US technology shares fell sharply on Wednesday as investors took fright at results issued late the previous day by the Canadian telecoms and internet equipment supplier Nortel Networks.

Nortel shares slumped 29% in heavy selling on the New York Stock Exchange.

The Toronto Stock Exchange, where the company is also listed, was forced to suspend trading in the stock after being overwhelmed with buy and sell orders.

The urgent selling of Nortel sparked a wider sell-off, with New York's technology-dominated Nasdaq Composite index sliding 6% to stand at 3,229.57 at the close.

"Old economy" rise

The Dow Jones Industrial Average of US blue chips was also lower, forced down by falls in computer industry stocks including Hewlett-Packard.

Telecoms giant AT&T was another big loser, dropping 13% after saying it would split itself into four separately traded companies.

The move was intended to help reverse the prolonged slump in AT&T's share price by separating the better performing divisions - wireless, broadband and business - from the struggling consumer telephone division.

But the shares fell as investors reacted to AT&T's unexciting growth prospects.

Despite some large individual losses, the Dow's fall was tempered by rises in prices of "old economy" issues including pharmaceuticals and financials as tech-wary investors reverted to safer homes for their cash.

The index ended 1% lower at 10,326.48.

Nortel revenue disappoints

Nortel had earlier reported third-quarter net earnings of $574m, or 18 cents a share, modestly ahead of analyst expectations.

Optical network revenue - the focus of investor attention - was 90% improved but was perceived as disappointing after analysts had earlier said they expected revenue growth of 120-125%.

When the selling of the telecoms firm's shares began, the most immediate knock-on effect was felt by the Toronto Stock Exchange (TSE) 300 index, of which Nortel is the leading component.

The TSE 300 ended the day 840.30 points, or 8.1%, down at 9,511.80 - its lowest finish since 1 June.

As US markets closed, investors were left with the prospect of more bad news to come.

Robert McTeer, president of the Federal Reserve Bank of Dallas, said that Friday's first estimate of third-quarter US gross domestic product might show a substantial slowing in the national economy.

"Be prepared for a fairly dramatic slowdown," he told the San Antonio Rotary Club in a speech.