Rough Start to 2008 for Data Center Stocks

The new year is quickly shaping up as a volatile one for technology stocks, and especially so for shares of data center companies. The U.S. stock market started its year with three days of bruising losses, as the Dow Jones Industrials lost 3.5 percent of its value in just three sessions. The tech-centric NASDAQ Composite index was hit even harder, shedding 5.6 percent of its value.

The losses were even sharper for the stocks of data center companies we track here at Data Center Knowledge. All of the 13 companies on our chart had steeper percentage losses than the Dow, and 11 of them had percentage losses exceeding the NASDAQ index. Here’s a look at data center companies’ performance over the first three sessions of 2008:

The selloff was driven by Friday’s weak jobs report, which fueled fears that the U.S. economy is growing weaker, which could lead to cuts in corporate spending.

Last week’s biggest decliner, BladeLogic (BLOG), has been a high flier since its IPO last fall. Walter Pritchard, the infrastructure software analyst for Cowen, included BladeLogic among IT service providers who could be hit hard by a recession. Pritchard said Cowen’s analysis was based on discussions with 900 executives involved in technology purchasing. The stocks with the highest risk, Pritchard says, are both players in the virtualization software market: Citrix Systems (CTXS) and BladeLogic.

DuPont Fabros Technology (DFT), VMware (VMW) and Equinix (EQIX) held up the best during the tech selloff, which saw the NASDAQ index shed 98 points on Friday.

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.