The roller-coaster market took bank technology stocks on a ride that ended with most of them down for the week.
Several companies took big hits early in the week, as investors reacted to the Dow Jones industrial average's largest-ever single-day point plunge. But by week's end most bank technology shares were creeping back.
First Data Corp. was one of the hardest hit by the volatility. The Hackensack, N.J., card processor announced two trading days before the crash that it was reducing its revenue estimates for the year. "Its stock got crushed in the process," said Joseph Donaldson, analyst at Lehman Brothers in New York.
First Data shares closed at $29.25 Friday, down $1.375 for the week.
Mr. Donaldson said First Data's stock hit also reflected problems with noncore assets, "which are growing slower than the corporate average and dragging on the company growth."
And he said that First Data's merchant processing business, which generates 25% of revenues, is underperforming. "We were looking for revenue growth in the merchant processing business of about 11%," said Mr. Donaldson. "But it came in at 7%-that caught everybody by surprise."
But despite the problems, Mr. Donaldson is bullish on the stock. During the next 12 to 18 months, he said, he expects First Data shares to appreciate markedly.
"It is one of the best companies in the market. Although it is going through a difficult time right now, it is definitely capable of turning the situation around," he said.
Harbinger Corp. also was hurt by last week's market swings. Like First Data, the Atlanta-based provider of electronic data interchange technology announced negative news just before the market plunged.
In the wake of a negative earnings report, Harbinger stock plunged from $40.375 to $31.875 on Oct. 24. The following Monday-the day of the general market crash-the shares lost 10% and closed at $28.50. Since then, the stock has made a modest comeback. It closed at $29.75 Friday.
C. Tycho Howle, chairman of Harbinger, said, "The test for us is not the stock market's reaction over the last three days or the next three weeks." It is "how well we do in the fourth quarter and subsequent quarters in 1998."
Amid the general carnage, some bank technology stocks registered modest gains.
Electronic Data Systems Corp. shares, for instance, reversed their recent fortunes, gaining $38.6875, to close at $4 for the week.
EDS, which sells a wide range of outsourcing and other technology services to banks, announced third-quarter earnings Wednesday. Operating revenues increased 4.6% from the year earlier.
Net income was $230.2 million, 13% lower than the year before but, analysts said, the market probably reacted positively because EDS did as expected for the first time in several quarters. For the year, EDS' stock is down about 26%.
HNC Software Inc. also posted gains for the week. The San Diego maker of credit card fraud prevention systems closed at $37 Friday, up $3.25 for the week.
Observers said the company's stock price was boosted by a prospectus HNC filed with the Securities and Exchange Commission outlining the effects of its acquisition of CompReview, an insurance company that processes workers' compensation claims.
HNC said in documents that the acquisition would increase its earnings for 1998.
Also gaining ground in recent weeks is Checkfree Corp. Shares of the Atlanta company best known for its bill payment processing services have increased about 40% in value since Oct. 6.
The fuel for this rise is the company's recent deal with Integrion Financial Network, the influential home banking consortium owned by International Business Machines Corp. and a group of large banking companies. Checkfree and Integrion have agreed to work together on a bill payment processing system.
The alliance will have "no impact on revenues and earnings in the near term," said Karl Keirstead, an analyst at Lehman Brothers in New York, "but it is significantly positive in the long term."
"The momentum in Checkfree is strong," he said, "and the sentiment toward on-line banking looks good."
