Robertson Stephens downgrades cripple techs

A flurry of downgrades from Robertson Stephens had a predictable effect on several software and Internet companies Tuesday, pushing the Nasdaq composite down more more than 124 points.

Analyst Dane Lewis said a "significant slowdown" in information technology spending will crimp average selling prices and total sales for a bevy of companies.

Veritas (Nasdaq: VRTS) shares were off $19.50 to $68 after Lewis cut the stock from a "buy" rating to "long-term attractive."

Among other downgraded stocks, CacheFlow (Nasdaq: CFLO) fell $2.44 to $14.63; Quest Software (Nasdaq: QSFT) lopped off $4 to $24.06; EMC (NYSE: EMC) tumbled $9.50 to $57; Network Appliance (Nasdaq: NTAP) shed $12.13 to $52.06 and Inktomi (Nasdaq: INKT) dropped $4 to $13.88.

"We expect ASP declines to accelerate in early 2001 as IT vendors fight for budget dollars that will likely be down year-over-year," Lewis said in a research note. "Furthermore, IT buyers will exacerbate ASP declines by trying to get the most out of fewer IT dollars in 1H0."

He also said delays in new hardware and software deployment in the IT, particularly in the first quarter of 2001, led to the change in the brokerage’s previous view that the sector would remain stable in a leaner spending environment.

Another half dozen stocks were implicated in the downgrade barrage.

Network Engines (Nasdaq: NENG) lost $1.56 to $43 while Net IQ (Nasdaq: NTIQ) and Netegrity (Nasdaq: NETE) shed $22.25 and $11.38 a share, respectively.

Certicom (Nasdaq: CERT) clipped $2.38 to $18 while Internet Security Systems (Nasdaq: ISSX) and Verisign (Nasdaq: VRSN) fell $14.94 and $11.38 a share, respectively.

"Additionally, we expect sales cycles to lengthen which will translate to higher costs per transaction and increase operating expense percentages and, thus, lower operating margins," the analyst added.

Lewis added that multiples would follow spending to lower levels. The analyst did note, however, that storage and security providers would remain near the top of IT spending priorities.

The Nasdaq composite was off 124 points, or 5 percent, to 2,346.17 in early afternoon trading. >