Software stocks bore the brunt of the selling in the technology sector Tuesday as hopes dimmed for a significant turnaround in the industry in the near term.
PeopleSoft Inc. tumbled $12.21, or 33%, to $25.16 on Nasdaq after the maker of computer programs for businesses said first-quarter software sales and profit missed analysts' estimates.
Internet software makers Commerce One Inc., Interwoven Inc. and BroadVision Inc. also warned about quarterly results.
Meanwhile, brokerage Goldman, Sachs & Co. triggered a sell-off in Microsoft Corp. after analyst Richard Sherlund cut his fiscal 2003 earnings estimate for the software giant to $1.95 a share from $2.05. Its new fiscal year begins July 1.
Microsoft slumped $3.08, or 5.1%, to $57.30 on Nasdaq, the lowest closing price since Oct. 18.
Sherlund kept Microsoft on the brokerage's "recommended" list but said the U.S. economic recovery is "taking longer to gain traction in the tech sector"--a warning that has been repeated by many analysts in recent months, keeping a lid on most technology stocks after their sharp gains in the fourth quarter.
Sherlund said his earnings-estimate cut for Microsoft was based on expectations that the company would incur higher marketing, research and development costs next year.
He also cut his profit targets for Siebel Systems Inc. because the environment may be "more challenging" than management anticipates, he said.
Siebel, which makes software for e-business applications, dropped $2.38 to $31.82 on Nasdaq. Sherlund trimmed his fiscal 2002 earnings estimate to 50 cents a share from 57 cents and his fiscal 2003 estimate to 65 cents from 75 cents.
PeopleSoft was the day's biggest software bomb. The firm, whose programs are used to manage companies' accounting, human resources and customer relations, said late Monday that first-quarter sales were $130 million to $135 million, a decline of as much as 15% from a year ago. In January, PeopleSoft forecast first-quarter software license revenue of $160 million.
First-quarter profit from recurring operations was 14 cents a share, based on a preliminary review, PeopleSoft said, without defining recurring operations. The firm was expected to earn 15 cents, according to earnings-estimate tracker Thomson Financial/First Call.
PeopleSoft's shortfall caught investors by surprise because the company managed to meet its forecasts every quarter last year, even as rivals Oracle Corp., Siebel and SAP fell short amid the slump in corporate spending on software.
Customers are taking advantage of slow economic growth to negotiate bigger discounts, hurting software makers' sales, analysts said.
"Everyone's cutting prices," said Bill Schaff, manager of the $70-million Berger Information Technology Fund, which holds 8,000 PeopleSoft shares.
In the Internet software sector, Commerce One said after regular stock trading ended that first-quarter sales would fall below forecasts because of sluggish tech spending, and Interwoven said its first-quarter loss would be bigger than expected.
Commerce One eased 10 cents to $1.48 in regular Nasdaq trading, then fell to $1.38 in after-hours activity. Interwoven gained 20 cents to $5.57 on Nasdaq in regular trading, then slumped to $4.93 in after-hours trading.
BroadVision, which late Monday said first-quarter sales would fall below estimates, sank 25 cents to $1.47 on Nasdaq.