From today's WSJ: Massive Sales by High-Tech Titans
May Hold Implications for Stocks
By LAURA SAUNDERS EGODIGWE
Staff Reporter of THE WALL STREET JOURNAL
At first glance, the massive stock sales by high-tech titans such as Bill Gates or Paul
Allen of Microsoft Corp., Andrew Grove of Intel Corp. or Michael Dell of Dell
Computer Corp. look as though they might hold some implications for their
companies' stocks.
But, in fact, experts who sort through such sales by officers and executives known
as insiders for just that kind of significance say that may not be the case, because
these executives regularly make huge sales to diversify their holdings, to make
philanthropic gifts or to make new acquisitions.
High-tech chief executives are "a different animal"
than executives in other industries, says Craig
Columbus, who tracks insiders' buying and selling
as vice president of research at Disclosure Inc.
"Once they attain superstar status, their
transactions are heavily scrutinized," he adds.
"These guys know people are watching them, and
they're very astute from a public-relations standpoint." As a result, he explains,
they're very careful to sell on a regular basis in relatively equal share blocks, and
usually not on pullbacks in the stock prices.
Indeed, it's when these sales depart from such past patterns that these experts perk
up. Take the recent disclosure of planned sales by Intel President Craig Barrett. Mr.
Barrett recently indicated that he plans to sell 700,000 of the company's shares,
representing 30% of his holdings of common stock and exercisable options,
according to CDA/Investnet, a Rockville, Md., company that tracks insider
transactions.
Click and Sell
Selected technology insiders and their year-to-date sales:
Company/Insider
No. of shares
(millions)
Significance
MICROSOFT
Bill Gates
9.52
Routine
Paul Allen
34.34
Routine
INTEL
Craig Barrett
0.80*
Not routine
DELL COMPUTER
Michael Dell
7.68
Routine
NETSCAPE
Jim Clark
1.00*
Not routine
Marc Andreessen
0.78*
Not routine
A company spokesman acknowledges that this planned sale is bigger than normal
for Mr. Barrett, who has sold 100,000 shares so far this year. The spokesman added
that the potential sale is associated with stock options that are scheduled to expire
in the next few months. Before this year, Mr. Barrett hadn't sold any Intel stock
since 1996. In the past year, Intel stock is off about 5%.
Netscape executives' selling also appears noteworthy, according to Bob Gabele,
president of CDA/Investnet, because some are selling at declining prices, and one
executive's planned sales are both larger than past sales and also represent a
substantial reduction in his holdings of common stock and exercisable options.
From Aug. 21 to Sept. 30, four Netscape insiders sold or filed to sell 1.4 million
shares, valued at $31.1 million, according to CDA/Investnet.
Netscape Chairman James Clark sold or indicated plans to sell one million shares.
Mr. Clark has been selling the company's shares at successively lower prices in the
past several years. The company's shares are down 68% from a 1996 high of $74.50.
Marc Andreessen, a Netscape cofounder and executive vice president, sold or
indicated plans to sell 400,000 shares. The sales would reduce Mr. Andreessen's
holdings of common stock and exercisable options by 30%, CDA/Investnet said.
Netscape, Mountain View, Calif., is an Internet software and navigation company.
Mr. Andreessen's planned and completed sales are larger than any of his prior sales.
So far this year, he has sold or indicated plans to sell 775,000 shares, with 375,000
shares sold in the $20 to $22 range. Mr. Andreessen, who didn't sell any Netscape
shares last year, sold 500,000 shares in the $44 to $71 range in 1996.
"Normally, insiders buy when there's value," says Gary Kaltbaum, chief technical
analyst at J.W. Genesis Securities. "If you think your stock is going higher, you're
holding," he says.
Mr. Kaltbaum points out that even if Intel's Mr. Barrett is required to exercise his
options to buy Intel shares before the options expire, he doesn't necessarily have to
sell the underlying shares. Although Mr. Barrett hasn't yet sold the shares, a filing
indicating a sale is expected on Nov. 10, according to the Intel spokesman.
Analysts warn, however, that sales by technology insiders -- like those in other
industries -- aren't necessarily predictive of a future stock-price decline. "There are
very good alternative explanations for sell decisions by technology insiders," says
Carr Bettis, associate professor, School of Management, Arizona State University.
These explanations include portfolio diversification, compensation reasons and the
fact that the insiders may believe their stock is overvalued.
But past sales by Messrs. Gates and Dell haven't signaled anything negative. Mr.
Gates, a consistent seller of Microsoft, has sold 9.5 million shares this year. Last
month, Mr. Dell sold four million Dell shares, according to Federal Filings Business
News, a Washington news service. Yet both companies have had extraordinary
runups.
Mr. Gates is by far the most heavily scrutinized insider, notes Disclosure's Mr.
Columbus. "People have tried to make a career of drawing a correlation between
Gates's selling and the future direction of Microsoft stock. He's proven time and
time again that that's an unwise strategy."
Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.
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