WSJ: Steady Slate of Profit Warnings Depresses Technology Stocks
April 3, 2001
Tech Stocks
By KRISTIN HUSSEY
WSJ.COM
NEW YORK -- Technology stocks skidded lower Tuesday as investors sold shares in anticipation of a rocky first-quarter earnings reporting season.
In midday trading, the Nasdaq Composite Index was down 91.90 to 1691.10, slipping below 1700 for the first time since Oct. 26, 1998. Morgan Stanley's high-tech 35 index was off 26.10 to 477.50 and the Dow Jones Internet Index fell 9.50 to 54.90.
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A parade of earnings warnings from technology companies continued after the close of trading Monday and began anew on Tuesday, sparking the selloff.
The software sector was hit hard as MicroStrategy, Ariba, BroadVision, Inktomi and E.piphany issued warnings.
MicroStrategy fell 63 cents to $1.94 on the Nasdaq Stock Market. The software maker on Tuesday warned of weaker-than-expected first-quarter results and unveiled plans to reduce its work force by one-third as it cuts back on "speculative" technology initiatives (see article5).
Ariba late Monday said it is likely to post a fiscal second-quarter operating loss of 20 cents a share and will lay off a third of its staff, or 700 workers. Wall Street was expecting the leading maker of business-to-business software to earn five cents a share in the quarter ended March 31. Ariba also called off its planned $2.4 billion purchase of Agile Software (see article6). Merrill Lynch cut its rating on the company to "intermediate/neutral."
Ariba fell $1.50, or 23%, to $5, while Agile Software edged up 17 cents to $10.69, both on Nasdaq.
Software makers BroadVision and E.piphany also issued warnings late Monday. BroadVision plummeted $1.44, or 32%, to $3.06 and E.piphany fell $1.88, or 19%, to $7.88, both on Nasdaq.
BroadVision, a maker of electronic-business software, said it would post a surprise loss for its first quarter and disclosed plans to lay off 325 people, or 15% of its work force.
E.piphany, a provider of customer-relationship-management software, said it expects to report a wider first-quarter loss and smaller revenue than analysts were expecting.
Inktomi plunged $3.23, or 52%, to $2.99 on Nasdaq. The company, which makes software to speed the delivery of data over computer networks and search the Web for information, warned of lower revenue and a bigger-than-expected loss and said it would cut its work force by 25%, or 250 employees (see article7).
Merrill Lynch analyst Henry Blodget lowered his rating on the stock to "neutral/accumulate" from "accumulate/buy," citing the company's "eye-popping 70% [quarter-to-quarter] decline in Network Products revenues." Mr. Blodget said that despite Inktomi's "plans to cut headcount by 25% and other cost-saving measures, we do not see profitability until June 2002" and he questioned the long-term impact falling bandwidth prices will have on demand for Inktomi's caching technology.
The software rout continued as Oracle, Siebel Systems, Veritas Software and Commerce One posted heavy losses. Oracle fell $1.79, or 12%, to $13.53; Siebel declined $4.58, or 16%, to $24.07; Veritas skidded $6.76, or $14%, to $40.64 and Commerce One fell $2.39 to $5.46, all on Nasdaq.
Elsewhere, Redback shed $1.29 to $10.41 on Nasdaq. Redback, a company that makes Internet-switching gear, said it expects revenue for the first quarter of $85 million to $90 million, roughly one-third less than the $132.3 million expected by analysts surveyed by Thomson Financial/First Call. Redback said it expects to post an operating loss of approximately 15 cents a share. Analysts had expected earnings of four cents a share.
PSINet was halted at 19 cents Tuesday by Nasdaq officials pending more information from the Internet-services provider. PSINet said that it likely will file for bankruptcy-court protection and may be delisted from Nasdaq. The company also warned that it may record fourth-quarter restructuring and impairment charges (see article8).
Entrust Technologies fell $3.03 to $4.25 on Nasdaq. Entrust said it expects to post a quarterly loss instead of the profit Wall Street was expecting because of a big drop in software-license sales (see article9).
Write to Kristin Hussey at kristin.hussey@wsj.com10
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