Storage stocks sink

February 22, 2001: 5:27 p.m. ET

Brocade and EMC spark sell-off; broader sector also slides

NEW YORK (CNNfn) - The stocks of companies involved in the data-storage segment were moving sharply lower Thursday as investors braced for weaker sales from EMC and Brocade Communications.

The Nasdaq composite index, which is weighted heavily with technology names, ended the session 23.96 lower at 2244.98.

Shares of Brocade Communications (BRCD: Research, Estimates) were among the most actively traded on Nasdaq, finishing $2.75 lower at $41.94, a 6.15 percent decline on the day. The company, which makes the hardware and related software used to connect storage area networks, or SANs, reported its latest quarterly results after Wednesday's close.

Although the company's profit came in slightly ahead of analysts' expectations, Brocade executives ratcheted down their revenue growth expectations for the current fiscal year, which ends in October.

That news came on the heels of a downward revision from one of Brocade's main competitors. Last week, Emulex (EMLX: Research, Estimates), which offers a similar product line to Brocade's, warned investors that its latest quarterly results will fall short of previous expectations, blaming customer order delays.

Emulex shares, which were beaten down in the wake of its warning, managed to escape the sell-off, ending the session $2.87 higher at $33.63. Similarly, Crossroads Systems (CRDS: Research, Estimates) shares rose 6 cents to $8.19. Shares of QLogic (QLGC: Research, Estimates), which also supplies components used in connect data-storage systems, rose $1.69, or 4.16 percent, to $42.25.

Computer Network Technology (CMNT: Research, Estimates) shares fell 44 cents to $12.25, a 3.45 percent slide. Vixel (VIXL: Research, Estimates) shares slipped 6 cents to $2.81. McDATA (MCDT: Research, Estimates) shares fell $2.59 to $22.62.

Meanwhile, shares of EMC (EMC: Research, Estimates), the leading supplier of data-storage systems, fell $2.60 to $40.35, a 6 percent decline on the New York Stock Exchange. They were the most actively traded on the Big Board for the second day in a row.

In a statement released Thursday, EMC warned that the uncertain U.S. economy would slow the company's growth in 2001. Although it said it is continuing to "march toward its revenue goal of $12 billion in 2001," EMC reduced its revenue-growth target to a range between 25 percent and 35 percent. The company's previous revenue forecast for 2001 was 33 percent to 37 percent.

The most recent consensus estimate of 13 analysts polled by earnings tracker First Call was for EMC to post $11.9 billion in revenue this year, suggesting a 33.7 percent increase from the $8.9 billion in sales it logged in 2000.

The most recent consensus earnings estimate for EMC this year was for a profit of $1.03 per share.

Andy Neff, a technology analyst at Bear Stearns, told CNNfn he reduced his earnings estimate for the company this year to 90 cents from $1, saying it makes sense to be more "prudent" when setting expectations in the current economic environment. (201K WAV) or (201K AIFF)

Also pressuring EMC's stock Thursday were downgrades from two brokerages. Banc of America Securities changed its rating on EMC to "market perform" from "strong buy." Morgan Stanley Dean Witter downgraded the shares to "neutral" from "outperform."

Among other data-storage hardware vendors, Network Appliance (NTAP: Research, Estimates) shares fell 50 cents to $33.81, a 1.46 percent decline. Auspex Systems (ASPX: Research, Estimates) shares finished $1.06 lower at $4.62, an almost 19 percent slide on the day.

Bucking the trend were: Storage Computer (SOS: Research, Estimates), up 19 cents at $7.20 and Storage Technology (STK: Research, Estimates) up 17 cents to close at $10.75.

Shares of Veritas Software (VRTS: Research, Estimates), which makes software used to manage data-storage systems, fell $6.87 to $65.50.

Entire sector slumps
Stocks in the broader technology sector were pressured as well, driving most of the major segment indexes lower.

Among software makers, shares of Microsoft (MSFT: Research, Estimates), the world's largest supplier of computer software, slipped $1.06 to $55.19. i2 Technologies (ITWO: Research, Estimates), which makes business-to-business e-commerce software, fell $1.94 to $32.19.

Meanwhile, shares of Intuit (INTU: Research, Estimates), which soared on Wednesday after the company logged a quarterly profit that beat the Street's expectations, see-sawed during the day, finishing 31 cents higher at $38.31.

Shares of Oracle (ORCL: Research, Estimates), the No. 2 computer-software supplier, managed to stay afloat, ended the session 38 cents higher at $23.37.

The Goldman Sachs computer software index finished down 6.35 points at 245.84, a 2.5 percent decline.

Among computer hardware makers, shares of Apple Computer (AAPL: Research, Estimates) fell 6 cents to $18.81. The company, which has been struggling with flagging sales of its Macintosh-brand computers, unveiled a slew of new products in Japan Thursday.

Meanwhile, PC vendor Compaq (CPQ: Research, Estimates) rose 44 cents to $21.44. Dell Computer (DELL: Research, Estimates) shares finished $1.31 higher at $21.94. Gateway (GTW: Research, Estimates) slid 67 cents to $17.58. Hewlett-Packard (HWP: Research, Estimates) shares lost 24 cents to $29.77.

The Goldman Sachs computer hardware index finished up 2.71 points at 341.79.

In the semiconductor segment, shares of Intel (INTC: Research, Estimates), the leading supplier of PC processors, ended the session down 75 cents at $30. Intel rival Advanced Micro Devices (AMD: Research, Estimates) fell $2 to $21. Computer memory-chip maker Micron Technology (MU: Research, Estimates) slid 40 cents to $38.

At the same time, Applied Materials (AMAT: Research, Estimates), the No. 1 supplier of chips used to manufacture semiconductors, rose 19 cents to $46.81. National Semiconductor (NSM: Research, Estimates) gained 54 cents to $22.69.

The Philadelphia Stock Exchange's semiconductor index, or Soxx, ended the session 7.48 lower at 605.70, a 1.22 percent decline.

Dot.coms finished sharply lower.

Internet media company Yahoo! (YHOO: Research, Estimates) fell $2.12 to $24, an 8 percent decline. Online auctioneer eBay (EBAY: Research, Estimates) fell $1.12, or 2.5 percent, to $44.56. Web retailing leader Amazon.com (AMZN: Research, Estimates) was unchanged at $11.94.