The new year started off with a bang, but our Partner Index has been a dud in recent weeks because of earnings warnings and continued concern about the slowing economy.
Our index fell 7.5 percent for the week ended Feb. 21, as losers beat winners by a 4-to-1 ratio.
Merrill Lynch triggered the sell-off when it issued a bearish report on Sun Microsystems. Merrill says fallen dot-coms are selling used Sun hardware for pennies on the dollar, which doesnt bode well for new hardware sales.
Our indexs biggest loser last week was Covad Communications, the troubled DSL service provider. Covad delayed its Q4 earnings report on Feb. 16, and says it will take a restructuring charge that could hit $100 million. The company also may erase $52 million from its year 2000 revenue bookings because some ISP customers arent paying up. Like fallen rival NorthPoint Communications, Covad has had trouble competing in the broadband market against the Baby Bells and cable companies.
IMRglobal also delayed its Q4 earnings release, but good news followed the delay. CGI Group, a consulting company in Toronto, snapped up IMR for $438 million plus debt. CGI says the deal gives the company instant access to several U.S.-based vertical markets, including health care and financial services. It also gives CGI an international presence in Australia, France, India and Japan.
The deal wasnt surprising. IMR in January said that it was exploring strategic options.
Still, most of last weeks news was downright gloomy. USinternetworking, iGate Capital and Inforte all suffered 20-plus percent stock drops.
Faced with mounting financial losses, many USinternetworking insiders arent waiting to see if the companys stock will rebound. CFO and senior VP Mark McEneaney sold 7,700 shares in December for $4.53 to $5.84 per share, according to First Call/ Thomson Financial. Thats well below USinternetworkings 52-week high ($71.63), but far above the companys recent stock price ($2.25).
Elsewhere, Exodus Communications opened its tenth Internet Data Center (IDC) in Silicon Valley and its second IDC in Australia. During its early years, Exodus depended heavily on dot-com customers. But, for the most part, Exodus has successfully transitioned much of its business to enterprise customers.