Hefty Returns at Five High-Tech Firms Appear to Spur Officials' Hefty Sales
The Wall Street Journal -- February 3, 1999
Inside Track:
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By Danielle Sessa
Staff Reporter of The Wall Street Journal
What are executives at several technology companies
doing as small investors barrel into their stocks?
Pulling back.
It isn't surprising that the technology companies
disclosing the highest dollar amounts of insider sales
were also the ones that posted impressive returns for
1998. But the recent insider sales could raise short-
term caution signs for investors.
Of course, executives at technology firms frequently
sell shares of their companies; much of their pay is
in stock. But insiders at EMC Corp. unloaded a whopping
$79 million in stock during December, taking advantage
of a tripling last year in shares of the computer-
storage systems supplier.
Other hefty insider sales took place at Network Appliance
Inc., Cisco Systems Inc., Oracle and Jabil Circuit Inc.
In each case, insider sales totaled at least $35 million
in December, according to Disclosure Inc., a Bethesda,
Md., company that tracks insider activity.
"It didn't surprise me to see insiders taking profits
in tech stocks that were approaching historically
vulnerable periods," said Craig Columbus, vice president
of research for Disclosure. "I know this sounds like
absolute heresy, but we are coming up on what is
traditionally a tough couple months for all technology
stocks."
Technology stocks frequently stumble in the spring and
late summer, Mr. Columbus said. Looking at the average
monthly returns for the past five years, Cisco, EMC,
Oracle and Jabil posted losses or low returns during
those periods, according to Disclosure. The combination
of heavy insider selling and the start of traditionally
slower months for these companies could be a sign of
caution to investors.
Based on data from Disclosure, four insiders at EMC
unloaded 1,045,000 shares in December. Directors Maureen
and Richard Egan sold 500,000 shares apiece at $77.50;
Director John Egan sold 25,000 shares at $80.25 apiece;
and Vice President Paul Noble sold 20,000 shares at $79.94
to $82.94.
"EMC, given its size, does experience more seasonality
with typical weaknesses in the March quarter and summer
quarter," said Philip Rueppel, a computer-systems analyst
at BT Alex. Brown. But Mr. Rueppel doesn't credit much
significance to the heavy selling by executives. "There
are often restrictions on executives that preclude them
from selling stock," he added.
Executives at Network Appliance dumped a split-adjusted
1,703,622 shares valued at over $65 million during the
month. Chairman Donald Valentine sold 1,293,624 shares
at $37.13 to $40.75; CEO Daniel Warmenhoven sold 200,000
shares at $37.50; VP Helen Bradley sold 120,000 shares at
$36.07; and Director Carol Bartz sold 89,998 shares at $36.13.
The company said that executives were not allowed to sell
stock from June to November while Network Appliance was
negotiating with Dell to resell some of Network Appliance's
computer products. "The activity you saw in December was
insiders selling because the restrictions were lifted,"
said Adam Trunkey, a Network Appliance spokesman.
The data-storage systems designer consistently made or
beat analysts' earnings estimates last year, said Don Young,
a PaineWebber managing director. "It was one of the best
years ever for the stock," he said.
As for the inside selling, Mr. Young said Mr. Warmenhoven,
the CEO, has "consistently cautioned people about overvaluing
the company" and it was probably a good time for the insiders
to take profits.
At Cisco Systems, two insiders unloaded 775,000 shares
valued at about $60 million. Chairman John Morgridge sold
675,000 shares at $77.17 to $79.40, while Vice President
Carl Redfield sold 100,000 shares at $77.53 to $78.
Cisco provides networking equipment for the Internet.
Four Oracle executives disposed of 1,240,580 shares
totaling about $50 million. President Raymond Lane sold
634,330 shares at $39.40 to $44.32; Vice President Pier
Falotti sold 480,000 shares at $38.69 to $44.44; Jeffrey
Henley sold 100,000 shares at $39.01 to $39.04 and VP Jay
Nussbaum sold 26,250 shares at $38.63.
Jennifer Glass, senior director of public relations at
Oracle, said the recent sales by executives "is not a case
of bullishness or bearishness, just a case of diversifying."
But Prudential analyst Douglas Crook said investors should
take notice of the large insider sales at the information-
management software developer. During November and December,
the stock was coming off a depressed period, Mr. Crook said.
"But I can see where human nature would say to hedge the
bet and diversify the portfolio."
Jabil Circuit executives sold 545,400 shares valued at
$28 million during the month. The top two sellers were
Chairman William Morean, who sold 300,000 shares from
$69.63 to $73.38, and President Thomas Sansone, who sold
255,000 shares from $68.25 to $71.06.
"Anytime you see a tripling of the stock you expect there
may be some rebalancing by shareholders of their portfolio,
including insiders," said Beth Walters, vice president
of investor relations for Jabil, a maker of circuit-board
assemblies.
In other news, Microsoft Corp. Chairman Bill Gates filed
an intention to sell two million shares of Microsoft with
the Securities and Exchange Commission yesterday.
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