As the third quarter came to a close, Handspring claimed the title of best-performing tech stock among those with a market share of $1 billion or more, according to CNET Investor. The company, which debuted with a respectable initial public offering in the previous quarter, ended the third quarter with a stellar 156 percent gain.
But a lot can change in a day.
While the handheld-device company ended the quarter at $69.06 on Friday, its share price fell $10.63, or 15 percent, today.
"PC Data came out with its numbers on retail distribution for August. And Handspring's numbers were lighter in August than in July," explained Thomas Sepenzis, an analyst with CIBC World Markets.
Top tech stocks
for the third quarter
According to CNET Investor, these were the 10 best- and worst-performing tech stocks in the third quarter. (To qualify, the market cap had to be greater than $1 billion at the end of the quarter.)
|Applied Micro Circuits||+110|
|iXl Enterprises FONT>||-70|
|Breakaway Solutions FONT>||-67|
Although some of the luster has been taken from Handspring's market performance today, Sepenzis said the strong third-quarter performance is not necessarily an anomaly.
"Handspring is riding the tide that will lift all boats. These companies are starting to show there is overall market demand for these devices and they'll do well in the future," he said.
Analysts are expressing a similar sentiment for networking companies, many of which posted percentage gains in the triple digits last quarter. This group far outperformed the overall Nasdaq composite index, which slipped 7 percent from July through the end of September.
Meanwhile, a networking company also claimed the title of best performing IPO in the third quarter, according to New York-based market-research firm CommScan.
"The networking sector was slow at the beginning of the year on a historical basis. But we started to see it build momentum in the second quarter and continue through to the third quarter, which is a typically slow period," said Erik Suppiger, an analyst with Chase H&Q.
Network-related companies that more than doubled in the quarter include MMC Networks, Extreme Networks and CacheFlow.
"CacheFlow is a story of fast revenue growth and market share, in an industry that's growing rapidly," said Robert Fagin, an analyst with Bear Stearns.
CacheFlow, whose products speed the delivery of Web pages, posted a 75 percent sequential increase in revenues to $22.4 million for the most recent quarter. The company's shares closed the quarter at $143 a share, up 132 percent.
Extreme Networks, which ended the quarter up 117 percent to $114.50, also posted a strong quarter as its revenue surged, Suppiger said. Extreme reported fourth-quarter revenue of $92.4 million, up 142 percent over a year ago. When the company reported its quarterly results last July, it also announced a 2-for-1 stock split.
Meanwhile, MMC received a lift in its share price from a $4.5 billion merger with Applied Micro Circuits, Suppiger said.
The builder of computer network processors and communications-management technology, is entering what is believed to be the second largest merger in the semiconductor industry.
Among IPOs for the quarter, shares of networking company Avici Systems posted the strongest first-day gain, surging up 212 percent to $96.75 on the day the company went public.
Avici was one of 138 successful IPOs in the quarter, raising a total of $16.2 billion, according to Commscan.
The IPO market regained some luster in the quarter, with the offerings handily beating the downtrodden second quarter in both the number of deals and average first-day gain. During the third quarter, IPOs averaged a 41 percent gain, while the 90 deals floated in the second quarter averaged 34 percent.
The most new issues for the quarter, and the year, were launched in August, typically a slow month. Sixty-three companies went public during August, compared with just 23 in September.
Despite these improvements, the third quarter falls considerably short of the 97 percent first-day gain seen in the first quarter and the 52 percent return for all of last year.
"There were too many deals that were put into the system, as a last-ditch attempt to get them done because they would not be able to compete with the deals in the post Labor Day period," said David Menlow, president of the IPO Financial Network. "Many of them that got priced this summer were part of the old-school perception (that almost any company can hold a successful IPO)."