Technology Channel Stocks Flat in Q1

By Joseph C. Panettieri  |  Posted 2004-03-27 Email Print this article Print
 
 
 
 
 
 
 

Big year-to-date winners include American Management Systems (AMSY), Ciber CBR), CDW (CDWC), MPS Group (MPS), Avnet (AVT) and Ingram Micro (IM).

The first quarter of 2004 was the best of times and the worst of times for channel stocks. The year began with a bang, as solutions providers expressed optimism and our Ziff Davis Channel Zone Stock Index rose more than 10 percent in early January.

But recent weeks have been far more challenging, as stagnant job growth, terrorism concerns and high energy costs undermined our index and broader financial markets.

The net result: Our index is up a scant 0.74 percent this year, split evenly between 15 index members that rose and 15 that declined since Dec. 31. The index's top Q1 performers were American Management Systems Inc. (AMSY, +27.79 percent), Ciber Inc. (CBR, +22.17 percent), CDW Corp. (CDWC, +14.32 percent), MPS Group Inc. (MPS, +13.90 percent), Ingram Micro Inc. (IM, +10.69 percent) and Avnet Inc. (AVT, +10.16 percent).

American Management Systems (AMS) shares rose amid plans to break the company into two and sell the pieces to CGI Group Inc. and CACI Corp. Under terms of the agreements, Canada-based CGI will acquire AMS for $858 million in cash and CACI will pay $415 million in cash for AMS's Defense and Intelligence business. AMS expects the deals to achieve regulatory and shareholder approval in the second quarter. Together, CGI and AMS will have roughly $3 billion in annual revenue and 25,000 employees across the U.S., Canada and Europe.

The Secret of Ciber's Success

Ciber, meanwhile, won multiple major integration contracts and strengthened its relationship with PeopleSoft Corp. A trusted source within Ciber says the company's vertical-market focus is paying dividends. A focus on the legal market, for instance, has generated contracts with the states of Alaska, Minnesota and Vermont. Another contract, with a state in the Southeast, is imminent. The contracts call for Ciber to install and configure CRIMES (Case Records Information Management and Exchange System), a software package for the legal market that Ciber acquired in 2001.Ciber has also partnered with PeopleSoft to develop CRM applications tailored for the higher education market. Smart move. My fulltime post at the New York Institute of Technology .a college in New York, compels me to keep a close eye on the education market. Although some businesses have suffered CRM setbacks, colleges are exploring CRM applications to attract and retain more students. Ciber and PeopleSoft hope to profit from the trend.

Meanwhile, profits continue to improve in the channel. Each of our remaining major Q1 winners—CDW, MPS Group, Ingram Micro and Avnet—announced increased revenue or earnings during their most recent quarters. Ingram Micro, in particular, says business is booming in Europe and improving in the U.S.

Major Decliners

Still, the news wasn't all good in Q1. Our index had several major decliners during the quarter, including Electronic Data Systems Corp. (EDS, -21.76 percent), Convergys Corp. (CVG, -12.94 percent), DiamondCluster International Inc. (DTPI, -12.75 percent), Accenture Ltd. (CAN, -9.23 percent) and Computer Sciences Corp. (CSC, -9.04 percent).EDS has been shedding non-strategic business operations in order to strengthen its balance sheet. After selling its software division for $2.3 billion earlier this month, EDS last week sold its Automotive Retail Group to Automatic Data Processing Inc. (ADP). The automotive group manages car dealers' computers. Nevertheless, Fitch Ratings on March 24 cut EDS's long-term debt rating to one level above Junk status, noted Reuters. Fitch made the cut based on continued cash flow challenges at EDS. CSC has suffered similar setbacks in recent weeks. Moody's Investors Service cut CSC's debt rating on March 19 because of cash flow and debt concerns.

What can we expect for Q2? Generally speaking, profits continue to improve within the channel and across the IT landscape. But the channel will almost certainly consolidate as solutions providers align with only the healthiest IT vendors. Watch for more solutions provider acquisitions, especially across Europe.

Top 30 Weekly Performance

 

 

Company

Symbol

26-Mar

YTD

Accenture Ltd.

ACN

 $     23.89

-9.23%

Acxiom Corp.

ACXM

 $     19.81

6.33%

Affiliated Computer Services Inc.

ACS

 $     49.60

-8.92%

Agilysys Inc.

AGYS

 $     11.71

5.02%

American Management Systems Inc.

AMSY

 $     19.27

27.79%

Arrow Electronics Inc.

ARW

 $     24.44

5.62%

Avnet Inc.

AVT

 $     23.86

10.16%

CDW Corp.

CDWC

 $     66.03

14.32%

Ciber Inc.

CBR

 $     10.58

22.17%

Cognizant Tech. Solutions Corp.

CTSH

 $     44.53

-2.43%

Computer Sciences Corp.

CSC

 $     40.23

-9.04%

Convergys Corp.

CVG

 $     15.20

-12.94%

Covansys Corp.

CVNS

 $     10.71

-2.64%

DiamondCluster International Inc.

DTPI

 $       8.90

-12.75%

Digitas Inc.

DTAS

 $     10.03

7.62%

Electronic Data Systems Corp.

EDS

 $     19.20

-21.76%

GTSI Corp.

GTSI

 $     12.86

-7.15%

IBM Corp.

IBM

 $     92.77

0.10%

Ingram Micro Inc.

IM

 $     17.60

10.69%

Keane Inc.

KEA

 $     15.32

4.64%

Manchester Technologies Inc.

MANC

 $       3.87

9.32%

Manhattan Associates Inc.

MANH

 $     27.49

-0.54%

MPS Group Inc.

MPS

 $     10.65

13.90%

PC Connection Inc.

PCCC

 $       7.51

-8.75%

Perot Systems Corp.

PER

 $     13.09

-2.89%

Pomeroy IT Solutions Inc.

PMRY

 $     14.00

-5.02%

Sapient Corp.

SAPE

 $       6.06

7.45%

Tech Data Corp.

TECD

 $     40.19

1.26%

The Titan Corp.

TTN

 $     20.22

-7.29%

Unisys Corp.

UIS

 $     14.09

-5.12%

 

 

 

 

 

Current Index

   1,116.22

 

 

Previous Week

   1,114.27

 

 

Weekly Change

0.18%

 

 

YTD Change

0.74%

 

 

Since Oct. Start

11.62%

 

 

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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