I wrote last weekabout ominous earnings warnings from top companies like Intel (Nasdaq:INTC), Texas Instruments (NYSE:TXN) and Altera (NASDAQ:ALTR). It appeared that retrenchment in the U.S. and Europe was starting to take a toll. My conclusion was: �If the deterioration continues, many top multinational companies could be vulnerable to price declines.�
This week we got further confirmation of the weakness, with a lackluster fourth-quarter forecast from Red Hat (NYSE:RHT). Yet it was Oracle�s (Nasdaq:ORCL) earnings report that was really scary.
It�s rare for Oracle to miss Wall Street expectations. As a result, Oracle�s stock is off a grueling 13% in Wednesday trading, which is its worst drop since 2002 — another time when the global economy was slowing down.
For the most part, Oracle has seen a delay in purchasing from its customers. And this seems fairly reasonable — how many CEOs are really confident about 2012? In light of the uncertainty, it�s easy to hold back on information technology spending. Excluding certain items like security software, there aren�t many �must-have� software applications.
Since Oracle sells globally, it�s a good barometer of the overall business software market. In other words, this likely means weakness for other major players like IBM (NYSE:IBM), SAP (NYSE:SAP) and Microsoft (Nasdaq:MSFT).
But the weakness could even extend to the high-fliers in cloud computing, which focuses on delivering software via the Internet. Just look at Salesforce.com (NYSE:CRM), which is down 9% in Wednesday�s trading and is down 40% since July.
It�s an increasingly good idea for investors to be cautious with tech stocks. The risks are becoming substantial.
Tom Taulli runs the InvestorPlace blog �IPOPlaybook,� a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of �All About Short Selling� and �All About Commodities.� Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.
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