Channel stocks continued to rally during the first full week of 2004, with many firms hitting 52-week highs ahead of earnings reports scheduled for this month.
Shares in Digitas Inc. (DTAS, +17.61 percent), PC Connection Inc. (+14.42 percent), Keane Inc. (KEA, +12.66 percent), Arrow Electronics Inc. (ARW, +12.45 percent) and DiamondCluster International Inc. (DTPI, 11.41 percent) last week propelled the Ziff Davis Channel Zone Stock Index to a new high. Less than halfway into January, the index has risen 5.16 percent so far this year and 16.53 percent since October.
Last week's showing would have been even stronger, had it not been for weak jobs data that undermined the market on Jan. 9, sending the Dow Jones industrial average down 133 points, its sharpest drop since October.
Still, a sense of optimism remains in the IT marketplace. Bullish investment firms watching the channel include Thomas Weisel, which upgraded shares in Arrow Electronics and Avnet Inc. (AVT, +8.45 percent) on Jan. 9 before the market opened. Soundview Technology delivered a similar upgrade on Convergys Corp. shares (CVG, +6.69 percent). Even Accenture Ltd. shares (ACN, 0.80 percent) managed to rise nominally despite a downgrade from Pacific Growth Equities.
Can the channel continue its recent momentum? The answer may emerge over the next two weeks, as solutions providers and distributors announce their latest quarterly earnings. Accenture (Jan. 13), CDW Corp. (Jan. 21), Sapient Corp. (Jan. 29), Unisys Corp. (Jan. 20) and offshore developer Wipro Ltd. (Jan. 21) are among those set to announce results before month's end.
Although the IT spending funk appears over, some evidence suggests that the technology recovery has yet to shift into high gear. Indeed, large companies plan to increase their IT spending a modest 1.7 percent this year, according to a survey of 818 North American companies conducted by Forrester Research Inc. of Boston, Mass.
About this Column: The Ziff Davis Channel Zone Stock Index tracks 30 channel-related stocks on a weekly basis. We don't recommend buys, sells or holds. Rather, the index seeks to measure the channel's financial health. We launched the index on Oct. 24, 2003 with a value of 1000. Each stock in the index is equally weighted. For example, if one stock rises 5 percent and another falls 4 percent, the net result is a 1 percent gain.
Joseph C. Panettieri has covered Silicon Valley since 1992. He is editorial director of the New York Institute of Technology . Write to him at joe_pan5@yahoo.com.
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