Tech Stocks Off the Deep End: But Ignore the Panic
Just as there is a tendency to inanely cheerlead the tech sector valuations on the way up, there is inevitably the equally ridiculous overreaction to the downward slide going on right now for digital companies.
Thus, while by no means the weakest sector of the economy, a range of tech stocks got hammered today in the markets, getting dragged down with the market at large as investors continued to fret about a sustained worldwide recession that government bailouts could not prevent.
Consider, after a week of getting socked, even more blows:
Yahoo (YHOO) closed at $15.19, down about 5 percent or 81 cents.
Google (GOOG) closed at $369.37, down just under 5 percent or $17.54.
Microsoft (MSFT) closed at $24.91, down 5.4 percent or $1.41.
eBay (EBAY) closed at $17.89, down 5.5 percent or $1.05.
Interestingly, the company with the most consumer exposure, Apple (AAPL), fell below $90, before closing at $98.14, up 1.1 percent or $1.07.
Now, there’s no question some of this tech carnage was due to the sector riding higher than most and worries about future results. Analysts are cutting estimates across the industry, in anticipation of weaker advertising and international markets.
At this point, as much as BoomTown has warned about the impact of the financial crisis on Silicon Valley, the meltdown in tech shares is beginning to feel a little undeserved and overdone.
After all, does anyone doubt most advertising will move online? Or that tech will not continue to permeate all sectors of our society and economy in the decades ahead? Or that digital companies, for all their fattening up of late, are not the most adept at adapting themselves to leaner times?
After all, everyone in tech did learn a thing or two from the bursting of the last bubble, which was entirely appropriate.
This time, while the industry had begun to party like it was 1999, the more recent expansion–aside from the lofty valuations for start-ups–was done in a way that will make it much easier to cut back.
I kind of feel like I might be channeling Chip Diller, the annoying ROTC cadet in “Animal House” (played by Kevin Bacon), with his famous line, “All is well, remain calm,” even as all hell was breaking loose around him (see video below).
But with a little rejiggering, it’s still the right prescription for the months ahead. In the short term, all is not well.
Nonetheless: Remain calm.