Profit warnings in the technology sector dragged US markets down dramatically last night, with the Nasdaq shedding more than 6 per cent of its value and the Dow dropping almost 3 per cent in a session when every one of its constituents ended up in the red. Worries about tension between the US and China only compounded market woes.
It was a day of blood-letting for US software companies battered by the ongoing Nasdaq crash and the plunge in demand for information technology following the disappearance of hundreds of dot.com clients. The Dow Jones ended down almost 300 points, or 2.99 per cent, at 9,485.31. The Nasdaq lost 110.34, or 6.19 per cent, to 1,672.63, a level not seen since October 1998. The broader Standard & Poor's 500 tumbled 39.52 points, 3.45 per cent, to 1,106.35.
"The market is looking for a compelling reason to buy and every day the market gets a compelling reason to sell," said Mr Peter Gottlieb, vice-president and portfolio manager at First Albany Asset Management, which oversees about $500 million in assets.
Several software makers saw their market value plunge after reporting reduced sales and profits caused by the US economic slowdown, and announcing that they would lay off hundreds of employees. Ariba, whose software runs electronic exchanges, said it planned to cut about 700 jobs, or a third of its staff. Inktomi, whose products accelerate Inter net traffic, plans to eliminate 250 jobs, or 25 per cent of its workforce. I2 Technologies, an Internet-commerce software maker, said it would cut as many as 600 from its workforce of about 6,100 people. The tech-rich Nasdaq slid 3 per cent within the first hour of trading and never looked like recovering.
The Dow also fell again after the US Commerce Department reported a fall in orders to factories in February for the second straight month, led by a drop in demand for industrial machinery and transportation products. At least a half-dozen software companies lost huge portions of their share values after reporting that they had cut expected first-quarter results and would eliminate jobs. Seventy per cent of the 1,036 companies that have pre-announced results in the first quarter have issued profit warnings, versus 46 per cent in the year-ago quarter, according to research firm Thomson Financial/First Call. Of the 220 technology companies that have pre-announced so far, 82 per cent have issued profit warnings, versus just 39 per cent last year.
"Economic conditions in the US and Europe have declined more quickly than we had initially anticipated," Inktomi chief executive Mr David Peterschmidt said yesterday. BroadVision, which makes software used for buying and selling goods on line, said it expects a loss before one-time expenses of as much as 16 US cents a share in the first-quarter as sales fell behind estimates. Redback Networks, which makes computer-networking equipment, said it would lay off 150 workers or 13 per cent of staff after reporting a first-quarter loss, excluding restructuring charges and other expenses, of 15 US cents a share, compared with the expected four-cent profit.
Internet service provider PSINet said yesterday it would delay filing its annual financial report, and that it may eventually file for bankruptcy.
