HNC Software Inc. stock plunged almost 20% last week amid speculation about what an investor conference call would reveal and rebounded when it turned out to be good news.
The stock slid $5.75 Wednesday, to $23.31 at the close. Then came the end-of-the-day call, in which HNC reported that Sears, Roebuck and Co., a major customer, had successfully implemented a second HNC product.
The stock jumped nearly 28% on Thursday, to $29.75.
It was a jittery response to market conditions, said Jane Leonard, HNCs vice president of corporate communications. Other midquarter calls by technology companies were bad news, and HNC got lumped in.
HNCs stock traded mid-day Friday at $26.50, down 13% from last week. (See the chart on page 13 for other technology company stock prices.)
In the conference call, which had been announced on Feb. 22, HNC said Sears had been using its Capstone Decision Manager software to determine the creditworthiness of new credit card applications for four months and was convinced of its utility.
Sears, which was already using HNCs fraud protection software, has more than 60 million credit card account holders and a card loan portfolio of nearly $27 billion, making it the largest issuer of private-label cards.
Richard T. Williams, a senior vice president and analyst with Jefferies & Co. in New York, said the selloff probably reflected expectations that the call would bring only bad news. A rumor that HNC had lost a major customer they needed to make the quarter had been making the rounds, he said.
Investors may also have been jittery because management sold more stock than usual in prior weeks, Mr. Williams said, which investors could have taken as a signal to start bailing out.
Ms. Leonard said investors should not have been surprised by the update, because the company had announced during its fourth-quarter call Jan. 24 that it would provide midquarter information to comply with new disclosure regulations. She added that there is no truth to the rumor that the company has lost a major customer.
The selloff may also have been the normal course of profit taking after a prolonged good run, Mr. Williams said. HNCs stock went from about $9 in August to about $33 in mid-February.
To have a stock almost quadruple in that period of time, its natural to see a sharp correction and then rebounds, Mr. Williams said. It was on such a good run it becomes hard to believe it will continue at that rate.
Of particular importance, Mr. Williams said, is that HNC has thrived even after spinning off its successful Retek Inc. subsidiary in October. Retek provides Internet-based management software to the retail industry.
HNCs fourth quarter was its first excluding Reteks operations in its financial results. In that quarter, revenues were $55.1 million, or 12 cents per share 2 cents higher than analysts had expected and 32% higher than the fourth quarter of 1999.
Weve been saying for two years plus that HNC has a great technology with lots of interesting applications, Mr. Williams said. Separating Retek and HNC forces the market to revisit the valuations and capabilities of each company. Once you took away Retek, what was left, that stock was dramatically undervalued.
