commissioner.org
| Source | Sabri Oncu |
| Date | 02/10/29/02:58 |
| From Class Acts to Penny Stocks
Commentary. David Pauly is a columnist for Bloomberg News. His opinions are his own. By David Pauly New York, Oct. 28 (Bloomberg) -- Lucent Technologies Inc. should have a secure spot in corporate history as heir to Western Electric, which made telephones that lasted, and as owner of the vaunted Bell Laboratories. Same for Corning Inc., inventor and biggest producer of fiber- optic cable, which speeds information around the world. Yet Lucent and Corning are now part of an ignominious bunch of companies that have lost virtually all of their stock market value. Lucent shares that traded at $64.69 about three years ago were worth 96 cents at Friday's close. Corning shares, worth $113.33 a bit more than two years ago, closed at $1.97. Lucent and Corning are now penny stocks, wallowing in the depths with unknown companies peddled by bucket shops. Lucent is resorting to a reverse split to raise the price of its shares -- and prevent them from being thrown off the New York Stock Exchange. They are not alone in their misery. Nortel Networks Corp., a competitor of Lucent that once accounted for about one-third of the value of all stocks on the Toronto Stock Exchange, has plummeted too. In mid-2000, its shares traded at $89; Friday they were worth $1.14 apiece. Sun Microsystems Inc. deserves our respect as a maker of server computers for the Internet, as the inventor of the Java software language and as a constant baiter of Microsoft Corp. Still, its stock has fallen to $2.88 from $64.66 about two years ago. Ice Cold EMC Corp., whose refrigerator-size computers mark it as the leader in data storage, has seen its shares plummet 95 percent to $5.42 in about two years. These companies weren't victimized by fraudulent accounting or looting by executives. Rather, they were savaged by recession, war jitters and their own overexuberant expectations for the telecommunications and computer markets. Investors might think the shares of such companies are good buys -- that the market was as crazy going down as it was going up -- but stocks reduced to cents per share have trouble coming back. The telecommunications industry is all red ink and pink slips. Sun's and EMC's sales began falling in mid-2001, and no rally is apparent. Better Bets? Bargain hunters might be more tempted by other respectable companies whose shares have dropped 75 percent or so from their peaks and are now trading at just below or above the $10 level. This group of the fallen -- nickel stocks maybe? -- includes Cisco Systems Inc., the once-sure-thing assembler of computer network equipment; Charles Schwab Corp., proven to be an adaptable financial services company; Oracle Corp., the producer of computer software for managing information; and Motorola Inc. and Nokia Oyj, both leading makers of cellular phones. Cisco's shares closed at $11.78 Friday, down 86 percent from their March 2000 high. Some companies may be sorry they split their stocks so eagerly when the market was bubbling. If Oracle, for instance, had foregone its three most recent splits, its stock would have been worth $61.56 Friday rather than $10.26. Oracle shares still would've fallen 78 percent from their peak, of course. Old-Timers Investors might be intrigued to find a company like Ford Motor Co. on the list of nickel stocks at $8.72. Here's a bedrock of the U.S. economy; certainly, it will rebound. Well, history is littered with once-solid companies that failed or became whispers: American Leather, Swift & Co., Woolworth, the Pennsylvania Railroad. Old-timers at Bell Labs and Corning may still realize something on their investments -- or their companies may be destined to live in infamy as case histories for MBAs. |
Copyright (c) 1998, Joongpil Cho