January 4, 2001 12:45 PM PST

Winners and losers of stock market 2000

Investors were giddy after the first Federal Reserve funds rate cut in two years Wednesday, but last year's damage to stock markets may not be so easily overcome.

Wall Street experts say the bloodletting is likely to continue for at least the next quarter or two, as technology stocks attempt to ascend from their worst year ever. In addition to facing skeptical investors, many are trying to rebuild stock values in the face of softer revenue and earnings.

Even with improved investor psychology, analysts say, technology companies will continue to face dented consumer confidence, slowed PC sales and inventory backlogs.

"Anybody that thinks we're going to hit Nasdaq 5,000 in the next couple of months is deluded," said Dave Nadig, a portfolio manager with MetaMarkets.com. "This is going to be a year of rebuilding. Companies will take this opportunity to do restructuring and take one-time charges because there's so much bad news out there already, they figure it's the best time."

Markets, indexes, corporate shares tank

Tech stock performance
The 5 best- and worst- tech stocks of 2000 in terms of share price appreciation.

Best
Microtouch Systems +241%
Objective System Integrators +103%
Adelphia Communications +87%
Carreker +78%
Sage +67%

Worst
VDC Communications -98%
Multimedia Kid -98%
eToys -96%
NorthPoint Communications -96%
Interspeed -96%

Source: CNET Investor
It's impossible to overstate the extent of the stock market carnage. The hemorrhaging began in April 2000, when a sell-off in tech stocks sent the Nasdaq sliding 10 percent.

Although many dismissed the plunge as a one-time hit, the tech-heavy index sagged another 17 percent between April and December, despite a few optimistic blips. For a brief spell in late summer, the markets seemed poised to rebound, but they were quickly deflated as third-quarter earnings warnings and lukewarm financial performances sapped investor enthusiasm.

The Nasdaq composite index ended the year down 39 percent, the biggest drop in the index's history. And an astounding 346 companies, or 35 percent of those tracked by CNET Investor, lost more than 80 percent of their value.

The CNET Tech Index fell 32 percent last year, with every technology index tracked except one ending the year down. Internet retailers showed the biggest losses, declining 71 percent from the beginning of the year. Internet services companies lost the second most, declining 66 percent, followed by PC hardware companies, which fell 60 percent.

It was especially painful for certain companies in the tech sector. Although a handful of companies finished the year with stock performance up 50 percent or more, the vast majority finished the year well below their starting points--and even further below their spring peaks.

Numerous companies lost more than 95 percent of their stock market value. VDC Communications and Multimedia Kid were the year's biggest losers, each plunging at least 98 percent from the beginning of the year. eToys, NorthPoint Communications and Interspeed each lost 96 percent of their stock's value in the year.

Executives bid farewell to lucrative options
Corporations weren't the only losers. The mood on Wall Street was further trampled last year by the drastic decline in the wealth of America's celebrity CEOs, a group that far outstripped the general growth of wealth nationwide throughout the last decade.

CEO winners and losers
Value measured by absolute dollar gain/loss as of 12/29/00.

Winners
Larry Ellison Oracle +$1.3 billion
Thomas Siebel Siebel Systems +$1.1 billion
B. Thomas Golisano Paychex +$876 million
Sanjiv S. Sidhu I2 Technologies +$572 million
William T. Coleman BEA Systems +$292 million

Losers
Steven Ballmer Microsoft -$17.5 billion
Michael Dell Dell Computer -$10.2 billion
Jeffrey Bezos Amazon.com -$7.1 billion
Bobby Johnson Foundry Networks -$3.0 billion
Robert Glaser RealNetworks -$2.6 billion

Source: CNET Investor
Microsoft CEO Steven Ballmer watched $17.5 billion leak from his account, bringing his net worth down 63 percent to $10.3 billion from $27.9 billion. Dell Computer CEO Michael Dell fell from an arsenal of $15 billion to $5 billion, and Amazon.com CEO Jeff Bezos went from $8.9 billion to $1.8 billion.

CMGI CEO David Wetherell was among the biggest losers of wealth in percentage terms, according to CNET's CEO Wealth Meter. His net worth, not including homes, art or investments other than his corporate stock options, bombed 96 percent, to $88 million from $2.1 billion.

"For technology investors, it was one of the worst years on record, if not the worst," said Charles Reinhard, senior U.S. equity strategist with Lehman Brothers. "To the degree that their wealth is tied to the price of their stock, technology CEOs saw their wealth diminish too."

IPO fever cools

IPO performance
The 5 best- and worst- performing IPOs in 2000.

Best
Embarcadero Technologies +350%
Krispy Kreme Doughnuts +295%
First Horizon Pharmaceutical +284%
Sun Life Financial Services +213%
Praecis Pharmaceuticals +193%

Worst
Pets.com -99%
HeathGate Data -98%
Varsity Group -98%
ImproveNet -98%
Asiacontent.com -97%

Source: CNET Investor
A flatline in the IPO market also added to the dire mood. Rather than the instant wealth many IPOs generated in 1999 and early 2000, the 451 IPOs last year ended down an average of 18 percent, compared with an average gain of 174 percent last year.

By comparison, the average IPO in 1999 had a first-day gain of 66 percent and ended the year up a stunning 194 percent, according to Thomson Financial Securities Data.

Pets.com came out as the worst-performing IPO last year, falling 99 percent from its offering price by the end of the year. The company, which sold pet food and supplies over the Internet before it went out of business, symbolized for many the bursting of the Internet bubble.

Pets.com proved that throwing the Internet into any business model did not equal instant success.

"Clearly it's the end of an era," MetaMarkets' Nadig said. "I think everyone is comfortable the dot-com bubble is over. Now it's just back to fundamentals."

More positive outlook for 2001
Despite the current slump, many analysts are hopeful that the Federal Reserve interest-rate cut will result in a swift stock market recovery. They say that Fed chairman Alan Greenspan's rate cut could shift investor psychology from pessimism to optimism, sending corporations and individual consumers on a spending binge.

CNET Tech Index performance

Sector

CNET Tech Index

-32%
Internet e-tailers -72%
Internet services -71%
PC hardware -66%
Internet content -60%
Storage -55%
Telecom equipment -49%
PC software -47%
Communications services -47%
Wireless -37%
Peripherals -34%
Server hardware -25%
Semiconductors -22%
Semi cap equipment -21%
Server software -19%
CAD/CAM -19%
Computer services -3%
Networking -1%
Distributors +6%

Source: CNET Investor
Even if the rate cut doesn't result in an immediate market rebound, many analysts are hopeful that it will at least return many investors to a more rational mood.

In recent months, many investors have interpreted positive news and surging profits as little more than neutral events, and they brutally punished companies that didn't meet estimates--even by margins of 1 cent per share.

In early November, when Cisco Systems reported that first-quarter earnings had exceeded analyst expectations and sales had jumped 66 percent, investors didn't rush to buy the stock. In fact, Cisco shares slipped slightly in after-hours trading, inching down to $54.38.

Analyst Phillip Dow of Dain Rauscher Wessels said it is hoped that investors will take a more optimistic outlook in 2001. They will return to a more rational era, when they interpreted good news as good and bad news as bad, he speculated.

"Everything was bad news (in 2000); in December you had the Cisco meeting, you had Corning come out and say their numbers were great, and same with Nortel, and all of them went down," Dow said.

 

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