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Techs shake IBM slump
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October 21, 1999: 6:21 p.m. ET
Big Blue ends way down, while AOL leads Internets up over hump
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NEW YORK (CNNfn) - Tech stocks were able to reverse an across-the-board losing streak by the closing bell Thursday: While IBM stayed down on a dismal future earnings outlook, AOL basked in the glow of winning first quarter results, and took the majority of Internet-related stocks along for the ride.
IBM (IBM) shares continued in free fall, ending a difficult day down 15-7/8 at 91-1/8. While several brokers swiped at the ailing computer giant and slashed "buy" recommendations, some tried to put a positive spin on its Y2K-related concerns.
Merrill Lynch computer analyst Steven Milunovich painted an optimistic picture about Big Blue's prospects.
"Next year IBM is probably going to come in roaring back into the second half, but in between it's a mess," Milunovich said. "I think IBM has a shot at double digit revenue growth at the second half of next year and then perhaps going on into 2001. The issue to get there is hardware.
"Beyond Y2K, IBM's hardware business, PCs and storage servers, it's not been acting well," Milunovich said. "They are not a leader in many of those product lines. I think they still have more work to do to get into the position where the entire company can then grow at double digits."
Big Blue took rivals Sun Microsystems (SUNW) and Hewlett-Packard (HWP) down with it. Sun sank 3-7/16 to close at 92-7/8 as Paine Webber lowered its opinion. HP also dipped, down 1-7/8, ending the day at 74-11/16 as market watchers worried about related Y2K issues.
Computing system maker Silicon Graphics (SGI) limped to close down 2-1/4 to 7-3/4 after also scaring Wall Street with disappointing first-quarter results announced late Wednesday. The loss of 37 cents a share was more than five times what analysts had predicted.
If IBM was the Street's big blue chip loser, AOL (AOL) was its darling. The Internet service provider ended a strong day up 4-3/8, closing at 122-3/8. Investors embraced the company on the heels of Wednesday's strong fiscal first-quarter earnings of 15 cents per share, beating estimates by two cents.
On Thursday, AOL announced a $56 million dollar, three-year deal with Stamps.com (STMP), expanding an earlier alliance with the online postage start-up.
Other Web-related stocks that soared include Net marketing firm Doubleclick (DCLK), which ended the day up 7-1/16 to close at 128 15/16.
Inktomi (INKT) also closed higher, up 4-13/16 at 120-1/2. After the market closed, Inktomi reported a 217 percent increase in fourth quarter revenue and turning in a smaller-than-expected loss.
Gateway (GTW) scored as well on the news that it formed an $800 million product and distribution partnership with AOL and will split the profits. By the close, Gateway rose by a solid 10, ending an upbeat day at 62. 
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