Softness in Software Darkens a Bright Day in Tech

The Y2K crisis and other problems loom.
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SAN FRANCISCO -- While the Nasdaq was setting a new record and Internet stocks and chipmakers were on a rampage, a number of software companies were hit hard.

Software companies have suffered through a string of earnings warnings, signaling a major shift in corporate spending. Though most analysts say the money is being funneled toward fixing year 2000 bugs, others say the problem runs deeper.

Software developer

Aspect Development

(ASDV)

, software designer

Aspen Technology

(AZPN) - Get Report

and

Axent Technologies

(AXNT)

all warned of earnings shortfalls. These reports followed recent earnings warnings from

Documentum

(DCTM)

and

PeopleSoft

(PSFT)

.

"When you start to see companies like Axent and Documentum, which have executed flawlessly in the past and have good management teams, preannounce, it's probably Y2K-related," says David Hilal, analyst at

Friedman Billings Ramsey

, adding that software companies may continue to have a hard time for the rest of the year.

But some analysts say the problem with many of the software companies is even bigger than Y2K.

"It's also the products," says George Gilbert, an analyst at

Credit Suisse First Boston

who believes many enterprise software companies are undergoing transitions. "The Web has grown faster than expected."

Gilbert says software companies are scrambling to move to Web-enabled and front-office applications that deal with customers. "They've shifted all their resources to deal with the Web and customers, but they haven't proven

the products to customers," he says.

Aspect Development closed down 14 15/32, or 65%, at 7 15/16. Aspen Technology closed down 3 5/16, or 25%, at 9 15/16, and Axent Technologies closed down 11 15/16, or 60%, at 8 1/16.

--

Medora Lee

Cashing in Chips

It was a big day for chipmakers, which soared for a variety of reasons.

Texas Instruments

(TXN) - Get Report

rose 7 1/8, or 7%, at 110 3/4. The company benefited from a

Dataquest

report that said TI remained the top analog chipmaker.

A recovery in computer stocks and seasonal buying to start the new quarter also benefited the chip sector. In addition, there were expectations that chip sales statistics for February to be released today by the

Semiconductor Industry Association

would show a year-on-year increase for the sixth consecutive month.

Claude Hazan, semiconductor analyst with

C.E Unterberg Towbin

, said "there is optimism as we head into the second quarter that the selloff in February has created opportunities."

Intel

(INTC) - Get Report

closed 6 5/8 higher, or 5.5%, at 127 1/2.

Linear Technology

(LLTC)

closed up 6 9/16, or 12%, at 62 1/8, while

Semtech

(SMTC) - Get Report

closed up 3 15/16, or 13%, at 34 1/8 and

Broadcom

(BRCM)

closed up 6 3/16, or 10%, at 67 15/16.

--

Marcy Burstiner

AOL All Over

America Online

(AOL)

has surpassed

AT&T

(T) - Get Report

in market capitalization.

AOL closed up 16 1/16, or 11%, at 166 1/16. There was a story in the

San Jose Mercury News

by gossip columnist Chris Nolan that suggested AOL could be close to buying

CBS

(CBS) - Get Report

. AOL also said it bought

When.com

, a personalized event directory and calendar service.

AOL now has a market cap of around $154 billion, far surpassing the $136 billion market cap of AT&T. AOL's P/E ratio is around 681, just a bit above AT&T's 22.