Hot or cool as the stock market's technology sector may be, 1997 will go down as a disappointment for vendor companies focused on the banking and payments industries.

Though there were a few pockets of strong performance-SEI Corp.'s 81% stock-price appreciation led a strong set of double-digit gains among outsource specialists-double-digit drops were more the rule.

Analysts said that when technology stocks turned turbulent, investors opted for the stability of larger-capitalization issues.

"The electronic commerce market, along with basically the entire technology and small-cap market, was dismal," said Bill Burnham senior research analyst at Piper Jaffray Inc., Minneapolis.

Goldman Sachs & Co.'s index of computer service firms, in which bank vendors like those tracked weekly in American Banker are heavily represented, appreciated by about 9% this year though Friday. It ended the short trading day at 107.19.

The Nasdaq composite, roughly one-third of which is technology, increased 17% for the year, to 1511.3. The Dow Jones industrial average rose 19%, to 7679.31, and the Standard & Poor's 500 index was up 26%, to 936.46.

Several companies' breaking of growth patterns and puncturing of analysts' expectations had broad repercussions.

Some declines, like those of First Data Corp. in the payment processing business and, more recently, Fair, Isaac & Co. in consumer credit information, seemed to drag down the prices of competitors as well.

Mr. Burnham said the transaction processors had a particularly bad year. First Data's Oct. 23 red flag on earnings preceded a one-day, 17% drop in its stock price. It is off 29% for the year and got only a slight, temporary bump up last week when it announced the signing of a credit card processing contract with Wells Fargo & Co.

A month before First Data's news hit, Paymentech Inc., which Banc One Corp. controlled after its acquisition of the card issuer First USA Inc., suffered a downgrade. Its stock is off 61% this year.

National Processing Co., a National City Corp. subsidiary, had earnings difficulties all year; its shares are off 40%.

"The fundamentals remain extraordinarily strong," so the processors "don't have anybody to blame but themselves," Mr. Burnham said.

"The market has seen a number of blowups in the sector, so it has discounted everybody," said Salomon Smith Barney analyst Richard Weingarten. He said eight major bank card processors lost 25% "in absolute price" during 1997, a mirror image of the positive S&P 500.

But this area still has "interesting investment characteristics," he said, including recurring revenues, long-term contracts, and recession- resistant tendencies.

Apart from Checkfree Corp., whose year-to-date stock appreciation of 55% stands out, electronic commerce companies were mixed at best.

Many of them went public in the last couple of years and are trading lower than their initial prices. Among these, Affinity Technology Group Inc. is down 64% for 1997, and First Virtual Holdings Inc. down 69%.

Gary Craft, analyst at BancAmerica Robertson Stephens Inc., said these companies have one thing in common: a tendency to change their business descriptions.

"Affinity went from being a maker of automated lending kiosks to a software company," he said. "First Virtual went from being an Internet payment company to an electronic commerce enabler."

Among the hard-hit in 1997, Intelidata Technologies Corp., a developer of screen phones and on-line banking software, saw much of its business in the telecommunications area evaporate this year. Intelidata lost 81% of its value, sinking to $1.65 on Friday.

Cybercash Inc., despite a strong reputation as an innovator in Internet payment systems and "virtual money," saw 28% of its stock price erode. At $13 a share, it suffered in the backlash from the Internet boom of early 1996, when it went public. It once traded at $64.

"In 1996, if you had a heartbeat and a business plan, you were able to go public," Mr. Burnham said. This year "investors actually started to care if and when you planned to make money. There is a much higher level of scrutiny."

On the plus side, shares of DST Systems Inc., a software provider and processor of mutual funds, are up 29% for the year.

SEI, 81% ahead, landed several new outsourcing contracts thanks to year- 2000 compliance investments. Its signings included BankBoston Corp., Norwest Corp., and Wachovia Corp.

Fiserv Inc., an outsourcer with a profile similar to SEI's, climbed 29%. George Dalton, chairman and chief executive officer of the $1 billion, Wisconsin-based company, said it signed 400 new customers in 1997, which accounted for $81 million in new business through the first 10 months.

He said next year's outlook is even stronger because of year-2000 concerns. He is even considering scaling back the rate of customer add-ons due to capacity concerns.

The company also went through a record 10 acquisitions this year. "It's not over," Mr. Dalton said of that trend. "We have a week left."

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