Tech vendor shares crash over spending uncertainty

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Tech vendor shares crash over spending uncertainty

Lower earnings forecasts sends worry throughout industry.

Dismal sales outlooks from marquee technology names sent shares in the enterprise sector crashing on Friday as investors questioned whether IT managers would keep spending on their products.

The uncertainty spread into the broader industry, sending the tech-heavy Nasdaq Composite Index down 3.25 percent to 4363.144. Meanwhile, the Dow Jones Industrial Average fell 1.29 percent to 16,204.97.

Business analytics company Tableau Software shed half its market value a day after cutting its full-year earnings guidance to between 22 cents (A$0.31) and 35 cents a share, around half the 57 cents analysts had expected. Tableau shares closed down 49.4 percent at US$41.33.

The company had cut its full-year 2016 revenue forecast to between US$830 million and US$850 million from prior guidance of US$845 million to US$865 million. And Tableau's fourth-quarter revenue of US$202.8 million only narrowly beat analyst expectations of US$200.8 million.

"When you get a company that barely beats that has [previously] been beating by a longshot, people are going to be scratching their heads a little bit," said Brian White, analyst at Drexel Hamilton. "If that guy can’t show much upside, what does that mean for the rest of the sector?"

Tableau's results came in tandem with poor performance from business network LinkedIn, which shocked Wall Street with a revenue forecast that fell far short of expectations. Its shares plunged 44 percent on Friday, exacerbating the rout in business services companies.

"They're a proxy for enterprise spend," said Daniel Ives, an analyst at FBR, about LinkedIn.

Investors wondered whether enterprise customers will be willing to splurge on trends like big data analytics and cloud computing. Those trends, hyped heavily over the years by analysts and the companies themselves, had previously driven big share price gains.

"If you’re uncertain how much is something worth, you’re going to give the lowest bargain-basement price," said analyst Katherine Egbert at Piper Jaffray.

Companies that sell cloud-based software also saw particularly sharp declines.

Business software companies and Workday fell more than 10 percent each. Salesforce's 13.6 percent drop was its worst one-day loss since October 2008.

Shares of data analytics software company Splunk closed down 23 percent at US$36.23.

Microsoft dropped 3.5 percent to US$50.16, while Amazon fell 6.4 percent to US$502.13.

Others taking hits included Qlik Technologies, Cornerstone OnDemand, Hortonworks and Teradata, which dropped between 8 and 17 percent.

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