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The BBC's Rory Cellan-Jones
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Thursday, 8 March, 2001, 21:34 GMT
Yahoo slide halts tech rally
Yahoo graphics
A 20% plunge in Yahoo's share price, prompted by a profits warning, has halted the rally in US technology stocks.

The tech-weighted Nasdaq index, which had risen for three successive days, stood almost 2% lower in morning trade after Yahoo's downgrade undermined investors' fragile confidence in technology firms.

The price of Yahoo shares plummeted by one fifth to $16.50 soon after the exchange opened, a level not seen since September 1998.

The slide added to losses of 6.3% incurred on Wednesday in the seven minutes before trading in the shares was suspended, ahead of the profits warning.

The stock rallied slightly at the end of business on Thursday, but were still closed 15.5% down on the previous day at $17.7.

And it spread to technology shares listed on the broad-ranging Dow Jones Industrial Average, including Hewlett-Packard stock, which lost almost $1.

Advertising cut backs

In its statement on Wednesday, Yahoo warned that revenues for the first three months of the year would come in at about one quarter below previous forecasts.

The internet giant blamed the slowdown on a slide in advertising revenue, which has shrunk as firms worried about how a slowdown in US economic growth could lead to a cut back on marketing spending.

The firm, which predicted it would break even this year, also revealed it was looking for a chief executive after Timothy Koogle, also chairman, said he would step down from the position.

Wall Street downgrades

The announcements prompted Wall Street analysts to revise their ratings of Yahoo.

"In the short term there is no visibility on the revenues and profits, and then we have a major new management decision that's still pending," said Safa Rashtchy, an analyst at brokerage firm Piper Jaffray.

"All of these... [make] the stock much less attractive."

Piper Jaffray was among financial institutions, including SG Cowen, Merrill Lynch and Credit Suisse First Boston, which downgraded their forecasts for Yahoo shares.

But, despite Yahoo's warning, First Albany Corp's Hugh Johnson remained optimistic about the outlook for technology shares overall.

"[Yahoo] just reminds us of the headwind the stock market has to slug its way through day after day," he said.

"Overall, though, the landscape is good. You've got all of the conditions that ordinarily accompany the end of a bear market."

Senior vacancies

AOL's joint chief operating officer Bob Pittman on Thursday became the first candidate tipped for Yahoo's chief executive vacancy to rule himself out of the running.

"I am delighted where I am," Mr Pittman said.

Yahoo is also seeking replacements for other senior officials.

The managing director of Yahoo Europe, Fabiola Arredondo, and the head of its Asian operations, Savio Chow, both resigned recently.

Their departures were seen as a double blow for Yahoo.

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See also:

07 Mar 01 | Business
Yahoo shares suspended
16 Feb 01 | Business
Yahoo bosses quit
13 Feb 01 | Business
Yahoo links with New York Times
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