Enterprise software stocks are not Internet pure-plays; the market just treated them that way today, hammering a number of them into the ground.
Until now, the companies that make software that helps businesses coordinate services, bill customers, integrate applications and manage e-commerce platforms have been somewhat insulated from the damage done to many of the stocks in the Internet sector.
"The values of this group have held up better than most other groups. They weren't dot-coms, and they didn't sell to dot-coms," said analyst Tim Klassel, infrastructure software analyst with
Thomas Weisel Partners.
That's over with.
A number of them plunged with other tech stocks Wednesday.
Gerard Klauer Mattison
analyst Gibbs Moody downgraded the sector this morning, citing the uncertain political climate and worries over growth in other technology sectors. Moody's downgrade brought
New Era of Networks
While the software stocks had been held out as safer than much of tech, two salient concerns hit them today, Klassel said. One was the slowdown in telecom spending. "There is a little bit of telecom exposure. Everybody
in the group sells a little bit to telecom. Some of them got painted with the broad brush
of its spending slowdown," he said.
On top of that are the continuing signs of a slowing economy. Even though the companies sold mostly to large, off-line firms, a slowing economy means a drop in the growth that drove their relatively high valuations, Klassel said.
Multiplying that downbeat message is the unending siege over the presidential election -- "...the uncertainty that drags on and on like water torture," said business-to-business software analyst Ed Bierdeman of
Moors & Cabot
Until today, many of the stocks had held their value relatively well, considering the general decline of tech.
, a B2B software stock included in the downgrade, had lost only 11% in the past month. It closed down $8.25, or 9.7%, to $76.88 today.
New Era dropped $2.82, or 30%, closing at $6.57. This was after the stock dropped 52.8% in trading Tuesday, on the news it had taken equity positions in some companies instead of cash for its products.
Vitria, which makes e-commerce software, closed down $3.75, or 22%, to $13.25. BEA, which announced a partnership with
last week, was down at the close $9.94, or 16.3%, to $51.06.
2:52 p.m.: Look to Tomorrow's Pecan Pie -- There's Nothing Yummy in Tech-Land Today
Give some thanks -- with a small "t" -- to a few of the semiconductor stocks. But if you're looking for a lot of joy this holiday season, stay away from almost anything connected to the Internet.
Think about a heaping ladle of eggnog. That'll work just fine.
A few of the semiconductor stocks were trading positively today, especially those of equipment manufacturers.
-- up 75 cents, or 2.3%, to $33.87 -- and
-- up 56 cents or 2% to $29 -- were two examples of today's modest gainers. Overall, though, the
Philadelphia Stock Exchange Semiconductor Index
edged in and out of the green and recently was off 0.5%.
The semiconductor equipment manufacturer book-to-bill ratio for October, released yesterday after the market's close, was 1.17, meaning that there were 17% more orders than shipments for the month. The number was flat from September, although it was at the high end of Street estimates, according to
analyst Brett Hodess.
Orders increased by 89% year-to-year, Hodess said. And many of the equipment manufacturers benefited from an industry move towards new types of semiconductors. Chipmakers are ordering new equipment to manufacture chips that may need thicker wafers or different types of internal wire.
And DRAM maker
, held down by depressed prices for its memory chips, used in PCs, was trading up after analysts reported a slight rise in prices.
The dot-com implosion, an evolving -- and shrinking -- advertising market and an uncertain start of the shopping season for e-tailers took the fun out of the Internet sector -- not that there was much left.
TheStreet.com Internet Sector
was down 4.3% led by e-commerce software maker
, which was trading down $3.13, or 10%, to $28.06.
Other e-commerce and Internet infrastructure stocks also dropped, after a sector downgrade by
Gerard Klauer Mattison
. The note by analyst Gibbs Moody cited the ongoing presidential uncertainty, slowing in telecom spending and decreased confidence by investors as the reason for dropping the sector's rating to neutral.
Adding to the jitters was the quick deflation of
, which was downgraded by
Banc of America Securities
. Portal announced yesterday that it had met earnings expectations, but that its growth in North America was slowing. Portal produces software for customer relations and billing for high-tech service providers.
Portal was trading down $12.06, or 64.8%, to $6.56.
Yahoo! Oh, Wait...Boo!
But there was mixed news for some of the sector's biggest names. Analysts dueled over
, as the giant portal received another reduced rating this morning.
analyst David Readerman downgraded the stock from strong buy to buy as a result of reduced estimates for the current and subsequent quarters based on shrinking Internet advertising. Yesterday, Yahoo! shares closed off 14.7% after another downgrade by
Morgan Stanley Dean Witter
analyst Mary Meeker, who gave Yahoo! a 30% chance of missing revenue estimates for the coming quarters.
Today, analysts for
U.S. Bancorp Piper Jaffray
defended Yahoo!, announcing they were comfortable with their earnings for the portal. Analyst Anthony Gikas wrote that most of the fourth-quarter revenue was committed and that additional revenue would come from new enterprise services, which were growing ahead of plan.
Still, investors chose the pessimistic view, with Yahoo! in recent trading down $3.13, or 7.5% to $38.56.
As the holiday shopping starts, big e-tailer
was up, even after mixed news about how well the season was going. Amazon was up 75 cents, or 3.1%, to $24.94.
biweekly note on Internet investing, analyst Scott Reamer wrote that information showed "a delay in the typical start of the online holiday rush." Shoppers don't have the incentives or the advertising that accompanied the holidays last year, Reamer wrote.
Still, Amazon will have a difficult time making the Street's estimate of $1 billion in revenue for the fourth quarter, and Reamer said he would remain "cautious" about the company until there was information that holiday sales improved.
, which fell sharply after a
upgrade Monday, was bouncing higher, trading up 44 cents, or 1.4%, to $32.