NEW YORK (CNNfn) - Computer hardware makers bore the brunt of a sell-off in the technology sector Friday on the heels of an earnings warning from Apple Computer.|
Apple's (AAPL: Research, Estimates) market value was sliced in half Friday, its shares falling $27.75 to end the session 51.9 percent lower at $25.75. They were the most actively-traded on Nasdaq and were among the biggest percentage decliners as well.
The Nasdaq composite index, which is weighed heavily with technology names, ended the session 105.92 lower at 3,672.40, a 2.8 percent decline on the day.
After Thursday's closing bell, Apple warned that its fourth-quarter profit would fall well short of Wall Street forecasts. The company blamed lower-than-expected sales in September, with particular weakness in the education market.
It was the latest in a raft of warnings from high-tech companies in recent weeks, including semiconductor giant Intel, which last week warned that its revenue growth in the third quarter would amount to as little as half what some on the Street had expected.
Apple's news spurred a flurry of analyst downgrades on the stock and cast a pall over the entire PC segment.
Merrill Lynch's Steve Fortuna downgraded Apple to "neutral" from "accumulate," saying he believes the problems Apple is now experiencing are just the beginning. He added, however, that he remains optimistic for the overall computer market.
"Apple is, in many ways, a market unto itself," Fortuna said in a research note Friday. "We believe there is a high likelihood that investors will overreact to this news and take down the PC names in sympathy. We would particularly view this as a buying opportunity for Gateway, and to a lesser extent, Compaq and Dell."
PaineWebber's Don Young downgraded Apple to "neutral" from "attractive," characterizing the problem as "unique to Apple."
Chase Hambrecht & Quist technology analyst Walter Winnitzki told CNNfn Friday that Apple's announcement "raises some serious fundamental questions and that the cloud is likely to hang over Apple's stock for a while until some of these issues are addressed." [288KB WAV or 288KB AIFF]
Bear Stearns analyst Andrew Neff offered a more sweeping assessment of the current status of the computer industry Friday. He downgraded his ratings on Apple as well as PC makers including Compaq, Dell, Gateway and Hewlett-Packard.
He cited concerns with "the macro picture" including negative data from high-tech companies as well as economic issues such as a weaker euro, higher oil prices and slowing economic growth.
Among the stocks on Neff's hit list: Compaq (CPQ: Research, Estimates) shares ended $1 lower at $27.25, a 3.5 percent decline on the day; Dell (DELL: Research, Estimates) slid $2.56, or 7.7 percent, to $30.88; Gateway (GTW: Research, Estimates) ended the session down $7.50, or 13.9 percent, at $46.50; and HP (HWP: Research, Estimates) finished $6.37 lower at $97.44, a 6.1 percent decline on the day.
The Goldman Sachs computer hardware index slipped 45.6 to 585.17, a 7.2 percent decline on the day.
Chips hit the skids
After rallying strongly on Thursday, semiconductor stocks headed sharply lower as well Friday. The Philadelphia Stock Exchange's semiconductor index, or Soxx, ended the session 49.97 lower at 851.57, a 5.5 percent decline on the day.
Shares of computer memory-chip maker Micron Technology (MU: Research, Estimates) was among the biggest decliners, falling $3.50 to $46, a 7.1 percent decline on the day.
Robertson Stephens analyst Eric Rothdeutsch maintained a "buy" rating on the stock Friday but lowered his fiscal 2001 revenue and earnings estimates on Micron due to what he believes will be weaker memory pricing in the next few weeks before the holiday PC rush.
"At that time, we look for DRAM pricing to stabilize. We believe that the company will meet or beat our fourth-quarter revenue and EPS estimates of $2.35 billion and 93 cents a share," Rothdeutsch said in a research note.
Intel (INTC: Research, Estimates), the world's largest supplier of PC microprocessors, also ended the session sharply lower. It's shares fell $2.81, or 6.3 percent, to $41.62. Intel on Friday said it has scrapped plans to develop an ultra-low-cost microprocessor, dubbed "Timna," because of technical glitches and weaker demand for low-end PCs.
Meanwhile, Advanced Micro Devices (AMD: Research, Estimates), which has been making headway in the low-end PC market with its "Duron" processors, slipped 19 cents to $23.44.
Shares of companies that make the equipment used to manufacturing semiconductors also fell sharply Friday. Applied Material (AMAT: Research, Estimates) ended $4.56 lower at $59.31, a 7.1 percent decline. Novellus (NVLS: Research, Estimates) shares fell $3.06, or 6.2 percent, to $46.56. KLA Tencor (KLAC: Research, Estimates) ended the session down $4.12 at $41.19, a 9.1 percent decline on the day.
Other tech movers
Other tech stocks making news Friday included Research in Motion (RIMM: Research, Estimates), which rose $15.12 to $98.56, an 18.1 percent gain on the day. After Thursday's close, the company, which makes wireless e-mail and paging devices, posted a fiscal second-quarter loss of $1.6 million, or 2 cents per share, beating Wall Street estimates by a penny.
Merrill Lynch analyst Bill Crawford raised his fiscal third-quarter revenue estimate by $2 million to $53 million and boosted his fiscal 2002 estimate to $345 million from $305 million, with a projected EPS view of 15 a share.
Not faring as well, Internet marketing software provider Net Perceptions (NETP: Research, Estimates) plummeted $7.78, or 62.3 percent, to $4.72. That decline came after the company warned it expects a loss between 22 cents and 32 cents per share, excluding charges -- much wider than the First Call consensus estimates of a loss of 13 cents a share for the quarter ending Sept. 30.
Several analysts hammered the company after Friday's news, with downgrades coming from US Bancorp and Chase Hambrecht & Quist.
Analyst Lowell Singer at Robertson Stephens downgraded Net Perceptions to long-term "attractive" from "buy," due to the "magnitude of Net Perceptions' shortfall, a lack of visibility into the fourth quarter and a lack of specifics regarding the drivers of the shortfall."
-- from staff and wire reports