Stocks Tumble On Tech Selloff

U.S. stocks buckled from more selling in the technology sector Wednesday, after a below-forecast revenue report from Dell Computer took the wind out of many computer-related issues.

The Dow Jones Industrial Average gave back 101.56 points, or 1.1 percent, to 9,195.47.

The technology-heavy Nasdaq Composite lost 64.95 points, or 2.8 percent, to 2,248.92. Among the index's most important components, Microsoft declined 6 1/4 to 150, Cisco Systems was off 3 15/16 to 95 1/8, and Sun Microsystems dropped 6 3/8 to 94 1/16.

Dell (DELL) surrendered 7 3/16 to 81 9/16 on staggering volume of 112 million shares. It normally trades 20 million. Fourth-quarter earnings per share came to 31 cents, matching a First Call Corp. survey of analysts' projections, and the PC powerhouse set a two-for-one stock split. But revenues totaled $5.17 billion vs. the $5.2 billion to $5.5 billion that analysts had expected. Too, on a year-over-year basis, revenue growth dipped to 38 percent in the fourth quarter from 50 percent in the third.

"Dell management commented that it failed to price competitively in large-account bidding situations during the third quarter, which accounted for the [revenue] shortfall in the fourth quarter," said Richard Gardner, computer analyst at Salomon Smith Barney, in a report. "This is the first sign that the reengineering efforts by Dell's major competitors at Compaq, Hewlett-Packard, and IBM are beginning to bear fruit."

Gardner is maintaining his "neutral" opinion and $60 price target on Dell shares.

Some felt the selling in Dell stock was overdone.

"After all is said and done, Dell's revenues were up 41 percent," Scott Curtis, senior equity trader at Brown Brothers Harriman, pointed out. "So it's not as if they're having major problems."

Another computer heavyweight checked in with a revenue figure that disappointed some analysts. Hewlett-Packard (HWP) gave back 2 1/4 to 68 1/4. The computer heavyweight said it tallied 92 cents a share in its fiscal first quarter, handily bettering Wall Street expectations of 83 cents. But revenues grew just 1 percent. As well, H-P cautioned that "revenue growth remains the key concern," adding that "there are many reasons for continued caution, given the economic environment." It's only seeing slight improvement in Asia.

The sub-forecast revenue reading from Dell fueled selling in other prominent computer-related shares on concerns that PC growth is ebbing.

Virtually all Internet shares nosed south following some morning gains. But eBay (EBAY) put on 1 7/8 to 233. The Wall Street JournalM reported that the online auctioneer is speaking with America Online (AOL) about extending their business relationship, including the possibility of AOL taking a minority position in eBay. AOL shares dipped 6 5/8 to 152 7/8.

EarthLink Network (ELNK) lost 8 7/8 to 58 3/8. The Internet service provider checked in with a fourth-qurter operating loss of 17 cents a share, 2 cents better than what most analysts had predicted.

Yahoo! (YHOO) fell 3 3/4 to 129 5/8 on reports of recent insider sales.

"We have seen an awful lot of deterioration in the near-term technical indicators, but we continue to see this as a near-term correction in a secularly trending bull market," Ralph Acampora, director of technical research at Prudential Securities, said in a research brief.

In Wednesday's market indicators:

• The Standard & Poor's 500 Index fell 1.4 percent.
• New York Stock Exchange declining issues pounded gainers by 1,985 to 1,030.
• On the Big Board floor, turnover escalated 12 percent to 729 million shares.
• Declining issues led gainers by 2.5 to 1 in the Nasdaq Stock Market. Volume totaled 894 million shares.
• The Russell 2000 Index of small-company stocks sank 1.7 percent.
• The 30-year Treasury rose 14/32, to yield 5.312 percent.

• Applied Materials (AMAT) demolished most analysts' estimates when it reported fiscal first-quarter operating net of 11 cents a share. A First Call Corp. poll of analysts had called for 6 cents. The shares eased 1/4 to 67 5/8.
• Abercrombie & Fitch (ANF) fell 3 3/8 to 74 5/8. It netted $1.12 a share in the fourth quarter, smashing the First Call consensus analyst estimate by 15 cents. Sales at outlets open a year or more grew 26 percent in the period. The apparel retailer will open as many as 56 stores in the 1999 fiscal year.
• Bellwether telecommunications equipment maker Lucent Technologies (LU) hatched plans for a two-for-one stock split. But the shares couldn't evade the grim climate for many technology issues, falling 1 9/16 to 96 7/16.
• Atlantic Data Services (ADSC) cratered 4 5/8, or 49 percent, to 4 3/4. The provider of consulting services to banks expects fourth-quarter per-share results to come in between a loss of 4 cents and a profit of 3 cents. Most analysts had looked for earnings of 12 cents. Atlantic said unrest in the financial services industry, the changing of customer purchasing patterns due to Year 2000 issues, and the loss of a major client contributed to the bleak forecast.
• Micro Warehouse (MWHS) sank 2 5/8 to 26 7/16 despite recording fourth-quarter earnings of 38 cents a share, 3 cents ahead of most estimates. In addition, BT Alex. Brown said it would no longer provide analyst coverage of the company.
• Analog Devices (ADI) pulled back 1 15/16 to 28 15/16. Fiscal first-quarter profits totaled 18 cents a share, a penny richer than most analysts' views. The chipmaker noted that order trends were very encouraging, with bookings increasing sequentially for the first time in many quarters. "Second-quarter earnings per share could grow approximately 20% sequentially if we can achieve revenues at the higher end of our expected range," the company said in a statement.