| |
By Julie Bort 04/23/01
If numbers don't lie, then the story the Network World 200 Index tells is nothing short of depressing. From its opening at a namesake 200 points, the NW200 Index has had more downs than ups. With the help of online investment education firm The Motley Fool, we created the NW200 Index a year ago by taking our list of the top 200 network companies, weighting each company based on revenue and deriving an average stock price, updated every 15 minutes. With the NW200 Index, we can ascertain the stock performance of the network industry. It's been disheartening.
In the last year, Wall Street has beaten down technology
stocks across the board - not even sparing those acknowledged as solid leaders.
In fact, only two stocks we tracked in the NW200 Index ended the year, on March
30, with a higher price than the day we began: PeopleSoft and SunGard Data
Systems. Certainly none of the 10 network companies Network World named as most powerful in our year-end 2000 Power Issue has seen its
stock price grow in the same period. It's been an incredible, wild ride for
most. For example, EMC saw its stock climb from $53.83 on NW200 Index launch
day, April 10, 2000, to $104.90 in September, only to be chopped by two-thirds
by March. The drop followed analyst downgrades foretelling soft storage sales.
And that's nothing compared to the roller-coaster rides by the stocks of Check
Point Software, IBM and Veritas Software.
Overall performance
The performance of network companies, shown in the NW200 Index chart, heavily influences the overall stock market. 
|
The dot-com crash that hurt the Nasdaq so badly last spring struck seven days before our index kickoff. Although the NW200 Index doesn't include any dot-coms, on April 15, 2000, it still dropped 30 points - losing nearly 10% of its value in a single day - to 169.77, reflecting Wall Street's general backlash against technology stocks.
Three days later, the NW200 Index feinted a rally. It
even hovered in the high 180s for a week late in the month, pulled along by the
strong performances of Hewlett-Packard, IBM, Oracle, SBC Communications and
Sun.
But the optimism didn't last long. In May 2000, the mood
shifted ominously and the NW200 Index retreated. On May 23, it landed at
159.19. The downturn actually began earlier that month with news that Novell
would miss expected second-quarter earnings by half.
This was the start of a brutal year for Novell. Its share price dipped below the $10 mark
in the summer and sank to less than $5 in January, compared to almost $20 per
share last April. On March 12, with the stock price hovering in the $5 range
for weeks, Eric Schmidt said he'd be handing over his CEO reigns to Jack
Messman, president of acquisition target Cambridge Technology Partners, once that buyout
closes.
Throughout the summer and early fall, the NW200 Index
boiled and reduced. Strong overall summer performances by Dell, EMC, Gateway,
IBM, SBC and Sun tempered the heat Wall Street gave HP, 3Com, Lucent and
Microsoft. The NW200 Index floated near or above 170 in June and early July,
but never again reached 180. The bottom dropped out on Nov. 30, to 119.74, in
the wake of the never-ending presidential election, missed-profit warnings by
PC mammoths Dell and Gateway, and growing problems at Microsoft, HP, AT&T
and Lucent.
The uncertainty of a breakup, called for by U.S. District
Judge Thomas Penfield Jackson on June 7, dragged down Microsoft's stock all
summer, as the case moved from verdict to appeals. Then, came other problems -
slower-than-hoped-for Windows 2000 adoption and uncertainty about the .Net
platform. On Jan. 1, the stock tumbled to $43.38 after the news that Microsoft
would miss second-quarter expectations.
Charting NW200 companies
While stock performances for individual companies varied wildly, these
six patterns were most common.
|
HP burned even worse in the summer heat. One year into CEO Carly Fiorina's reign, HP's stock spiked between the high 60s and the low 50s until September, when it began sinking. News of a planned $17 billion acquisition of PriceWaterhouseCoopers dropped HP's stock to the 40s. With missed fourth-quarter projections, HP dropped those plans in November; its stock hit the 30s. On March 1, the stock dropped to its 52-week low to $27.60 on news that HP would kill its OpenMail product. Last week, HP's troubles worsened when it warned that it would miss its second-quarter expectations by a wide margin and layoff 3,000 people. Oddly, investors applauded the cost-cutting move. On the day of the announcement, April 18, its stock rose about $3 to trade in the low 30s.
As for Lucent, a biplane stunt devil couldn't pull off
such a steep nose-dive. In early July 2000, the stock traded at around $60. The
next week it turned south, to the mid 40s, starting a lunge from which it has
yet to stabilize. In October, after CEO Richard McGinn issued Lucent's third
warning of missed quarterly expectations in 2000, the board
booted him out. Still, the stock continued downward, to about $14 in
mid-February and $11.52 on March 12. In a mere eight months, Lucent spilled off
81% of its market value.
July was painful for 3Com, too. Its stock bottomed out
on July 28, when the company completed the spinoff of its profitable Palm
division.
But March was the blackest month of all for the index.
On March 12, Cisco announced layoffs, triggering a massive high-tech sell-off.
The industry's poster child was fried a month earlier by failing to meet its
second-quarter projections for the first time in a decade. Its stock fell from
the high 60s in May 2000 to below $30 in January and continued downward, with
nearly each day in March bringing it another 52-week low. On March 30, the
sickly stock closed at $15.81.
The NW200 Index mimicked Cisco's illness, as did the Dow
and Nasdaq. On March 21, the NW200 sagged to its all-time low, 113.37, smacked
down by one company after another missing quarterly targets or announcing
layoffs.
As the first year of the NW200 Index closes, a new motto
for the network industry is materializing. What goes down, must come up.
Related links
Judge orders Microsoft breakup
Network World, 06/07/00
Cisco slashes Q3 estimates, takes $3.7 billion charge
Network World, 04/16/01
HP misses fourth-quarter expectations, drops PricewaterhouseCooper plans
Network World, 11/13/00
Lucent's explanations are wearing thin
The Edge, 10/14/00
Company profiles
Check Point Software
Cisco
Hewlett-Packard
IBM
Lucent
Microsoft
Novell
PeopleSoft
3com
| |
