Oz channel unaffected by stock slide

Oz channel unaffected by stock slide

US technology share markets sneezed again last week with what was originally being dubbed "the second great tech wreck of 2000" unfolding on Nasdaq, but most rebounded late in the week and local stocks didn't seem to catch the cold.

In the middle of the week many shares, including Intel and Apple, were savaged but most bounced back by Friday, alleviating fears the rout might end up infecting local IT channel stocks.

Australian channel companies who trade on the ASX are viewing the slump as an extension of the downturn which purged many unstable dot-coms from the market in Autumn this year.

Simon Duncan, CEO of Volante Group, suggests the fall of seemingly solid shares, such as Lucent Technologies and Compaq, could simply be read as excessive price/earning (P/E) ratios returning to somewhere near normal.

Compaq's P/E peaked in late August with shares trading at just under $35 before experiencing a steady decline to $22 and a P/E of 33. Lucent too has returned to a conservative 25 P/E, with stocks trading at $21, a massive dive from its $60 share price in July.

Duncan says the dot-com buying frenzy, which saw undiscerning investors gorging themselves on any technology-related stock is over and people are starting to look at the fundamentals -- the earnings and profit capabilities -- behind IT companies.

Adrian Di Marco, managing director of Technology One, who expressed limited concern of an ASX downturn, said a fall in share price would have little impact on medium-term business. "We are cash positive so the stock price is not something we watch or worry about on a day-to-day basis. Stock price only becomes a primary concern when a company needs to raise capital for expansion or large acquisitions," he said. "As an investor however, the implications are a little more damning because share price is everything. Obviously we care about our investors so we want the price to remain steady."

Di Marco, who shares are trading strong at $4.40, believes Australian investors are starting to look more intelligently at IT-listed firms and differentiate the different styles -- short term or medium term. "The result of this is that even if the market does experience a slump companies like us tend to bounce back quite quickly," he said.

Meanwhile, local IT shares are still feeling the effects of the first "great tech wreck of 2000". Data#3 has plummeted to a new yearly low of 80 cents after sliding from $3.30 in June. Powerlan has settled at $1.25 after suffering a $2 drop per share in May, and Volante dropped 70 cents and is currently trading at just under $1.

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