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Techs take 2-fisted blows
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April 19, 1999: 7:54 p.m. ET
Internets lead way as correction talk mounts; Compaq sturdy amid CEO exit
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NEW YORK (CNNfn) - Tech stocks fell sharply Monday, prompted by carnage in the Internet sector as top analysts hinted of a looming correction for the high-flying issues.
The recent slump among Internet stocks snowballed, sparing few in the sector, after Morgan Stanley Dean Witter's Mary Meeker told The New Yorker that Net issues could face a "big correction" this year.
Meeker, who until recently had been a bull about Internet stocks, said in fact she would welcome a correction as "very healthy" for the highly valued issues.
But Merrill Lynch's Henry Blodget, speaking on "Moneyline News Hour with Lou Dobbs," said there may be a buying opportunity for Internet stocks after the market settles down.
"What we would encourage investors to do is look at the long term," he said. Internet stocks "have almost always advanced in a three-steps-forward, two-steps-back fashion.
"If you are trading in and out of them, you can drive yourself crazy -- and you can lose a lot of money, obviously," he added. "But if you buy the best companies and hold on, you can do very well."
The Dow Jones composite Internet index fell 39.32 points, or 14.2 percent, to 237.34.
Among the premier Internet stocks on the downside: Amazon.com (AMZN) sinking 31-1/16 to 158-15/16, or about 16 percent, America Online (AOL) dropping 23-5/8, or 17 percent, to 116-1/8, Yahoo! (YHOO) off 25-1/2 to 163-11/16, or roughly 13 percent, and eBay (EBAY) off 21-7/8 to 154-7/8, roughly 12 percent.
Tech tumble is widespread
While the Nasdaq Composite index of 100 stocks has little representation of Net stocks, financial software maker Intuit (INTU), which has a significant Internet presence, fell 16-5/8 to 78-15/16, or more than 17 percent.
Top analysts said investors are continuing to have cold feet about high-tech stocks, just as less volatile issues perform well due to a strong U.S. economy.
"This is long overdue profit taking in the momentum stocks," Al Goldman, chief market strategist at A.G. Edwards in St. Louis, said in reference to high-technology stocks.
And Hugh Johnson, chief investment officer at First Albany, said the decline in the tech sector is "ultimately extremely good news for the health of the market."
The Nasdaq Composite index plummeted 138.43 points, or 5.6 percent, to 2,345.61, in its second-biggest point drop of all time.
Leading the way down were bellwethers of technology. Microsoft (MSFT) fell 5-5/8 to 81, Intel (INTC) shed 1-3/4 to 55-1/2, while Cisco Systems (CSCO) dropped 5-11/16 to 100 and Oracle (ORCL) lost 1-1/8 to 23-3/8.
Compaq steady amid shake-up
Shares of Compaq Computer (CPQ) drifted 3/4 to 22-7/8, after the sudden resignation Sunday of Chief Executive Eckhard Pfeiffer, just nine days after the company warned its earnings will be about half what analysts expected.
Elsewhere in the PC sector, among direct-selling rivals, Dell Computer (DELL) sank 2-13/16 to 35-7/16 and Gateway (GTW) shed 4-9/16 to 59-5/8.
But two high-tech Dow issues were mixed: IBM (IBM) was off 3-7/16 to 166-15/16, while Hewlett-Packard (HWP) rose 1 to 71-3/8.
BellSouth goes on a Qwest
Notable survivors were a pair of telecom-sector players enjoying a bout of deal-making.
BellSouth (BLS) rose 11/16 to 41-7/8 after announcing a $3.5 billion investment, or a 10-percent equity stake, in the long-distance firm Qwest Communications International (QWST). Qwest was flat at 82.
Elsewhere, IXC Communications (IIXC) dropped 3-3/8 to 40-7/8 after Merrill Lynch cut the stock to "neutral" from "accumulate," citing lower likelihood the company will be bought.
Dow member AT&T (T) fell 2-1/8 to 53-7/8 even though the telecom giant announced it has won a three-year, multimillion-dollar contract to provide to Delta Air Lines (DAL) data, wireless and video services.
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