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Technology stocks take beating on US mortgage problems

Technology stocks made an abrupt U-turn, reducing the gains that had been piling up as investors sought refuge from the lending and housing morass weighing on the US economy.

Internet networking supplier Cisco Systems Inc took one of the biggest beatings after chief executive John Chambers warned that weakening demand among major customers, including banks saddled with huge loan losses, would probably slow Cisco's growth.

Shares of Cisco fell US$3.12, or 9.5 percent, to close on Thursday at US$29.63.

The setback obliterated US$19 billion in shareholder wealth and was the sharpest decline in the San Jose-based company's stock price since a 10.6 percent drop in August 2004.

But Thursday's comedown was widespread, pulling down even high-tech stars like online search leader Google Inc and iPod maker Apple Inc, whose stocks had been leaping from one new peak to another for months.

Apple shares were down US$18.53, or 9.9 percent, at one point. And Google shed as much as US$55.06, or 7.5 percent, before rebounding later in the session to close at US$693.84, down US$39.10, or 5.3 percent, for the day. Apple's stock closed at US$175.47, down US$10.83, or 5.8 percent.

The downturn trimmed Google's market value by US$12 billion and clipped Apple's market value by US$9 billion. Google's total market value was US$217 billion at the close of trading on Thursday, Apple's was US$153 billion and Cisco's was US$180 billion.

Other prominent losers included: China's top Internet search engine, Baidu.com Inc, down US$37.13, or 9.4 percent, to US$357.87; software maker Oracle Corp, down US$1.75, or 7.9 percent, to US$20.35; IBM Corp, down US$4.97, or 4.5 percent, to US$106.11; Amazon.com Inc., down US$3.46, or 4 percent, to US$83.58; eBay Inc, down US$1.29, or 3.8 percent, to US$32.40; and Hewlett-Packard Co, down US$1.90, or 3.7 percent, to US$49.94.

The tech-laden NASDAQ composite index fell 56.72, or 1.9 percent, to 2,696.

The deepening trouble in the financial and real estate sectors had caused Wall Street to turn to high-tech industry as a sort of safe harbor, with investors reasoning that the demand for computers, gadgets, software, networking gear and Internet advertising would hold up reasonably well amid the duress.

But that rationale suddenly looked shaky after Chambers indicated his company has been having trouble selling products to its 25 largest customers -- a group that overlaps with the biggest businesses in the US.

Among the industries targeted by Cisco, "the finance one was the one hardest hit," Chambers told analysts during a conference call held late on Wednesday after Cisco released its earnings for the fiscal quarter ending last month.

The reluctant buyers include eight banks that Chambers didn't identify by name.

Several US financial services companies have recognized billions of dollars in losses from soured home loans.
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