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To: SMALL FRY who wrote (4861)	10/27/2000 3:15:44 AM
From: Susan G	Read Replies (1) \| Respond to of 8046

BEA's Bloodletting Shows Rush to Flee Big-Multiple Stocks By Justin Lahart Associate Editor 10/26/00 5:48 PM ET People are always happy to find a reason for a big drop in a stock. Getting Out BEA slides in sympathy Ask any trader why e-commerce software company BEA Systems (BEAS:Nasdaq - news) dropped 10% today, she'll tell you it was sympathy pains for Vignette (VIGN:Nasdaq - news), a competitor that got taken off of the Chase H&Q focus list and got clocked for 10.5%. Ask why Network Appliance (NTAP:Nasdaq - news) got hit for 4.5%, and you'll hear about how EMC (EMC:NYSE - news) is about to come out with a competing network storage system. Ask why EMC dropped 4.4%, and you'll probably get a reason for that, too. The Myth of Execution But step back and it seems like something bigger is going on. Name a highflier that wasn't taken apart in recent weeks and it probably got taken apart today. And unlike other recent selloffs, this one really didn't have any event to ascribe it to. There's no indication that BEA has done anything but execute flawlessly. Brocade (BRCD:Nasdaq - news), down 10.3%, has done no wrong. The only problem with any of these companies is that their stocks trade at extremely rich multiples. And investors don't seem to like stocks with rich multiples anymore. Turnaround Nasdaq's late Thursday snapback This is a change. Earlier, when a highflier misstepped, investors would take down its sector but leave other hot areas unscathed. So cell phones tanked, but semiconductors hung in there. Intel (INTC:Nasdaq - news) whacked the chips, but the optical sector hung tight. But somehow, yesterday's selloff in optical equipment makers on the failure of Nortel (NT:NYSE - news) to continue to expand revenues at a viral rate prompted some soul-searching that hasn't happened before. "People are just looking through their portfolios and asking, 'If I can wake up and have Nortel miss, then what else can happen?'" says Seth Tobias, manager at the New York-based hedge fund Circle T Partners. "What you're seeing is multiple compression across the board." Capitulation? "People don't want to pay ridiculous multiples anymore," agrees Miller Tabak strategist Peter Boockvar. "It's a change in psychology." Yet even as investors sold these last highfliers, they moved into other tech stocks that have already been knocked down. "I can buy IBM (IBM:NYSE - news) at 20 times earnings and sell something else at 1,000," is how Tobias characterizes the shift. Perhaps that's a good sign. Investors going after high-multiple stocks for no reason at all, except that they hadn't been hit yet, may have represented a final wringing out of excess in the market. Perhaps that's why the Nasdaq, after being down nearly 150 points, was able to turn around at the end of the day and finish up 42 at 3272. TheStreet.com