch of few trading days market seems to be in the rebound mood. A fresh batch of earnings suggests that market may be able to sustain a weak rally at least for today.

Woes at General Motors are expected to dominate the early hours of trading. Yesterday’s cut in dividend and management salaries and retirement benefits are certainly steps in the right direction but are not likely to help the company at least in the near future. Market fears that more significant cuts from labor and management may be necessary and that too very soon. Apart from cost cutting, General Motors still does not have turnaround plan to protect and grow its market share in North America.

General Motors ((GM)) shares decline 3% in the early trading.


Earnings News

On the earnings from Cisco ((CSCO)) reported earnings of 22 cents vs. 21 cents a year ago. Net revenue declined on rise in sales of 9.3%. Cisco is the most active stock on Nasdaq up 5% at the opening.

PepsiCo ((PEP)) reported fourth quarter profit of 65 cents vs. 58 cents a year ago on revenue growth of 15% to $10.1 billion. For the full year 20005 the company profit fell to $2.39 from $2.44 per share on revenue growth of $32.56 billion from $29.3 billion.

Blue Nile ((NILE)), online jewelry retailer shares plunged 20% at the opening on earnings report. The company reported earnings of 29 cents vs. 24 cents a year ago on revenue growth of 13.5% to $73.2 million in the fourth quarter.

The company missed analysts’ projection of 33 cents per share earnings. For the year 2005 earnings grew to $13.2 million or 71 cents per share from $10 million or 56 cents a share a year ago. For the first quarter the company projected sales of $47 million and profit of 10 to 11 cents a share well below analysts projection of 16 cents.

Corporate News

Nortel Networks Corp. ((NT)) stated that it has reached preliminary settlement with two shareholders class-action lawsuits. The total settlement worth $2.74 billion has terms involving stock, cash and future contributions. The company will pay app. $570 million cash and issue 14.5% of new equity and contribute 50% of any proceeds received from future collections from lawsuits against former executives.

Pfizer ((PFE)) plans to spin-off its consumer products division representing 8% of its total sales or revenue of $3.88 billion. The stock is trading 3% higher at the opening.