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Published on 03/01/1999 All articles from this issue

Tech stocks taking a beating - are Internet stocks next?

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By Clyde Noel

Special to the Town Crier

Weeks of questioning whether the high-flying technology group is over-valued and unable to maintain a strong growth rate brought U.S. stocks down again last week.

The Dow Jones Industrial Average closed down 59.76 points at 9306, because of tech-related companies like Intel, IBM and Hewlett-Packard Company.

For the week, the Dow was off 33.37 points and the Nasdaq composite index rose 4.43 to 2288.03.

Surprisingly, the Town Crier stock index was ahead for the week because of local Internet stocks like Yahoo, Infoseek and E-Trade. Aspect Development and Yahoo corporate stocks split on a 2-for-1 basis.

VLSI, an original Town Crier issue, increased 58 percent when Phillips Electronics, of Amsterdam, agreed to purchase the company.

The big drops for the week occurred when Intel Corp. had a 8 1/8 point decline to 119 15/16, and Applied Materials shares fell 7 1/16 points. These losses were still not enough to bring down the Town Crier 50.

Internet stocks are still on the most-wanted list for growth issues, but experts say the gold rush will not pan out with future gains for these Internet company stocks.

The buying frenzy is in its second year and investors are still buying stocks that have a ".com" connected to them.

Stock experts are betting that many of these Internet stocks will go bust and the companies that have nerdy-hip appeal will wind up on the "see you later" list. Some experts claim these issues will be taking the same road that many Ponzi schemes experienced.

Analysts say some Internet stocks without earnings are trading at an eye-popping 2,000 times anticipated 1999 earnings and command outlandish capitalization that exceeds good common sense.

e-bay, a local company, but not on the Town Crier 50, is trading at $280 after going public five months ago at less than $20. It has zoomed more than 900 percent since it went public and still has no profit to show for its high value.

The survivors will be companies that can bankroll the biggest advertising budget and manage the best return on profits.

Noel, an experienced investor, covers the stock market for the Town Crier.