The High Heels are Coming Off

Last week, Intel and Yahoo-two firms that actually make money-announced that they would miss first-quarter revenue projections by a long shot, and Yahoo's CEO resigned.

You have to be Imelda Marcos to supply all the shoes dropping in this market.

Last week, Intel and Yahoo—two firms that actually make money—announced that they would miss first-quarter revenue projections by a long shot, and Yahoos CEO resigned. Loudcloud lowered the offering price on its much-awaited IPO. And within our own index, several leading e-consulting firms issued new warnings about performance this quarter, sending our index down 3.7 percent.

DiamondCluster International, the jewel of the group, slashed its earnings projections by more than a third to 19 cents per share. "The economic environment in North America has deteriorated very quickly during the quarter," says chairman and CEO Mel Bergstein.

ELoyalty also cited a slowdown in North American operations when it revised earnings projections for Q1. A few days earlier, Sapient warned that it would lose 3 cents to 5 cents a share on a pro forma basis in Q1 instead of pocketing the 9-cent-per-share profit forecast by analysts. In addition, Sapient announced plans to cut 20 percent of its staff.

"A different bellwether technology name is seemingly missing numbers every day," says Gary Dean, analyst at Robert W. Baird & Co.

Consulting companies cite the slowing pace among clients to sign new IT deals or expand existing ones. At first, the Fortune 1000 companies that the consultancies were courting delayed deals because they no longer faced competition from dot-coms, many on their way out. Now, with the economy grinding almost to a halt, those same large-cap companies have slashed IT budgets and arent expected to ramp up spending until their own business picks up, along with the economy.

"You can probably scrap the whole year," says one analyst.

Still, the outlook is better for the leading consulting firms than the rest of the pack. "The top names are suffering more from macroeconomic issues than company-specific issues," says Sandra Notardonato, analyst at Adams, Harkness & Hill. "And once the economy gets over this downturn and tech spending picks up, companies like Diamond Technology will be able to snap back very quickly."

Other losers in our index last week include C-bridge and MarchFirst. The latter company lost CFO Peter Murphy, who was quickly replaced by Michael E. Salavati. CEO Robert Bernard also may be out.