This seems to be what is happening:
The bifurcated market continues to leave small stocks in a Zombie state. Today I heard a commentator state that the average NASDAQ stock is down 41% from its 52 week high. The Y2K slowdown, coupled with deflationary pricing problems for all corporations, is crashing down now on anything to do with PCs or IT department purchases in general. In particular, software and services companies are being trashed, usually following a warning, and sometimes in anticipation of problems appearing in the sector. I won't even bother giving examples, because I don't want to get blood all over the thread. The similar crash in the spring of 97 took down most software companies; most exceptions, such as ERP companies, are getting theirs now along with everybody else (MSFT excepted once again).
The FUD that tripped WIND on Jan 22 of this year, weakened the stock. INTS flat revenues reported a couple of weeks ago weakened the sector even more. This, combined with the monster bear market underway in software, was enough to convince institutions to bail out of the sector. They leave by trying not to trash the stock, in order to get out as whole as they can in a not-very-liquid situation. This is why the stock backs off any intraday gain, and consistently closes lower each day.
Professional short sellers targeted the stock because receivables have been up-trending over the last couple quarters, along with DSOs. They played off of some of the FUD, like “I2O has disappointed” and “INTS is resurgent”, and attacked the stock. We know the short interest increased to 1.5 million shares as of mid-March, and my sources tell me it breached 2 million shares a couple of days ago, and they started hitting the stock big-time today. This means the short interest probably is in the 2.5 million range.
Of course the irony is that WIND is about as far away from the Y2K slowdown as a software company can be. INTS revenue problems continue to be either (a) the CEO void they suffered until December, or (b) WIND. Meanwhile, the sector is doing fine. One fund manager today told me WIND has been rumored to have made its numbers already, with DSOs expected to revert back to more normal levels. On top of that, the H&Q conference is coming up at the end of April, providing a venue for WIND to beat its chest.
Looks like we have an exact repeat of “the spring of '97.” Sounds like a movie. And, “Todo this sure doesn't look like Kansas.”
This is what is going to happen: Very soon, the shorts and sellers will be stopped, and some buyers will appear because there is nothing about the company that is broken. The stock will pop back up like a cork under water, propelled by the shorts, and institutional investors jumping back on for the ride up.
Think about this. Management has been whip-sawed just like you. They must be thinking about why crashes happen, and what they might do to break the pattern. The next time up, expect them to do something to get the stock out of harms way.
Allen |
