Insiders selling, NOT buying......
Tuesday March 27, 12:20 am Eastern Time
TheStandard.com
Baby, It's Cold Inside
By Cory Johnson
There's a ridiculous yet tempting notion infecting investors right now: It's the idea that many stocks are so cheap that they have got to be worth buying. Cisco and Sun have fallen below $20, Oracle $15, Ariba $10 ... the list goes on. But in a market defined by its lack of buyers, an alarming phenomenon suggests things will get even worse.
Company insiders aren't buying stock. Worse still, they're selling, despite the depressed prices their shares now fetch. One would think that if anyone could recognize a bargain, the directors and corporate executives would. After all, if anyone drank the Kool-Aid, they did.
But figures released last week show that the pace at which executives buy their own stock fell to a five-year low in February, worse than January's record low, hinting that the market has further to fall. The sold-bought ratio - a figure kept by InsiderScores.com - compares insider buying to insider selling, and that ratio has never looked lousier. Insiders are always selling more than they're buying (and, therefore, the ratio has never been negative), but in February the ratio hit 29.07, a record high.
Historically, a spike in this ratio has proved a warning of an impending market decline. In May 1996, the sold-bought ratio jumped to 13.7 and in July of that year the S&P 500 index dropped 4.5 percent. In a rising market in July 1998, the ratio hit 20.3; the following month the S&P 500 fell 14.6 percent. "We've found that the sold-bought ratio is a leading indicator of where the market is going," says Lon Gerber, InsiderScores.com's director of research. "There's a two- or three-month lag, so clearly the rise in February doesn't suggest good things for the market."
This is, of course, the last thing market watchers want to hear. "I think people are frightened, insiders included," says Wall Street veteran Jon Burnham, chairman of Burnham Investment Trust and manager of the $176 million Burnham Fund. "This tells you the insiders don't think their stocks are particularly attractive, and they don't think this thing is over."
What has characterized the rise in the sold-bought ratio is emblematic of the larger stock market: It is not so much a cabal of sellers as a lack of buyers. For the last six months, insiders have sold between $3.2 billion and $4.3 billion in stock each month. But inside buyers have simply disappeared. In February, insiders accumulated $144.4 million in stock, less than half December's figure of $313 million. But they sold $4.2 billion in stock.
Some of the data suggests that corporate insiders have been burned as badly as everyone else buying stock in recent years. The record for insider buying was set in February 2000, when the market was at an all-time high. Insiders bought $480.1 million worth. But that same month, they dumped $10.9 billion in shares. The sold-bought ratio, therefore, hit 22.6, then a historic peak. The market, of course, fell apart shortly after.
"You hear nothing good in the news," says Burnham. "And corporate executives are hearing the same. The market is not going to stabilize unless something good happens."
An old saying on Wall Street goes, "There are many reasons insiders sell, but there's only one reason they buy: They think the stock is going up." Last week's numbers make it painfully clear insiders aren't feeling bullish.
biz.yahoo.com
Bank One (ONE:NYSE - news) sounded the alarm on bad loans yet again,
warning of sharply rising credit losses in coming quarters.
In its annual regulatory filing, made Tuesday, the Chicago-based bank said it
expects commercial credit losses for the next several quarters "will at least
double" the typical level of recent years, which has been around 0.40% of
loans.
"The main part of the 10-K is that they expect credit quality to get worse for
several quarters," says Mike Mayo, banks analyst at Prudential. "A lot of
people have expected they would get bad for two more quarters in the industry
and then it would plateau. Well, here's one major bank saying several
quarters," says Mayo. (He rates Bank One a sell.)
Bank One chalked up the expectation of higher losses to a continuation of
trends from 2000 and the outlook for a weaker economy in the current year.
Indeed, 2000 was a decidedly rough year for the bank operationally, though
the optimism that surrounded the hiring of former Citigroup (C:NYSE - news)
executive Jamie Dimon as CEO drove the stock 15% higher.
thestreet.com
Tuesday March 27, 4:43 pm Eastern Time
Press Release
Nortel Networks Sees First Quarter Below Expectations
TORONTO--(BUSINESS WIRE)--March 27, 2001--Nortel Networks Corporation(a) (NYSE:NT - news; TSE:NT. - news) today announced that its results for the first quarter of 2001 are anticipated to be below the Company's previously stated expectations.
Nortel Networks now expects revenues in the range of US$6.1 billion to US$6.2 billion and a loss per share from operations (b) in the range of US$0.10 to US$0.12 for the quarter. This is below the Company's previous estimates of US$6.3 billion of revenue and loss per share from operations(b) of US$0.04 provided on February 15, 2001.
``We continue to feel the impact of the economic downturn in the United States and are now seeing customers globally assess its effect on their businesses,'' said John Roth, president and chief executive officer, Nortel Networks. ``Reduced and/or deferred capital spending and increased pricing pressure are resulting in lower overall revenues, particularly in the United States.''
Nortel Networks has made significant reductions in its employee base and adjusted its supply chain to reflect the current economic environment. The Company has substantially completed the employee related actions announced on February 15, 2001. The full benefit of these reductions is expected to impact the second quarter of 2001. However, due to the market environment, the Company is planning further reductions and now expects an aggregate net reduction, by mid year 2001, of approximately 15,000 from the number of employees at December 31, 2000. Nortel Networks expects to tightly adhere to its cost reduction and business realignment initiatives while driving further improvements in productivity and efficiency despite a difficult economic environment.
``Given the poor visibility into the duration and breadth of the economic downturn and its impact on the overall market growth in 2001, it is not possible to provide meaningful guidance for the Company's financial performance for the full year 2001,'' Roth said.
``We continue to align our cost structure and industry leading product portfolio with our customers priorities and plans,'' Roth said. ``It is our belief that Nortel Networks continues to be the best positioned high-performance Internet and communications equipment vendor for the customers we serve, and that our global leadership position combined with our agility will enable us to weather the current economic storm and come out of it a stronger company.''
Nortel Networks is a global Internet and communications leader with capabilities spanning Optical, Wireless, Local, Personal Internet and eBusiness. The Company had 2000 U.S. GAAP revenues of US$30.3 billion and serves carrier, service provider and enterprise customers globally. Today, Nortel Networks is creating a high-performance Internet that is more reliable and faster than ever before. It is redefining the economics and quality of networking and the Internet, promising a new era of collaboration, communications and commerce. Visit us at www.nortelnetworks.com.
Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the impact of price and product competition; the dependence on new product development; the impact of rapid technological and market change; the ability of Nortel Networks to make acquisitions and/or integrate the operations and technologies of acquired businesses in an effective manner; general industry and market conditions and growth rates; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of consolidations in the telecommunications industry, the uncertainties of the Internet; stock market volatility; the ability of Nortel Networks to recruit and retain qualified employees; the ability to obtain timely, adequate and reasonably priced component parts for suppliers and material manufacturing capacity; the impact of increased provision of customer financing by Nortel Networks; the impact of the credit risks of our customers; the entrance by Nortel Networks into an increased number of supply, turnkey, and outsourcing contracts which contain delivery, installation, and performance provisions, which, if not met, could result in Nortel Networks having to pay substantial penalties or liquidated damages; and the impact of increased provision of customer financing and commitments by Nortel Networks. For additional information with respect to certain of these and other factors, see the reports filed by Nortel Networks with the United States Securities and Exchange Commission. Nortel Networks disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(a) On May 1, 2000, Nortel Networks Corporation acquired all of the outstanding common shares of Nortel Networks Limited (formerly called Nortel Networks Corporation) by way of a Canadian court-approved plan of arrangement. Nortel Networks Limited has preferred shares outstanding which are publicly traded. Nortel Networks Limited's financial results have been consolidated into the results reported for Nortel Networks Corporation. Holders of Nortel Networks Limited preferred shares will receive separate financial disclosure from Nortel Networks Limited in accordance with the requirements of applicable law.
(b) Net earnings (loss) from operations applicable to common shares is defined as reported net earnings (loss) applicable to common shares before ``Acquisition Related Costs'' (in-process research and development expense, and the amortization of acquired technology and goodwill all acquisitions subsequent to July, 1998), stock option compensation from acquisitions and divestitures, and one-time gains and charges.
Nortel Networks, the Nortel Networks logo and the Globemark are trademarks of Nortel Networks.
biz.yahoo.com
PALM lowers guidance for the 4th quarter:
`Palm has recently begun to feel the effects of the deteriorating macro economic environment,'' Yankowski said, ``resulting in a reduced incoming order rate amid signs of what appears to be a sector slowdown. Based on this, we believe that demand is approximately flat to the fourth quarter a year ago in which our revenues were $350 million. At the same time, Palm is going through the most significant product transition in its history, and we currently anticipate volume shipments of the new m500 series in the last month of our fourth quarter. Taking all of this into account, we expect our fiscal fourth quarter 2001 revenues in the range of $300 million to $315 million.''
In addition, the company expects to report a net loss in the fourth quarter of approximately $0.08 per share.
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