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2HRS2GO: Who needs details when a stock&#039s moving?

How do you fight a trend in a negative market?



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The Dow rose this morning, but the the Nasdaq composite index dove, which usually means a lot of technology stocks going down -- but not everyone. So what does it take to make headway against a negative tech tide?

It takes the biggest Web commerce deal ever to carry someone like Oracle (Nasdaq: ORCL), rising as the Nasdaq's most active stock in the morning, although the stock subsequently retreated into negative territory this afternoon.

It takes a partnership with America Online (NYSE: AOL) to push Arch Communications (Nasdaq: APGR), which increased 21 percent by early afternoon. Arch's network will carry e-mail and Instant Messenger for wireless devices. The companies plan to push other AOL content and e-commerce in the future.

It takes a demonstration of a new product to lift Micronetics Wireless (Nasdaq: NOIZ -- love that ticker symbol) 84 percent. Micronetics says its latest device -- used to test PCS phones by simulating noise -- represents a step up because it works on several channels, and is cheaper, smaller and easier to use than other testing gadgets on the market.

It takes the announcement of improved manufacturing to drive the shares of AML Communications (Nasdaq: AMLJ) to an 83 percent gain. AML says it developed a better way to test and tune the power amplifiers it makes for wireless devices.

These items share one trait: they're short on numbers.

Everyone has heard about the online purchasing venture being formed by the Big Three car makers. Most folks have probably looked at the size of the Big Three auto procurement market and fantasized about how that translates into dollars for Oracle, which will supply ERP software for the project and gets a stake in the venture. But even analysts who made upbeat comments about the Oracle news can't say for sure how much Oracle gets out of this deal.

Same holds true for Arch's AOL contract. It sounds great, but details are scant. Nevertheless, the AOL deal at least momentarily erased doubts lingering about Arch's upcoming merger with Paging Network (Nasdaq: PAGE).

PageNet this morning gained as much as 16 percent -- a damned good showing for a company booted from the Nasdaq National Market to the Small Cap listings just four days ago. PageNet says it will qualify for the NMS by the time the merger closes.

A deal with AOL surely can't hurt, but it's hard to see how much it helps without knowing any revenue figures or anything much in the way of details on how the deal is structured.

(Update: Arch wasn't able to return my call before the deadline for this column, but I spoke to the company later in the afternoon. Specific estimates for revenue or traffic stemming from the AOL deal won't be released, but Arch says it will raise its guidance for Wall Street because of the new agreement. Arch expects to start carrying AOL traffic late in the second quarter.)

On a broader note, Arch and PageNet still have to deal with their mounds of debt. In its latest quarterly report Arch said it's generating enough cash to pay down its debts. But PageNet last month failed to issue cash payments on its subordinated notes, causing Standard & Poor's downgrade their credit rating to 'D' from a 'C-Minus'.

As for Micronetics and AML -- nice announcements, but again, who knows exactly how much they'll bring to the bottom line? Micronetics merely did a demo, and AML's new item isn't even a product for sale so much as an internal cost-saving device.

You can see a thread tying the last three items together -- wireless. It's one of the hottest market investment buzzes right now and as long as you can announceme something connected to wireless devices or wireless access, you can get a boost. Business-to-business works too, a la Oracle.

Yet some folks point to today's rise of the Dow and decline of the Nasdaq as evidence the market is thinking about traditional metrics such as earnings. People are suddenly thinking about rational value.

Sure, and the Wall Street Journal will start using color photos on its front page tomorrow.

More likely the markets are just trading around until they get more solid footing on broader issues. Meanwhile, the bottom line still doesn't matter much in the technology field if you hit the right catch phrases.

Other issues:

  • Echelon
  • (Nasdaq: ELON) Several people criticized last week's bit on this provider of networking technology and accused me of ignoring the basics in looking at the company. My favorite line: "Fundamentals -- They begin with f-u."

    Hard as this may be to believe, the first thing I do when writing about any company is peruse the fundamentals. But to reiterate the aforementioned point: this market hardly relies on fundamentals these days.

    No stock sees a one-day rise akin to ELON's on Friday purely because of fundamentals. It's highly unlikely that hundreds or thousands of traders happened to all decide on the same day that they liked the same numbers they'd been dismissing since the company reported fourth quarter results on Jan. 20; between then and Feb. 22, ELON slid 30 percent.

    But since the point was brought up, let's talk about Echelon's fundamentals. The company has lost money every quarter since going public in the summer of 1998, and its cash at the end of the fourth quarter was down slightly year-over-year.

    It's alright for a budding tech company to lose money as long as top line growth remains heavy. Last year Echelon boosted revenue 29 percent, which would be great if it had, say, $3.75 billion in revenue instead of the relatively small $37.5 million reported in 1999.

    At least readers who blast me on Corel (Nasdaq: CORL) can say their stock is cheap. On the other hand, Echelon trades at 73 times 1999 sales -- not outrageous for a Web company, but sky high for a hardware vendor. Echelon has few if any direct competitors publicly traded on U.S. markets, but take look at established leaders in other networking fields: Sun Microsystems (Nasdaq: SUNW) with a price-to-sales ratio shy of roughly 12; Cisco Systems (Nasdaq: CSCO) trading at 31 times revenue.

    Ok, a hot outfit like Redback Networks (Nasdaq: RBAK) is more expensive than Echelon. But Redback is younger, so it gets more leeway. And it makes money -- Redback turned profitable in just its third quarter since going public.

    None of this says Echelon is a bad company, just as last week's piece didn't say that. But at this point, it's not trading on fundamentals; it's up for the same reason Arch, Micronetics, AML Communications and even an established stalwart like Oracle are higher today: people like the idea. 22GO>