The end may really be nigh for the raging bull market in technology stocks, because last week, it seemed to be the bad news that so often over the past year or so has been shrugged off by the market that this time was moving shares. Trigger for a technology mini-bloodbath was disappointment with the fourth quarter figures from Adobe Systems Inc (numbers in Company Results, alongside), which were enough to send the shares into a tailspin. Adobe lost 35% of its value after hours on Thursday and in early trading Friday, slumping $20.75 to $37.75 in volume of more than 5m. The downer was that before exceptionals, it did $30.5m net this time, compared with $30.09m last. The market was unmoved by an upbeat forecast from the company, in which it said it expects to post 20% growth in revenues in its core businesses during 1996. The developer of desktop publishing software and related graphical and transmission products says it expects to cut costs through workforce reductions, especially in the newly acquired Frame Technology business during the first half, and by selling non-strategic businesses. Operating income for the quarter was below our stated business goals, said John Warnock, chairman and chief executive. He said the timing and effect of the acquisition of Frame Technology had a more substantial impact than anticipated, and our expenses as a percent of sales were higher than our targets. Elsewhere, with IBM Corp now widely perceived to have spent $3,500m for virtually no real value when it bought Lotus Development Corp, there was no way that its shares were worth the $100 a time at which they were trading a week or three back. Investors are at last beginning to look at its failure to protect its once vital disk subsystems business from the predations of upstarts like EMC Corp, its abject failure to get the PowerPC established in the mass market, its failure to do more than poke around at the edges of its marginally profitable personal computer business, and its failure to develop any convincing growth business, and have marked the shares down accordingly.
Head and shoulders
In the arcane parlance of the chartists, those astrologers of the stock markets, IBM ‘seems to have formed a head and shoulders top with the neckline at $88.’ Any point under $88 is bad for the stock, said Alan Newman, technical analyst at H D Brous & Co. told Reuter. The shares traded at $88.875, off $2.375, late Thursday, and IBM looks like it is going lower at this time, said Peter Green, technical analyst at Gruntal & Co. Internet stocks, the ones that set the pace into the stratosphere are now moving down to more atmospheric prices – $118 for Netscape Communications Corp, down from $171; $56.50 for UUNet Technologies Inc, down from $93 at its peak. Culprits here were FTP Software Inc, which develops software that enables corporate and individual personal computer users to access the Internet, and warned of a down quarter, massacring its share price, which shrivelled $13.375 to $11.875. And Firefox Communications Inc, having only just gone public, would be looking at a snowstorm of lawsuits now had the law not been changed: it warns that it now expects a loss in its fourth quarter – a day after it had said it expected to report a profit albeit below analysts’ forecasts. Tandy Corp shares slipped $3.75 to $36.125.
