Technology stocks made an abrupt U-turn Thursday, reducing the gains that had been piling up as investors sought refuge from the lending and housing morass weighing on the U.S. economy.
Internet networking supplier Cisco Systems Inc. took one of the biggest beatings after its chief executive, John Chambers, warned that weakening demand among major customers, including banks saddled with huge loan losses, would probably slow Cisco's growth.
Cisco's shares plunged $3.12, or 9.5 percent, to close Thursday at $29.63. The setback obliterated $19 billion in shareholder wealth and was the sharpest decline in the San Jose-based company's stock price since a 10.6 percent drop in August 2004.
But Thursday's comedown was widespread, pulling down even high-tech stars like online search leader Google Inc. and iPod maker Apple Inc., whose stocks had been leaping from one new peak to another for months.
Apple shares were down $18.53, or 9.9 percent, at one point. And Google shed as much as $55.06, or 7.5 percent, before rebounding later in the session to close at $693.84, down $39.10, or 5.3 percent, for the day. Apple's stock closed at $175.47, down $10.83, or 5.8 percent.
The downturn trimmed Google's market value by $12 billion and clipped Apple's market value by $9 billion. Google's total market value was $217 billion at the close of trading Thursday, Apple's was $153 billion and Cisco's was $180 billion.
Other prominent losers included: China's top Internet search engine, Inc., down $37.13, or 9.4 percent, to $357.87; business software maker Oracle Corp., down $1.75, or 7.9 percent, to $20.35; IBM Corp., down $4.97, or 4.5 percent, to $106.11; Amazon.com Inc., down $3.46, or 4 percent, to $83.58; eBay Inc., down $1.29, or 3.8 percent, to $32.40; and Hewlett-Packard Co., down $1.90, or 3.7 percent, to $49.94.
The tech-laden Nasdaq composite index fell 56.72, or 1.9 percent, to 2,696.
The deepening trouble in the financial and real estate sectors had caused Wall Street to turn to high-tech industry as a sort of safe harbor, with investors reasoning that the demand for computers, gadgets, software, networking gear and Internet advertising would hold up reasonably well amid the duress.
But that rationale suddenly looked shaky after Cisco's Chambers indicated his company has been having trouble selling products to its 25 largest customers -- a group that overlaps with the biggest businesses in the United States.
Among the industries targeted by Cisco, "the finance one was the one hardest hit," Chambers told analysts during a conference call held late Wednesday after Cisco released its earnings for the fiscal quarter ending in October.
The reluctant buyers include eight banks that Chambers didn't identify by name.
Several major U.S. financial services companies have recognized billions of dollars in losses from soured home loans and home loan investments, a setback that resulted in the departure of the CEOs at Merrill Lynch & Co. and Citigroup Inc.
Cisco's difficulty closing sales with banks made investors realize that the high-tech industry might not be as insulated from the turmoil in finance and housing as previously thought, said Standard & Poor's equity analyst Scott Kessler.
"People are starting to connect the dots," Kessler said.
Although it doesn't sell hardware like Cisco, even Google could be affected by the misery in banking and real estate because those areas of the economy generate significant advertising. Google makes virtually of its income from Internet ads.
There haven't been any signs of a slowdown at Google so far. The Mountain View-based company's third-quarter profit soared 46 percent to US$1.07 billion, a performance that had lifted its stock price from US$497.55 in mid-August to a high of US$747.24 earlier this week.
Apple has been on even longer roll, with its stock more than doubling in value so far this year to create about US$90 billion in shareholder wealth.
Those large gains, coupled with so much uncertainty, probably caused many investors to sell high-tech stocks Thursday just to lock in their profits for the year, Kessler said.
