Rob, for over a year Billy has been saying "we're out of the woods now".
Are we?
>Not out of the woods yet
Big-tech woes hurt Nets; EBay is this week's winner
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 6:57 PM ET Feb 16, 2001 NewsWatch
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NEW YORK (CBS.MW) -- Net shares retraced some of this week's earlier gains Friday, falling precipitously on the heels of further evidence the economic downturn is far more severe than investors have assumed.
The Goldman Sachs Internet Index flopped 5.4 percent to 185.62. The Net barometer has fallen 23 percent from its recent high of 240 on Jan. 24.
Merrill Lynch Internet Holdrs shaved off 4 percent while business-to-business shares, as measured by Merrill Lynch B2B Holdrs, gave up 7 percent. Merrill Lynch Internet Architecture Holdrs sank 5 percent.
The latest warnings came from Nortel, the world's largest provider of fiber optic plumbing for the Internet. "We now expect the U.S. market slowdown to continue well into fourth quarter 2001," said Nortel CEO John Roth. See full story. Meanwhile, if companies aren't giving dour forecasts, they give none at all. Dell Computer gave analysts little guidance beyond its first quarter while in the e-commerce sector, Priceline.com (PCLN: news, msgs) shed little light on business conditions beyond the first half of this year.
"Visibility is even worse than expected," said Merrill Lynch analyst Henry Blodget, referring to Priceline's disappointing quarterly results.
Conventional wisdom has been that the second half of this year will see a turn-around in the economy as consumer and corporate spending picks up. Yet there is little data, if any, to support that assumption. "There is no evidence the economy is going to pick up in the second half," said Bruce Lupatkin, portfolio manager at North Bay Technology Partners.
The perennial question is whether the slowdown is far worse than current projections, said Robert Fagin, a Net infrastructure analyst at Bear Stearns.
Ripple effect
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Updated:
2/16/2001 6:45:32 PM ET
Fiber-optic gear maker Nortel Networks said it will slash 10,000 jobs, or 11 percent of its work force and lowered revenue guidance to reflect a slowdown in carrier spending.
Companies that have modest to large exposure to carrier spending -- including Inktomi (INKT: news, msgs) and Portal Software (PRSF: news, msgs) -- gave up ground. Inktomi fell 8 percent while Portal gave up 6 percent.
But the news sent tremors across the board as the investment community sought to outline the implications.
If carriers are not spending, this could indicate that businesses might not deploy as many servers to support their applications and content. This leads to fewer servers to be managed by the hosting companies, said Rick Juarez, an analyst at Robertson Stephens.
"This is a hangover from the capital funding shutdown and that is having a derivative effect on the overall Net infrastructure group," said Harry Blount, an analyst at Lehman Bros.
The implications of an economic slowdown are simply fewer new customers and a slowdown in existing client business, he added.
Web hosting and managed service provider Exodus (EXDS: news, msgs) gave up 10 percent to $16.13. If business slows down, companies may not need to push their content to the edge. Content distributor Akamai (AKAM: news, msgs) saw its shares slide 9 percent.
Meanwhile, dot-coms simply going out of business are taking the toll on other dot-coms. Web site application and hosting company NaviSite (NAVI: news, msgs) tumbled 20 percent to $2.25 after a revenue shortfall due to its significant dot-com exposure.
The company took bad debt reserves for its dot-com clients and terminated about 45 primarily dot-com customers out of its 392 customers, according to Juarez.
It's getting small, very small
Priceline.com was the latest company in the e-commerce space to leave investors with few clues about the financial outlook for online commerce in the second half of this yearPriceline.com (PCLN: news, msgs) lost 38 cents, or 13 percent, to $2.63 after the company reported a fourth quarterly loss that was more than double expectations. While Priceline executives said it will reach operating break-even in the second quarter, some analysts questioned whether Priceline could be big, really big.
"We believe the company has enough cash to reach break even, but it is not clear how big a business the company will be able to build (revenue may well drop this year) and/or how much it might be worth," said Merrill's Blodget.
Priceline generated revenue of $228 million, up 33 percent from the year-ago period. That was a dramatic slowdown from the 124 percent year-over-year growth in the prior quarter.
Amazon.com (AMZN: news, msgs) lost 81 cents, or 6 percent, to $13.69. Despite receiving a "sell" rating this week, shares ended unchanged. See Net Stocks, Thursday.
Silver lining
EBay (EBAY: news, msgs) slipped $1.75, or 4 percent, to $48.75 on the day, but ended the week up 9 percent as the company appears to be among the few firms weathering the economic storm.
Yahoo (YHOO: news, msgs) gave up 10 percent to $28.19 on the day, but managed to eke out a modest gain on the week; AOL Time Warner (AOL: news, msgs) lost 3 percent to $48.36 on the day, but edged up slightly for the week. |
