TECH STOCKS: Techs Turn Positive As Starent Soars On Cisco Deal

By Benjamin Pimentel

The tech sector turned positive Tuesday as shares of Starent Networks soared on news of a merger deal with Cisco Systems.

The Nasdaq Composite Index (RIXF) recovered from earlier losses to rise 0.3% to 2,145. The Morgan Stanley High Tech 35 Index (MSH) and the Philadelphia Semiconductor Index (SOX) were each up about 0.4%.

The big news of the morning was Cisco Systems' (CSCO) announcement that it was buying Starent Networks (STAR) for $2.9 billion, making it the networking gear maker's second major purchase in three weeks.

Cisco was up about 1%, while Starent, which makes mobile infrastructure equipment, soared more than 15%.

Meanwhile, Intel Corp. (INTC), which is on deck to report third-quarter financials after the market closes, was up 1.3%, even as the debate on where the chip industry is headed continued.

"We believe that increasing concerns regarding double ordering and cancellations will trump generally better results and guidance this earnings period," Jefferies & Company analyst Adam Benjamin said in a note.

Bank of America analyst Sumit Dhanda offered a different take, saying in a note, "While the inclination of late seems to be to view any outsized beats with a dose of strong skepticism, and as a precursor to troubles ahead (double ordering that sets the stage for cancellations, for instance), we think concerns here are overdone."

More data expected this week as the tech earning season kicks off should help clarify some of these concerns. Intel's arch-rival, Advanced Micro Devices (AMD), reports on Thursday. The chip maker's shares were up about 0.8%.

Meanwhile, other tech giants also declined, including Dell Inc. (DELL) and Hewlett-Packard (HPQ).

Other tech players were in positive territory, including eBay Inc. (EBAY) and Amazon.com (AMZN).