Companies: CMO    EGS    FIB    IQE    ITL    KWL    RM.    SRF   

Recent times have been bad for most technology stocks, with all of the major contributing sectors falling by 10 per cent or more, with the exception of the newly beefed-up pharmaceuticals and biotech sector, which has held its own, rising 2 per cent. The techMARK 100 index of the most highly rated technology companies was recently down 10 per cent at 1264.34 for the period from 24 January.

Much of the slide has been put down to the fear surrounding the novel accounting practices that so many technology companies employ, following the collapse of Enron. But there has also been the steadily deflating impact of more companies releasing profit warnings.

Telecoms crash again

One of the worst places to be has been telecom-munications, a sector that has again plunged close to the depths that it plumbed on 11 September, falling 17 per cent in under a month. Accounting fears made worse by the collapse of US fibre optic firm Global Crossing stoked some fears. But confidence has been shaken further by a couple of warnings from some of the more highly regarded companies in the sector, namely Energis and the smaller Fibernet.

The former shocked the market with a stark profit warning in which it admitted that it is in danger of breaching some of its banking covenants. Fellow fixed-line network operator Fibernet joined the throng by saying that its sales cycles have lengthened, although it reassured that its business plan is fully funded. Its shares were down 54 per cent at 167.5p, while Energis was off a further 37 per cent at 14.75p, having previously halved in value on the day of its warning.

More warnings

Semiconductor 'epiwafer' supplier IQE's shares fell 22 per cent to 121p after reporting an 'extremely challenging' market and a likely net loss of £3.5 million to £3.8 million for the fourth quarter, with trading expected to show a further decline in the first quarter. Meanwhile, Kewill Systems chairman Andy Roberts said that market conditions were 'extremely tough', as the company reported that sales in the period from October to December were behind expectations. The shares fell a third to 29p. Other warnings have been forthcoming from the likes of RM and Comino (again), the shares of which have fallen 68 per cent to 86.5p and 34 per cent to 110p respectively.

Software turkey InterX has been the most volatile performer of late, plunging following a profit warning and then recovering quickly after announcing that it is looking to protect the cash that it has left. Interim results showed a loss of £17.4 million for the six months to the end of December. Excluding goodwill, it had net assets of £12.6 million at the end of that stage, compared to a current market capitalisation of £6.8 million at 30p, a third of last month's valuation. (see director's dealings, p. 46).

Good news fails to inspire

But, as ever, it is not all doom and gloom out there. Telecoms software firm Intec Telecom Systems announced that its first quarter revenues were ahead of forecasts by about 10 per cent, while network filtering firm SurfControl even beat the expectations that it raised with a bullish update in January. Affinity Internet also boosted investors by announcing that it expects to report turnover more than 15 per cent ahead of expectations for the year to December, after buoyant Christmas trading. The market was not impressed however, and Intec is down 25 per cent at 63.5p, SurfControl off 7 per cent to 607.5p and Affinity down 29 per cent at 240p.

Coming up

Oil refining process engineer and consultant KBC Advanced Technologies' shares have fallen 34 per cent to 105p since it released interim results showing a 37 per cent increase in pre-tax profit last August. Barney Gray at broker Beeson Gregory expects a 32 per cent increase to £4.5 million for the full year, giving EPS of 6p. In addition to its earnings, the company has substantial asset backing, with £20.2 million in cash at the half-year end to back up a progressive dividend policy. One to watch.