Techs Stagger Under Weight of Blue-Chip Selloff

PC makers slipped after a Merrill analyst made mildly negative remarks.
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SAN FRANCISCO -- A selloff among blue-chips has erased yesterday's good cheer in the tech sector.

The

Dow

opened weaker, pressuring the

Nasdaq

, as traders took advantage of Wednesday's gains to get out of Net stocks. Techs were weaker even as

Goldman Sachs

analysts called the selloff "overdone," adding that any weakness "presents an opportunity to build further positions in leadership names."

Merrill Lynch

hardware analyst Steve Milunovich noted margins are being squeezed in the PC industry as prices continue to fall. Milunovich said he "suspects consumer unit growth may slow and prices could come down more aggressively." If that trend plays out, Milunovich wrote,

Compaq

(CPQ)

"may get hurt" given that about 30% of its PC sales are to consumers.

Hewlett-Packard

(HWP)

and

IBM

(IBM) - Get Report

"could suffer, but less so."

Dell

(DELL) - Get Report

is vulnerable, but "we see its superior direct model as an offsetting positive," the analyst said.

In early trading, Dell was off 1/2, or 1.5%, at 34 1/16; Hewlett-Packard was down 1 3/8, or 1.5%, at 34 1/16; IBM was down 2 5/8, or 2%, at 115 1/2 and Compaq was down 1/8 at 24 1/8.

In the larger tech sector, Goldman said several near-term events should serve as catalysts, including strong second-quarter results and "improving fundamentals, continued consolidation, strong e-commerce adoption by mainstream and Internet players alike, and closing mergers."

Reports that

Lehman Brothers

reiterated its buy rating on

Microsoft

(MSFT) - Get Report

with a 12-month price target of 110 failed to move the stock.

CNBC

reported that analysts were saying the recent weakness represents a "once-in-a-lifetime opportunity" to buy the stock, which was off 1/4 at 78 1/4 in early trading.

Among stocks in the news were enterprise software developer

J.D. Edwards

(JDEC)

, which Wednesday reported a narrower-than-expected second-quarter loss. It was down 9/16, or 3%, at 18 7/16.

Fatbrain.com

(FATB)

was also down after posting a first-quarter loss of 46 cents a share, 4 cents narrower than the estimate. The stock was down 1 3/4, or 9%, at 17 5/8, after gaining more than 2 points Wednesday ahead of the report.

PSINet

(PSIX)

was lower after the Internet service provider filed with the

Securities and Exchange Commission

to sell up to $300 million worth of common stock, about 6.8 million shares. The stock was down 2, or 4.5%, at 42 3/8.

Internet stocks?

Dipping one toe in water.

Getting out after Wednesday recovery.

They'll never get this low again.

Shorting the hell out of them.