Tumbling Software Stocks Follow Informatica’s Warning

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When data integration software maker Informatica Inc. (NASDAQ: INFA) warned on second quarter earnings after markets closed last night, the company’s share price fell by more than -25% and now down nearly -29%. The company cited overall weakness in the global economy, particularly in Europe, as the source of the problem, but also noted that the company “did not adapt” quickly enough to the economic slowdown.

Investors must think that slow reaction time is contagious because many software makers are taking their lumps today. Another drag on the market today is the weak jobs report, which clearly demonstrates just how slowly the US economy is growing.

There’s no safe place to be in the software industry today. Operating systems, business services, networking, storage systems, no exemptions. Size appears to matter, with the larger software makers trading down the least, although there are some big exceptions there too.

The world’s largest software maker, Microsoft Corp. (NASDAQ: MSFT) is down more than -2%, and number 2-ranked Oracle Corp. (NASDAQ: ORCL) is down by about the same amount.

Salesforce.com Inc. (NYSE: CRM) is down nearly -5% and SAP AG (NYSE: SAP) is off -4.5%.

F5 Networks Inc. (NASDAQ: FFIV) has dropped -6.6% and Riverbed Technology Inc. (NASDAQ: RVBD) is down more than -7%.

Red Hat Inc.(NYSE: RHT) is down -6.3% and Broadsoft Inc. (NASDAQ: BSFT) is off -6.6%.

VMWare Inc. (NYSE: VMW) is down -6.5%, likely on reaction to the earnings warning last night from Seagate Technology plc (NASDAQ: STX), as well as the Informatica warning. Seagate said quarterly sales and margins would miss earlier forecasts on lower shipments and a “quality issue.” One analyst also cut VMWare’s revenue target for the year.

Design software firm Autodesk Inc. (NASDAQ: ADSK) is off -6.6% and engineering software maker Ansys Inc. (NASDAQ: ANSS) is down about -5.7%.

The NASDAQ composite is down nearly -1.5% in the late morning, and it’s pretty easy to see where the downdraft is coming from. Once the Informatica effect is baked into share prices it will only remain to be seen how any other warnings hit the software makers. Warnings season has probably just begun.

Paul Ausick