With the Nasdaq market in New York falling for the fifth successive day, technology share prices around the world fell as investors increasingly adopted the view that revenue growth of many tech firms could not justify current valuations.
Yesterday, the Nasdaq was down 2.22 per cent at 3,168.49 and at this level was almost 35 per cent off last March's peak. Stocks all across the technology sector took a beating yesterday.
One of the worst performers was Lucent Technologies, which has extensive operations in Ireland, as it indicated it would only generate third-quarter earnings of 17-18 cents a share compared to market expectations of around 27 cents. Lucent has cut its earnings outlook twice already this year.
Another big loser was Motorola, which employs 2,000 in Dublin and Cork. Although Motorola met market forecasts for third-quarter earnings, it said it would take a fourth-quarter charge for product cancellation and also revised its profit margins for some of its mobile phone products down to 6.5 per cent from 10 per cent.
And even Internet firm Yahoo, which comfortably met forecasts, was not immune to the weakness. Yahoo shares, which have been under severe pressure for the past two months, fell sharply again with investors fearing that online firms would spend less on Internet advertising.
After the recent profit warnings from Intel and Apple, market sources said it would take some big technology companies to beat market forecasts for earnings for investors to return to the market.
"I think Nasdaq is going to test its lows for the year - we're only 70-odd points above that - and from the strength of reaction in Europe this morning I suspect it could get worse," said Mr David Thwaites, European strategist at BNP-Paribas.
The Wall Street losses were preceded by heavy selling of TMT stocks on European markets. In London, stocks took a hammering ending 2.1 per cent down at a 4 1/2-month closing low as Wall Street blue chip stocks joined the downward march in flightier technology names.
`It's basically a question of a lack of confidence in earnings," said a Dresdner Kleinwort Benson UK equity strategist. "The oil sector is bravely holding out but the other two big sectors, banks and telecoms, are being dragged down."
German equity markets were battered lower by falling technology stocks on Wednesday as global high-tech shares went into a tailspin. Sharply weaker banking shares also helped drag the blue-chip DAX index almost 2 per cent lower while the techrich Neuer Markt Nemax 50 index was over 5 per cent down.
Germany's largest bank, Deutsche Bank, was 7.7 per cent lower at €84.70 - its lowest level in three months. Traders said Deutsche Bank stock continued to be hit by persistent rumours that the bank could be suffering losses from junk bond dealing.
With few technology shares, the Irish market was down only 1.4 per cent with continued demand for financial shares supporting markets. On overseas markets, however, some Irish stocks were hammered yesterday with Trintech down 13 per cent on the Neuer Markt while Baltimore and Parthus were heavily sold in London.
