Stock Watch: Week Ended Nov. 7, 2003, Channel Stocks Inch Higher

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The patient isn’t cured, but vital signs are improving.

That’s the general feeling among investors who track publicly held solutions providers and distributors. Indeed, our Ziff Davis Channel Zone Stock Index rose a respectable 2.86 percent for the week ended Nov. 7, closing at 1061.71. The index is up more than 6 percent since mid-October.

Last week’s big winners included Avnet Inc. (AVT, +12.27 percent), Pomeroy IT Solutions Inc. (PMRY, +10.36 percent), Perot Systems Corp. (PER, +10.26 percent), and Manhattan Associates (MANH, +10.06 percent). The only major decliner was Manchester Technologies Inc. (MANC, -10.63 percent).

Avnet shares have rallied strongly since the company announced 11 percent year-over-year quarterly revenue growth on Oct. 30. The Phoenix, Ariz.-based distributor also earned applause from Institutional Shareholder Services (IIS), which praised Avnet’s corporate governance practices. On the technology front, Avnet last week announced a line of white box PCs equipped with AMD Inc.’s Athlon 64 processor, as well as a sales alliance with Rittal Corp., which specializes in electronic enclosure systems. Not exactly earth-shattering news but investors like Avnet’s momentum.

Pomeroy shares also continued to rally on improved quarterly profits, which the company announced more than two weeks ago. Rival solutions providers should keep a close eye on Pomeroy’s new partnership with Altiris Inc., which makes systems management software for servers, desktops and handhelds. If you’re not familiar with Altiris, look them up—fast. The company has strong relationships with Dell Inc. and Hewlett-Packard Co. In fact, Altiris, HP and Intel Corp. recently organized a road show aimed at sparking corporate migrations to Windows XP.

Meanwhile, Perot Systems announced that year-over-year 3Q profits slid 16 percent. Ouch. Bad news, right? Wrong. Barrington Research upgraded Perot shares from market perform to outperform (memo to Barrington: Can’t you just say “hold” to “buy”?), based on the company’s year-over-year 3Q revenue growth of 8 percent. President and CEO Ross Perot, Jr., said he was “pleased” with the company’s results and progress. And he pointed to a 10-year, $275 million outsourcing deal with Vanguard Car Rental USA Inc. as proof of Perot’s momentum. The deal includes app development, maintenance, and data center services.

One week after announcing soft 3Q results, Manhattan Associates’ stock rebounded strongly without any major news from the company. Perhaps rising tides do lift all ships.

The index’s only major decliner was Manchester Technologies. Shares in the Hauppauge, N.Y.-based solutions provider have been on a roller coaster ride since a weak earnings announcement on Oct. 27. In the earnings release, President and CEO Barry Steinberg delivered upbeat statements about Manchester’s balance sheet and services revenue. Shares did manage an 8.5 percent rally on Friday, Nov. 7, but that wasn’t enough to offset daily losses from earlier in the week.

The Ziff Davis Channel Zone Stock Index tracks 30 solutions provider 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 October 24 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 and founder of JCP Media Inc..