Nasdaq's year of turmoil

Tech investors saw the value of their shares slide

David Schepp BBC News Online's North America Business Reporter

What a difference a year makes - 8,760 little hours. Or so the song might go if one were talking about the Nasdaq Composite Index.

On 10 March, 2000, the technology-stock bellwether soared to a height it had never seen before - past 5,000 to a record 5,047.69. It took a mere four months for the Nasdaq to climb from 3,000 past 4,000 to its new record.

But the Nasdaq's rapid rise has seen an equally rapid fall. It took two-thirds the time for the Nasdaq to tumble back to current levels - not seen since late 1999 - as it took to rise.

A year later after achieving its record high, the Nasdaq is struggling to maintain a level less than half its year-ago high (recently hovering around 2,200).

Some tech-related stocks whose shares once went for exorbitant sums now trade at less than 10% of their 2000 highs. Internet-portal Yahoo!, for example, has fallen nearly 90% from year-ago levels to around $21 a share.

Speculative bubble

Analysts interviewed a year ago noted that the "valuation" - the method by which the value of a stock is determined - of many dot.com and other technology stocks was grossly overstated.

They warned of a speculative bubble that could burst and send shares plummeting. Anxious investors, they said, would soon grow weary of having their money invested in businesses that only lost money, among other concerns.

Seems they were right. And analysts now contend that investors who bought into highflying tech stocks at year-ago highs are likely never to see all their initial investment.

Going, going, gone

To be sure the technology landscape is laden with dot.com cadavers, including Furniture.com, pets.com, Mortgage.com, Quepasa.com, MotherNature.com, Garden.com and, most recently, eToys.

But many more dot.coms remain, albeit at a fraction of year-ago prices.

Now and then

Popmail.com 17 cents ($52.50)

E-Stamp 13 cents ($10.63)

Fusion Networks 22 cents ($16.38)

Netplex Group 13 cents ($16.50)

InterWorld 47 cents ($84.13)

While stocks such as these tumbled, others soared in the face of the Nasdaq market's fall, which reeled from other technology-stock downfalls in the computer-related products and telecommunications products and services.

Shares of Green Mountain Coffee have gained 277%, while Cima Labs, a drug company, now trades at around $55 a share, up from $23 a year ago, a 140% increase.

In fact, drug and biotechnology companies were the big winners in the last year. Other gainers include Impath, a cancer-research firm, up 174%, and Pharmaceutical Product Development, up 121%.

Mutual funds weaker

The tumble in tech stocks has taken its toll, too, on mutual funds that specialize in technology issues.

Inflows into all mutual funds in January 2001, the period for which the most recent data was available, were nearly the same as a year ago, at $24bln and $24.7bln, respectively, according to mutual-fund-analysing firm Lipper Inc.

Flows into technology stocks, however, fell precipitously. In January 2000, money flowing into tech-related funds rang in at $10.9bln. A year later, interest in these funds fell to just $100m, less than 10% of year-prior levels, says Denver-based Lipper.

Additionally, when the Nasdaq was at its zenith in March 2000, technology funds saw nearly $15bln coming in just one month - the highest level on record for any one month.