Gloomy forecasts nail tech stocks

Summary:Technology issues took a turn for the worse Tuesday as a flurry of profit warnings and downgrades pushed the NASDAQ composite down 24.34 points to 1606.

Technology issues took a turn for the worse Tuesday as a flurry of profit warnings and downgrades pushed the NASDAQ composite down 24.34 points to 1606.38. The Dow, however, managed to scramble for a slight gain of 5.72 points to close at 8018.83.

Tuesday's tech sell-off began after Western Digital Corp. and Cabletron Systems Inc. issued warnings that pricing competition and slower sales would dampen fourth-quarter earnings prospects. Western Digital fell $1.81 per share to $19.31 while Cabletron Systems was off $7.50 per share to $15.69.

The announcements had something of a cooling affect on most disk-drive stocks as Seagate Technology Inc. shares sank 25 cents to $23.88 and Quantum Corp. lost $3.25 per share to $24.25.

If the two firm's profit warnings were the only bad news, investors likely would have maintained the strong rally started Monday, but there was more bad news.

Virtually the entire semiconductor industry took a blow when leading brokerage firms downgraded some of the industry's leading companies.

Altera Corp., which shed a stunning $10.88 per share to $40.81, was downgraded by Morgan Stanley Dean Witter, Volpe Brown Whelan & Co., and ABN Amro. Competing Xilinx Corp., which also manufacturers programmable logic devices, fell $6.50 per share to $33.94 in Tuesday's carnage.

"There are going to be days like these," said Rick Faust, an analyst at Forum Capital Markets. "Orders are lower than expected and margins are shrinking fast. This in the inevitable response."

When a couple of companies in a particular segment get hit, the virus tends to spread. Intel Corp. sank $3.50 per share to $78 while Advanced Micro Devices Inc. and IBM lost $1.25 and $1.88 per share, respectively.

PC makers weren't immune to the bug, either, as Dell Computer Corp. lost $1.81 per share to $88.25; Compaq Computer Corp. shed $2.13 per share to $63.88, and Gateway 2000 Inc. fell $1.69 per share to $28.06.

Networking stocks, for the most part, were also victimized. Cisco Systems Inc. fell $3.94 per share to $86.50, even though Merrill Lynch upgraded the company to a long-term "buy" from a long-term "accumulate." 3Com Corp. slid $3.06 per share to $35.31 and Ascend Communications Inc. dropped $1.81 per share to $23.75.

In a day of ugly trading, Lycos Inc.'s 72-cent gain was impressive. The Internet search firm escaped the firestorm that scorched competitors Yahoo! Inc., down $1 to $53, and Excite Inc., down 75 cents per share to $24.69.

Among other actively traded issues, Microsoft Corp. was off $1.56 per share to $142.25 and Oracle Corp. lost $1.50 per share to $30.28. Netscape Communications Corp. shed 94 cents per share to $27.94 and Sun Microsystems Inc. was off 56 cents per share to $37.81.

Topics: Cisco, Dell, IBM, Intel, Malware, Microsoft, Oracle

About

Larry Barrett is a freelance journalist and blogger who has covered the information technology and business sectors for more than 15 years. Most recently, he served as the online news editor for 1105 Media's Office Technology Group and as the online managing editor for SourceMedia's Investment Advisory Group publications Financial Pl... Full Bio

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