'Pessimistic' markets see tech giants' shares tumble

Apple, Microsoft and ARM share prices drop as FTSE 100 also drops

A host of the world's tech giants saw their share prices tumble this week as the stock markets suffered a pessimistic mood.

Apple saw its share price fall roughly seven per cent to $121.80 (£77.93) per share on Tuesday, Microsoft also saw its share price fall about four per cent to $45.38 per share and FTSE 100 constituent ARM Holdings' share price fell 6.6 per cent to $15.13 per share on Wednesday.

These drops in share value coincided with a fall in the FTSE 100, which fell by roughly 102 points to 6,667.34 yesterday.

Speaking to CRN, Philip Carse, principal analyst at Megabuyte, said the tech companies' fall in share price was a collective reaction to the mood of the market.

"If there is some reason for poor sentiment generally, that will drag down share price. So the fact all those companies [ARM, Apple and Microsoft] saw their share price decline, even though their numbers were pretty good, is symptomatic of the market being in a reasonably pessimistic mood over the past couple of days," he said.

"The markets are down because they are a weighted average of individual company share price, so from that point of view, the share price decline of Apple, Microsoft and others helped drive down the market. But it's also the other way round, so market sentiment carries through into how investors look at company results," he added.

Another tech bubble?

But Carse disparaged questions that this week's stock market decline is part of a wider tech bubble.

"I think it's a blip. When you are talking about the solid tech companies, with the likes of Microsoft, there is no denying we are in a very strong position for tech companies. The internet economy, the move to the cloud, these things are happening and the outlook for most of the tech we follow is positive," he said.

"We are not in a tech bubble like we were back in 2000 when everyone expected the internet to revolutionise the world straight away."

The share price drops followed Microsoft, ARM and Apple releasing their financial results this week.

It is perhaps not hard to see why Microsoft's share price fell, given it reported a net loss of $3.2bn for the three months to 30 June for its Q4.

What is less clear is why Cambridge-headquartered ARM's market valuation was hit, given the chip developer recorded Q2 profit after tax of $193.23m, up 32 per cent year on year, for the three months to 30 June.

While in Apple's Q3, net profit grew 38.9 per cent year on year to $10.7bn, on sales of $49.6bn, which were up 32.6 per cent over the same period, for the three months to 27 June.

Carse said Apple's share price drop in the wake of its results showed the "fickleness" of the market.

"If you look at Apple's results, they beat expectations; they had their best growth for three years. It's hard to see what else they could do," he said.

"I suppose the markets were a bit spooked by concerns of reliance on China given the economic situation there and maybe they hoped for more news on the Apple Watch. It might just have been that the Apple share price might have been at its highest and there wasn't the real surprise in the results to push it further. To my mind the share price fall was an overreaction to the results."