After a two-month drop of almost 14 percent, tech stocks stopped their slide yesterday, at least momentarily, led by surprisingly good quarterly earnings from PC manufacturers. The news indicates a growing awareness that different technology sectors, such as those that include Internet companies and hardware makers, are more independent of each other than previously believed.
"Last summer we saw tech stocks rise together, largely because the Netscape IPO was on the road," said Megan Robertson, analyst at Smith Barney. "Now it's all settled down. Internet companies have issues that play with the telephone companies and Microsoft, but it doesn't necessarily impact hardware."
Dell Computer led yesterday's charge, its stock jumping 4 1/8 to 60 3/4 yesterday after Tuesday's report of a 58 percent rise in quarterly earnings. Three other leaders in the PC market followed suit: Compaq was up 1 7/8 to 58 1/8, Gateway 2000 rose 2 1/4 to 42, and IBM jumped 1 7/8 to 111 1/4.
PC makers are also benefiting from a sharp increase in mail order sales. Last quarter, PC mail order sales grew 12 percent, according to market research firm Dataquest.
The Nasdaq index, home to many high-profile tech stocks, was buoyed by Wednesday's activity, rising 7.36 to end at 1,133.51.
This week's news follows the release of figures that confirmed many observers' warnings of IPO burnout. Companies with initial public offerings in the past 24 months suffered a 32 percent decline in value from May 24 to July 19, according to a report from Broadview Associates, a New Jersey consultancy on mergers and acquisitions. Many of those recently gone public, including CNET, are Internet-related, and analysts see the drop as a result of a market correction after months of Internet hype and overspeculation.
"It was getting pretty ridiculous," said Robertson. "The multiples were getting so high for companies that didn't even have any value. But reality sunk in."