Shares in Microsoft, the world's biggest software maker, plunged 8% on Friday.
The drop came a day after Microsoft revealed third quarter profits that met analysts' expectations but disappointed wider hopes of recovery in USA Inc.
Microsoft's stock has not fallen by such a big percentage in a single day since 17 September 2001, the first day of trading after the attack on the World Trade Centre.
The fall, mirrored across the technology sector, was prompted by a mix of profit-taking and market fears that the wider economic picture did not justify recent rises in stock prices, analysts said.
Profits meet targets
Microsoft said that better-than-expected PC sales in the back-to-school shopping season had offset continued sluggishness in the corporate IT market.
Profits were $2.6bn (£1.53bn; 2.2bn euros), or 24 cents a share, for the three months to 30 September compared to a figure of $2bn - adjusted to reflect stock options granted - for the same period last year.
Turnover was up 6% to $8.2bn, and the company raised its sales forecast for the rest of the year.
It also announced the first quarterly profit ever for the company's MSN internet division, founded in 1995.
But Microsoft stock was sharply down in after-hours trading on Thursday, as traders digested the numbers.
Some investors were concerned that the company had signed far fewer new contracts with corporate customers than it expected, hitting its "unearned revenue" figures.
Microsoft's chief financial officer John Connors said: "While corporate IT spending was slow to improve this quarter, we saw strength across all of our consumer businesses, driving higher than expected revenue for the company.
"Delivering value to our customers with innovative software like the new Office System, Exchange Server 2003, and Small Business Server and executing on our plan to better help protect customers from a growing number of security attacks are our top priorities for the rest of the year."
Mr Connors said Microsoft's sales people had been distracted by helping customers cope with the Blaster virus, during the September quarter.
But he said he expected personal computer sales for the current financial year to be higher than previously forecast, in the high single digits.
"Our expectation is that PC demand and consumer demand is actually improving," Mr Connors told Reuters.
Microsoft's shares have gained 11% since the start of the year.
Its shares closed up 0.02 at $28.91, after spending much of the day in negative territory.
Chipmaker Intel and PC maker Dell have also given signs recently that demand for PCs, 90% of which run Microsoft's Windows operating system, are recovering.
But there was little joy at PC maker Gateway, which reported increased losses on Thursday.
The company reported its 11th loss, including restructuring charges and others items, in three years as revenue fell 21%.
The company, which is expanding to sell handheld computers, digital cameras, flat-screen monitors and TVs, said it had a net loss of $138.8m, or 43 cents a share, compared with a year-ago net loss of $49.7m, or 15 cents a share.
Sales fell to $883.1m from $1.12bn.