Tech stocks limped back into positive territory Thursday as traders grappled with the likelihood of slower sales this year.
While it's no great surprise that growth for many info-tech powerhouses is subsiding, investors are nevertheless displeased that the sky's no longer the limit for companies like Dell Computer and Hewlett-Packard, which both reported lower-than-desired revenue numbers for the latest quarter. The simple fact is, there are a lot of portfolios out there that are top-heavy with tech shares, and their owners are scrambling to decide whether to sit tight or cash in.
The broader market showed strength. If traders were unsure what to do with their tech holdings, they felt a good deal more comfortable about hunting down bargain-priced blue chips following Wednesday's sell-off.
The Dow Jones Industrial Average gained 103.16 points to close at 9298.63, and the Nasdaq Composite Index was up 11.64 at 2260.55. The S&P 500 rose 13.25 to 1237.28.
"It's a strange bird we have here," Bill Meehan, chief market analyst with Cantor Fitzgerald, said of the roller-coaster market. "There's a lot of money out there that's dazed and confused."
Investors are slowly coming to terms with how current valuations stack up against expected near-term performance, he observed, and also are weighing the prospect of Greenspan & Co. raising interest rates in weeks ahead.
The bumpy ride for tech stocks, though, stems mostly from having too much money chasing after too little supply. "Everybody and their mother loves these stocks," Meehan said. "People are adjusting to the fact that you can't keep buying the same stocks and expect them to go up 20 percent a year, or more."
You can't? That's going to come as a shock to the Internet crowd.
One encouraging sign: It looks like Dell (DELL) hit bottom after declining about 20 percent over the past three days. Say what you will about the company's lower revenue, Dell remains a perennial favorite, and the bargain hunters were quick to latch onto its shares as the day progressed. Dell was up $1.44 at $83.
International Business Machines (IBM) was higher as well as it announced plans to bundle the Linux operating system with a number of its servers, workstations, and personal computers. IBM gained $2.63 to $173.13, while Microsoft (MSFT), which can't be happy with any challenge to the dominance of Windows, shed $5.94 to $144.06.
Sun Microsystems (SUNW) eased 6 cents to $94 even as Credit Suisse First Boston and Bear, Stearns reiterated "buy" ratings for the company's stock. For its part, Intel (INTC) was up $2.69 at $127.31 as Donaldson, Lufkin & Jenrette maintained a "buy" for the chipmaker.
PeopleSoft (PSFT) was breathing easier after the Securities and Exchange Commission decided the business application maker won't have to restate past earnings because of questionable accounting practices. PeopleSoft had boosted its bottom line by taking charges for research in the works by acquired firms. The SEC is now in the process of tightening the policy screws to curtail such doings. PeopleSoft rose 19 cents to $17.50.
While most Internet stocks were lower, Broadcast.com (BCST) resisted the downtrend with a 16 percent surge to $67.63. The company inked a deal with Capitol Records to create a new online music channel featuring both audio and video attractions. Separately, DLJ raised its rating for Broadcast.com's stock to "buy" from "market perform."
Affinity Technology Group (AFFI) also had wings on its heels, flying 10 percent to $2 after unveiling new e-commerce technology that allows lenders to deliver speedy loan decisions to customers via the Net. It didn't hurt that Affinity named the subsidiary handling this new service decisioning.com.
Is "decisioning" even a word?
Closer to home: Lycos (LCOS) fell $3.19 to $84.25 after the Boston Herald followed a similar story in Salon speculating that the portal's $83 million takeover of Wired Digital, parent of Wired News, may be jeopardized by a spat among Wired shareholders. Lycos shareholders, distracted by their company's shaky merger proposal with USA Networks, may see the Wired deal as more trouble than its worth, the Herald reported.
No one asked, but it sure seems like the whole Wired-Lycos-USA rodeo wasn't thought through very well. Don't be surprised if some or all of the deals involved end up back at the negotiating table.
AT&T (T) advanced $1.50 to $85.81 after receiving a green light from federal regulators for its $57.5 billion acquisition of cable giant Tele-Communications Inc. Meanwhile, Comcast (CMCSA), the No. 4 US cable company, was $4.25 higher at $67.19 after agreeing to buy Greater Philadelphia Cablevision for approximately $264 million in stock.
For a really big-bucks deal, check out Transamerica (TA) being gobbled up by Europe's seventh-biggest insurer, Aegon, for nearly $11 billion. Transamerica soared 26 percent to $72.81 on the news.
Lastly, special sauce all around for McDonald's (MCD), which advanced $2.44 to $82.94 (and helped lift the Dow in the process) after Merrill Lynch raised its 12-month price target for the burgermeister to $100. Mickey D's also topped Fortune's annual list of "most admired" food-services companies for the second straight year.
Must be doing something right.
