It’s not just software.

Hardware shares are taking a beating Thursday, as investors grow increasingly worried about the prospects for Q3 earnings - and Q4 guidance. Shebly Seyrafi, an analyst now with Calyon Securities (his last stop was at Caris) Thursday warned that channel checks find hardware demand hit “an air pocket” starting in early September. He notes that international economics have weakened in recent weeks, that many hardware companies did not see the usual back-to-school pick up in demand, and that the financial sector has “noticeably worsened.”

In response, Seyrafi chopped his ratings on multiple stocks.

  • Sun Microsystems (JAVA): Rating to Reduce, from Neutral. Target to $7, from $9.
  • Hewlett-Packard (HPQ): Rating to Add from Buy; target to $50 from $60. He cut his FY ‘09 estimate to $4.04, from $4.11; for ‘10 he goes to $4.40, from $4.47.
  • Emulex (ELX): Rating to Reduce from Neutral. Target to $10, from $13.
  • QLogic (QLGC): Rating to Reduce from Neutral. Target to $13, from $19.
  • Seagate (STX): Rating to Reduce from Add; target to $11 from $14.

Seyrafi also cut his price target on Apple (AAPL) to $130, from $190, while retaining his Add rating. Seyrafi contends that Apple’s notebook sales growth has slowed recently, due to weaker macro growth and a pause ahead of new MacBooks expected later this month. He also says that Apple is “vulnerable to consumer spending retrenchment.” He now sees Apple EPS at $5.99 for FY ‘09, down from $6.10, and $7.28 for FY 2010, down from $7.44. But he adds that at current levels “it is hard to go bearish on AAPL.”

In Thursday’s trading:

  • Sun is down 37 cents, or 4.9%, to $7.12.
  • HP is down $2.19, or 4.9%, to $42.78.
  • Emulex is down 31 cents, or 3%, to $10.10.
  • QLogic is down 82 cents, or 5.4%, to $14.46.
  • Seagate is down 23 cents, or 2%, to $11.32.
  • Apple is down $4.73, or 4.3%, to $104.40.