Bank technology stocks were mixed last week.
Goldman, Sachs & Co.'s index of U.S. traded technology companies shed 9% of its value in May after a 28% growth spurt through the first four months of 1998.
For the year the index is up 16%, still outpacing the Dow Jones industrial average, up 13.9%, and the S&P 500 index, up 14.4%.
"There's a certain element of taking a breather here," said Bill Burnham, a San Francisco-based analyst at Deutsche Securities Inc. "Stocks just can't keep growing at that kind of a pace."
Karl Keirstead, analyst at Lehman Brothers, New York, said computer services firms in particular have taken a beating on concerns that corporate spending to fix the year-2000 problem will slow.
Mr. Keirstead also said that a number of technology companies tried to temper the market's exuberant growth expectations in reporting their first- quarter earnings, causing portfolio managers to move investments out of several software companies.
"Analysts got a little nervous about the sustainability of the terrific growth rates on the software products side," he said.
In news affecting bank technology stocks, National City Corp., the Cleveland-based regional bank, is mulling whether to buy back its faltering credit card processing unit, which was spun off less than two years ago.
In a Bloomberg wire report, David Daberko, National City's chairman and chief executive, said he would consider buying all outstanding shares of National Processing. The bank already owns 88% of the company's 50 million shares.
The wire report caused National Processing's stock to rise $1.75 for the week, closing Friday at $11.75. Though the report prompted the bank to issue a statement confirming the consideration, no proposal has been made to National Processing or its board of directors, said bank spokesman Brad Hemstreet.
National Processing's woes started soon after the company went public in August 1996. Pitted against weighty competition, the second-largest processor of merchant credit card transactions has fared poorly. Its stock price fell 64% within eight months of its initial public offering.
More recently, the company's lockbox operation has encountered difficulty in making an expensive investment in image-based item processing pay off, said Richard Weingarten, a research analyst with National Processing's underwriter, Salomon Smith Barney.
"It just hasn't worked the way they thought it would, and that impacted both the first and second quarter," Mr. Weingarten said.
The analyst said revenue and earnings growth are the company's main concerns. He lowered earnings-per-share expectations for the company by 5 cents, to 60 cents, in 1998.
"It earned 58 cents last year, so that is not a lot of growth," he said.
In other news, Mr. Weingarten assigned an "outperform" rating to Electronic Data Systems Corp. of Plano, Tex. He said the computer services firm, whose stock trades around $36, is undervalued by 25%.
"There is inherent value," he said. "The company is worth more than where it is trading now."