It wasn’t a pretty first quarter for Los Angeles County’s technology stocks.
Of a sampling of 10 L.A. firms from computer hardware and software, industrial machinery, electronic games and semiconductors, all but three saw lower share prices coming out of the three-month period than going in.
That was due, in part, to traditionally slow first quarter sales in the technology sector and a volatile market of late, in which tech stocks were particularly hard hit, analysts say.
But for some L.A. firms, the drops also reflect a serious withering of investor confidence.
“The first quarter is typically the slowest for technology stocks and that took its toll,” said Dave Kang, an analyst at Seidler Co. in Los Angeles.
Corporate America often makes technology purchases at the end of the fourth quarter, as managers look to spend any money left over in their budgets from the previous nine months, Kang said.
“Managers will try to use up all the budget by December, then there’s a transitional period in Q1 when they’re getting new budgets,” Kang said.
As a result, many corporations hold off on purchases until the second quarter, when technology companies correspondingly see sales and their stock prices increase.
Making this year’s first quarter even tougher for tech stocks was a choppy market in which investors alternately poured money into and scrambled away from technology issues.
“Tech stocks have been having a difficult time since the summer of 1996 caused by product transitions and delays in bringing out new products,” said James Reynolds, an analyst at Webush Morgan Securities.
In particular, delays in the launch of digital television, cellular telephone networks and high-speed Internet access services turned institutional investors off of technology stocks, Reynolds said.
That had a carry-over effect hurting the share prices even of those companies which didn’t see product delays, he said.
“Very few tech firms emerged unscathed,” Reynolds said.
A final factor contributing to the downward push since last fall is many investors have turned off of small-capitalization stocks, Kang said.
In Los Angeles County, most tech companies are small and privately held. Those that are public tend to be small-capitalization firms, Kang said.
“And those have just been out of favor,” Kang said. “Only very recently are people beginning to see them as more compelling.”
While sector-wide justifications abound, for some Los Angeles companies the drop in their share prices reflected specific and deeper investor concerns with operations.
Quarterdeck Corp., L.A.’s largest software maker, was trading at $4.50 a share in early January, down from a 52-week high of $17.12. Then, from January to April its price further eroded to about $3, a loss of roughly 30 percent. In recent weeks the price has further plummeted to around $2.50 a share.
Quarterdeck blames much of the fall on investor concerns over a lack of leadership at the company until February, when a permanent DEC was named.
“There was a leadership vacuum for a while,” said new president/CEO Curtis Hessler. In addition, he said, a current company executive in need of cash recently sold off a large holding of Quarterdeck stock.
When the trade was listed on insider trading sheets, investors experienced a mini-panic, he said.
“It was a market misunderstanding,” he said.
One of the few local tech stocks to do well during the first months of 1997 was bar code printer manufacturer Eltron International Inc., which saw its price hold steady at around $20 a share in the first quarter, and rise to $23 since April. While still down from a 52-week high of $38.50 per share, the rise reflects renewed investor confidence in the firm after a failed merger with competitor Zebra Technologies Inc. of Vernon Hills, Illinois. Eltron’s shares took a beating after the merger talks collapsed last November.