Tech Stocks Fall Despite Good Profits

Despite mostly favorable earnings reports, bank technology stocks drifted lower last week amid a broad market correction.

After setting records the previous week, the Dow Jones industrial average had shed about 80 points by late Friday, to 6,015, while the Nasdaq composite, which incorporates many technology companies, was off about 20 points, to 1,225.

The Commerce Department on Friday reported the biggest increase in durable goods orders in almost four years - 4.6% in September - renewing concerns that interest rates may rise.

The market's downtrend was also seen as reflecting Wall Street's recognition that corporate valuations are at record highs.

Companies with anything less than exemplary profits were pummeled in the market. That was the case with Verifone Inc., whose stock price dropped 20% two weeks ago after a poorer-than-expected third-quarter earnings statement.

It responded last week with a stepped-up stock repurchase program. The Redwood City, Calif., transaction automation company has authorized $67.5 million to buy back up to 1.5 million shares during the fourth quarter.

Verifone has about 25 million shares outstanding. Its stock edged up $3 for the week, trading Friday afternoon at $34.625.

A more recent hit was taken by Electronic Data Systems Corp. Despite meeting Wall Street's consensus earnings estimate of 55 cents per share, as published by First Call, the Plano, Tex.-based technology service vendor's stock plunged nearly 20% last Wednesday.

EDS officials, through press statements and in meetings with analysts, said they anticipated slowdowns in revenue growth.

The company sells large-scale outsourcing and systems integration services to corporations and banks. EDS said the pace of new contracts had slowed this year.

EDS is currently bidding on "a rich pipeline of business, which means its sales and marketing expenses are unusually high," said Gregory Gould, analyst at Goldman, Sachs & Co.

What's more, EDS told investors this year that one of its outsourcing customers - the U.S. operation of Memorex Telex, Amsterdam - might go bankrupt soon.

Last month, Memorex did in fact file under Chapter 11 of the U.S. bankruptcy code. EDS had set aside $12 million against that possibility. But it said last week that Memorex owed it $24 million, and it was unclear as to how much of that amount could be recovered.

"It was a combination of events" that, taken separately, "people would not have batted an eye at," Mr. Gould said.

EDS' stock was trading Friday afternoon at $47, down $14.50 for the week.

First Data Corp., Hackensack, N.J., reported net income for the most recent quarter had risen 37% from the year before, to $166.6 million. At 72 cents a share, that was a penny short of expectations. The shares were trading at $81.625, off $2.25.

Fiserv Inc., Brookfield, Wis., reported a 20% rise in third-quarter net income, to $15.7 million, or 34 cents a share. That met the consensus estimate. The bank outsourcing company's stock price was $37.50 Friday afternoon, down $2.25.

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