Further falls in technology sector after CSC bodyblow

A shock report from Computer Sciences Corporation (CSC), the world's third-largest supplier of computer services, of falling sales in the US and Europe, sent technology stocks tumbling in the US yesterday, The news from CSC came at the end of a horrendous week for US technology companies, with a steady drum beat of missed earnings and profit warnings, and new announcements of job cuts, at CSC, Compaq and Oracle.

CSC shares fell by almost 40 per cent, and dragged down shares in IBM, the world's dominant computer player and a major employer in the Republic, which sells similar products. CSC supplies computer services to both government and the commercial sector. It derives the lion's share of its revenue from the US and Europe.

CSC said that it was seeing a deterioration in its European systems integration business, which involves installing and maintaining back-office computer systems and Internet based business marketplaces. After its stock plummeted to 1977 levels yesterday, it said it was developing a restructuring programme and would cut 700 to 900 of its 68,000-strong workforce. US companies have now begun blaming not just the US economic downturn but falling demand and eroding margins in Europe, though Compaq said it was more upbeat about growth in Europe than the US.

Oracle, which employs almost 1,000 people in Dublin, said it would trim staff worldwide and that it was uncertain about future results because of the weakening economy. It is understood that Oracle has yet to decide where it will make job cuts while it reviews all departments' budgets, and that the world's number two software-maker will try to trim staff through attrition rather than lay-offs. Oracle executives blame the slowing economy for disappointing earnings, saying customers are putting off purchases of its database and applications software because they're worried about their prospects in the coming year.

Compaq Computer said late on Thursday that it would reduce 7 per cent of its global work force (or 5,000 jobs) and warned of lower sales projections. It said it would undertake a drastic restructuring that would streamline the company's PC operations.

Mr Michael Capellas, chairman and chief executive officer, said the company saw "continued weakness in the US economy, and resultant pricing pressures". "Pricing's fierce, so it's time to get aggressive," he said in a statement.

He was more upbeat about the overall growth overseas. "We still see year-on-year growth in all regions outside the United States," he said.

Industrial production in the US fell in February for a fifth consecutive month amid declines in manufacturing, mining and utilities, Federal Reserve statistics showed yesterday.

Xerox Corporation, which is battling steep financial losses, is postponing annual pay raises to most of its employees until July. The office-equipment company said it needed to put off the annual raises as it struggled to return to profitability.