The Stock Market

The topsy-turvy nature of the financial market was more turvy than topsy last week, as Wall Street struggled to get back to business after the terrorist attacks and rough news in other industries spilled over to high-tech and the channel.

Traders at the New York Stock Exchange steeled for a rough ride on the first day of trading since the terrorist attacks.

A downbeat mood accompanied the back-to-work sentiment after the Sept. 11 attacks in New York and Washington. Closed for the remainder of the week following the disaster, the Nasdaq and Dow Jones Industrial indices fell about 10 percent and 5 percent, respectively, within days of reopening. Even the Federal Reserve Board's aggressive work to relax interest rates and new stock buyback plans by companies ranging from Compaq Computer to Akamai Technologies failed to stem massive stock market losses.

However, major technology companies such as IBM, Intel, Dell Computer and Microsoft saw their market values remain relatively stable on Wall Street. Channel-related companies were down slightly, but less than other industries and the market as a whole.

Robert Anastasi, senior managing director at Raymond James & Associates, a St. Petersburg, Fla.-based investment advisory firm, said the Fed's decision to lower the overnight lending rate for banks to 3 percent, a half-point reduction, will surely help IT distributors and solution providers.

"The channel is a large net borrower, and lower interest rates will directly benefit net borrowers,particularly Ingram Micro and Tech Data, which borrow hundreds of millions of dollars and sometimes billions," he said. "A half-point is very significant."

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Late last week, both of the major distributors saw other pressures affect their stock prices. At press time, Ingram Micro's shares were at $12.84, down from $14.51 on Sept. 10, the day before the attack. Tech Data, considered one of this year's better performers in any industry, saw its shares slip to $37.33 from $40.40 over the same time span.

"On the minus side, the concern is that there's a macro [economic] problem. [The attacks are] a jolt to consumer confidence, and you can't help but think that won't indirectly impact technology capital spending, which has already been rocked. That's not good for any tech company," Anastasi said.

"I think [channel-related companies] will be less impacted on Wall Street, but not because they're less exposed. They've been less expensive stocks, and they're less risky," he added.

Though the channel likely will feel only a trickle-down effect, other companies,notably airlines and aircraft manufacturers,will feel a direct economic impact from the attacks, analysts said. Airline companies United, America and Delta have announced layoffs in the tens of thousands, and aviation giant Boeing,which has major contracts with Microsoft and IBM, among others,last week said it plans to lay off up to 30,000 employees.

Many companies took their own measures to calm the markets in the form of renewed stock buybacks, even as the markets retreated. Those companies included Compaq, Hewlett-Packard, Doubleclick, Intel and Cisco Systems, which said it would buy back $3 billion in shares over the next two years.

Analysts say stock buybacks help stabilize share prices and take shares out of circulation in a manner that in most cases lifts quarterly earnings per share or at least limits the degree of any declines. The buybacks also may have another positive effect: raising morale. Akamai Technologies, which lost one of its top officers,founder and CTO Daniel Lewin,in the Sept. 11 terrorist attack, led the charge among companies that bought back their own shares.

"We have confidence in our company and in our country," Akamai CEO George Conrades said in announcing the stock buyback.

SCOTT CAMPBELL contributed to this story.