Tech Stocks Continue Free Fall and Gateway Goes Splat!

The U.S. gross national product dropped significantly from last quarter as expected. The Dow took the news of a slowing economy in stride, but the Nasdaq responded by moving to 52-week lows, again, and is now almost 50% below its March high. Appleis stock, along with many others, dipped into price territories not seen in more than a year. Tomorrow is shaping up to be another negative day for PC stocks after Gateway warned it will lose money in the fourth quarter.

The GNP grew at a modest 2.4% annual rate in the third quarter, slightly lower than the 2.7% rate forecast by economists and much slower than the 5.6% annual rate reported for the second quarter. The Commerce Departmentis price index for personal consumption rose only slightly indicating that inflation remains in check.

PC stocks continued to sink as more financial analysts joined the bear parade after yesterdayis Salomon Smith Barney report by Richard Gardner lowered hopes for the PC vendor stocks.

"Personal computer inventory levels are high and demand is lagging," Reuters reported. "At this point we are expecting a disappointing December quarter for PC OEMs (original equipment manufacturers). Depending on holiday demand and quarter-end inventory levels, these disappointing results could continue into the first quarter,ii Gardner wrote.

Just as we were going to post this article Gateway warned it expects fourth quarter earnings of $0.37 per share, way below First Callis $0.62 per share estimate. Figuring in a $200 million dollar charge to write down some investments and assets Gateway could actually report a loss of $0.02 per share in late December. In after hours trading Gateway is down over 9 dollars to 21.50.

John Todd, Gatewayis chief financial officer, after recently reassuring investors Gateway was going to meet estimate now bemoans:

"We expect consumer sales to continue ramping up this quarter, but it is now obvious to us following the Thanksgiving weekend that they will not grow sufficiently to allow us to meet previous consensus for EPS and guidance for revenue. The economic slowdown, coupled with on-going shifts in PC seasonality, clearly had a significant impact on our sales over the holiday weekend. We expect these issues will continue to have an effect on overall demand over the next twelve to eighteen months.ii

Appleis stock dipped 15/32, or -2.60%, to close at 17 9/16 (just a 1/16 off the 52-week low) on volume of 8.5 million shares. AAPL was trading as low as $16.45 per share in the after hours due to Gatewayis astoundingly large miss.

A news report from India gives a rare glimpse of Appleis expanding efforts to engage emerging PC markets in Asia.

The Nasdaq shed 27 points (-1.02%), after being off as much as 90 points earlier, to close at 2707 on volume of 2.04 billion shares. The Nasdaq is down 34% year-to-date.

The Dow rallied 121 points (1.16%) to close at 10629 on volume of 1.1 billion shares. Defensive investments like food, drugs and tobacco stocks were scoring new 52-week highs today.

The S&P 500 climbed 5.85 points (0.44%) to close at 1341.94.

In Apple related businesses: Akamai climbed 9/16 to 30 15/16. Adobe lost 15/32 to 64 5/16.

IBM, Microsoft, Intel and 16 other tech leaders have joined to form an e-business Internet consortium website. Itis an industry wide attempt to achieve a cross-platform language for e-business transactions. IBM jumped 1 15/16 to 99 13/16. Intel climbed 23 /32 to 42 3/4.

Shares of Microsoft lost 1 15/16 to 65 1/16 after a Goldman Sachs research note by Rick Sherlund said Microsoft was on track for "conservative" expectations, but if slowing demand continues the 20 to 22% revenue growth expected could fall through.

A Bloomberg News report points out that Palm Inc. (PALM) , which currently owns the dominant handheld device OS is losing market share to new handhelds using Microsoftis Pocket PC operating system. IDC analyst Kevin Burden even predicts that by 2004, "Microsoft will have almost 40 percent of the market, compared with 51 percent for Palm." Microsoftis Pocket PC market share has recently surged from 10 to 18%. Palm lost 2 3/4 to 34 5/8.

Motorola is all over the press release news wire as the company announces, demonstrates or introduces a slew of new communication devices at the Western Cable Show 2000 in Los Angeles. Motorola traded flat at 20 3/4.

After lowering and then lowering again its sales growth projections, Dell has announced it will offer a full year of Internet access with the purchase of a new PC. Sales must be slow. Dell slipped 5/8 to 21 13/16.

Gateway will meet with financial analysts soon to report on the quarter, but Merrill Lynch indicated it doesnit expect any positive surprises and lowered their sales estimate for Gatewayis fourth quarter. GTW reeled back by 1/98 to 29.02.

PC stocks are plainly out of favor this holiday season. Compaq shed 0.40 to 22.70. Hewlett Packard fell 1/8 to 34 9/16.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our updated Apple Stock Watch Special Report.