Wall Street Beat: IT gets hit in market slump

Tech vendor shares were slammed in the worst six weeks on exchanges since the dot-com bust

Major U.S. stock markets on Friday closed for a sixth straight week of losses, the worst weekly losing streak since the third quarter of 2002, during the dot-com bust.

Nasdaq computer company shares suffered some of the worst declines this week, to the point where they are down about 2 percent for the year. The Nasdaq composite closed at 2,643.73, down by 41.14, the worst decline in terms of percent of the major U.S. exchanges. Even Apple, whose announcement of a new operating system and iCloud Web-based hosting service at the World Wide Developers Conference this week spurred analysts to raise recommendations on the company, was down Friday afternoon by US$5.59 to $325.90.

The Dow Jones Industrials index slipped 172.45 points Friday afternoon, closing at 11,951.91, under 12,000 for the first time since March. The broad-based S&P 500 meanwhile, closed at 1,270.98, down by 18.02.

Reports about a weak housing and labor market have fueled fears that the recovery is sputtering out and will affect spending for a wide range of companies. A U.S. Federal Reserve survey this week, for example, said that residential construction and real estate continues to flag, and that wage increases are minimal even for skilled workers. The Fed's second round of stimulus, the purchase of $6 billion in bonds, is also ending, with no other government stimulus plan in sight.

Arguments between the European Central Bank and the German Finance Ministry over a new Greek sovereign debt rescue plan raised fresh concerns about the European economy as well.

But despite some trouble spots for IT, underlying news seems to indicate a fairly strong market. Networking equipment supplier Ciena, for example, on Wednesday said its preliminary results for the April quarter were worse than analysts expected. Excluding one-time gains and losses, net loss for the quarter was $22.4 million, worse than the net loss of $11.7 million in last year's second quarter.

But remarks by CEO Gary Smith indicate that the company sees a strong pipeline for product sales, and company shares Friday bucked the overall downward trend, trading up by $0.04 to close at $19.04 Friday.

Likewise, Texas Instruments on Wednesday lowered its guidance for second-quarter results. It said revenue would be $3.36 billion to $3.5 billion, compared with the prior range of $3.41 billion to $3.69 billion, while earnings per share would be $0.51 to $0.55, compared with the prior range of $0.52 to $0.60. But analysts seemed to take this in stride.

Canaccord maintained its Hold rating on TI, with analyst Bobby Burleson noting in a research report that "the shortfall was mostly attributable to weaker demand from Nokia for basebands and has little bearing on broader demand trends for analog or semiconductors in general."

Meanwhile, while IDC and Gartner this week reported reduced expectations for the PC market this year due mainly to weak consumer demand, there is a glimmer of hope for 2012 and beyond.

Worldwide PC shipments are expected by IDC to grow by just 4.2 percent in 2011, down from a February forecast of 7.1 percent. But for 2012 through 2015, growth is still expected to fall in the 10 percent to 11 percent range, according to IDC.

"The PC market has definitely hit a slow patch," said Loren Loverde, an IDC analyst, in the report. "Nevertheless, the long-term growth drivers -- first among which are growth in emerging markets, declining prices, and growing functionality -- remain intact, and the product and design innovations underway will keep PC growth healthy in the long term."

There was some good news on the macroeconomic front as well this week, with a government report Thursday showing that U.S. exports hit a record high of $175.6 billion in April, helped by a weak dollar.

And despite some of the dire news on the Fed report this week, Chairman Ben Bernanke seemed to take a measured stance. "The economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers," Bernanke said in prepared remarks to bankers Tuesday.

Even though IT was one of the sectors that took a market hit this week, IT financial results so far this year have been strong. Tech vendors in a variety of markets, including IBM, Intel, Google, EMC, Oracle, Apple and Qualcomm, recorded an increase in year-over-year sales figures, often beating analyst expectations.

Last year, IT stocks took a dive during the third quarter as fears of a double-dip recession weighed on investors, and then rose again as quarterly results showed that tech vendor sales were doing better than ever. This year may end up being a replay of last year's stock story.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags business issuesAppletexas instrumentsCiena

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Tom Pope

Dynabook Portégé X30L-G

Ultimately this laptop has achieved everything I would hope for in a laptop for work, while fitting that into a form factor and weight that is remarkable.

Tom Sellers


This smart laptop was enjoyable to use and great to work on – creating content was super simple.

Lolita Wang


It really doesn’t get more “gaming laptop” than this.

Jack Jeffries


As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr


The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?