Looks like the cloud-computing bubble is losing some air.
In a move likely at least partly spurred by a warning and subsequent massive sell-off in shares of data center operator Equinix (EQIX), the Street this morning is engaged in a wholesale dumping of the enterprise software and data storage sectors. Also contributing to the pressure on the stocks: a warning this morningby U.K.-listed Autonomy (AU.L). An infrastructure software provider, the company said Q3 revenue will be at the top of its previous range. But the company also indicated that current Street revenue forecasts for the full year are too high, and that there is still “volatility” in corporate IT spending.
Autonomy CEO Mike Lynch said in a statement that the company was “pleased to be at the top end of our range during our traditionally seasonally weakest quarter, but were disappointed not to be in a position to report revenues above this range. There are unique challenges to the summer months with a consequent September catch-up, but we are also noticing customers still showing volatility around their view of the current macro economic situation.”
Lynch also said the company’s internal model suggests current consensus estimates are about 3% too high.
The general thinking, I suspect, is that the intensifying price pressures and increased churn Equinix described – and the uncertainty Autonomy noted – are symptomatic of a broader tightening of the screws by corporate IT buyers everywhere. In short, there are new fears that the corporate IT spending in general is showing a little softening. And with the shares of many stocks in networking and enterprise software sporting fat gains, some of those related to speculation about potential acquisitions, there were plenty of profits for investors to take.
Piper Jaffray analyst Mark Murphy noted in an interview with Tech Trader Daily this morning that the massive sell-off in EQIX “shows you what can go wrong when a company is just slightly light.” Today’s session, he says, is “a day of reckoning for investors who have been too greedy.” Murphy, who had downgraded a variety of enterprise software stocks in mid September, notes that the “fast money” had piled into cloud computing plays, due in no small part to the insane bidding war for 3Par, which convinced many on the Street that there was big money to be had from a consolidation in enterprise software and storage.
The storage and data warehousing stocks, which has been boosted by the recent acquisitions of 3Par and Netezza, are selling off hard:
- Isilon (ISLN) is down $1.58, or 6.1%, to $24.30.
- Radware (RDWR) is down $2.53, or 7.3%, to $32.05.
- Teradata (TDC) is down $2.06, or 5.2%, to $37.64.
- CommValut (CVLT) is down $1.45, or 5.2%, to $26.24.
Likewise, enterprise software stocks are getting smacked:
- VMware (VMW) is down $5.43, or 6.3%, to $79.79.
- Salesforce.com (CRM) is down $9.18, or 8.1%, to $104.73.
- Red Hat (RHT) is down $3.03, or 7.3%, to $38.47.
- Tibco (TIBX) is down $1.28, or 7.1%, to $16.83.
- Citrix (CTXS) is down $6.94, or 9.9%, to $63.06.
Instead, investors are fleeing for the safety (and lower multiples) offered by tech blue chips:
- Oracle (ORCL) is up 47 cents, or 1.7%, to $27.77.
- Cisco (CSCO) is up 32 cents, or 1.5%, to $22.31.
- Hewlett-Packard (HPQ) is up 4 cents, or 0.1%, to $40.85.
As noted earlier, the sell-off also include data-center and content delivery network stocks.
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