Heard on the Desk
Retail Investors Support Comm. Equipment as Sector Slides

By Epoch Partners Equity Capital Markets Team

For the week ending June 1, communications equipment stocks made a comeback among retail investors even while the sector and broader market took a dive. The Nasdaq closed down 4.5% for the week ending. During the same week, Morgan Stanley Dean Witter's communications equipment analyst Alkesh Shah, who was bullish on the sector during last year's stock slide, now says Nortel (NYSE: NT, $ 12.53) and JDS Uniphase (Nasdaq: JDSU, $ 16.05) are not worth buying at current prices. His public statement caused network shares to follow the Nasdaq's downward trend.

Surprisingly, while all but one of the top 10 stocks on our bought list experienced double digit declines in share prices, retail investors went in and supported them. New Focus² (Nasdaq: NUFO, $7.99), who is in the middle of a class-action suit filed on behalf of purchasers of its common stock during the period between Oct. 24, 2000 and March 5, 2001, ended the week down 27.5%, while Epoch's partners' retail investors added 10.2% to their positions. New Focus purchasers charge that certain of its officers and directors violated securities laws by providing materially false and misleading information about the company's financial condition and growth potential.

Similarly, retail investors also supported Commerce One (Nasdaq: CMRC, $6.17) and Network Appliance (Nasdaq: NTAP, $18.71) by adding 4.1% and 3.3% respectively, to their positions; the stocks were down 18.8% and 26.8%, respectively. Commerce One shares were down even though the company announced the completion of its acquisition of Exterprise, a leading provider of software solutions for building and managing collaborative business networks.

Retail investors were more diverse in their sales for the week. Investors unloaded a mix of software, communications equipment, and services stocks; many of these had a tough week. Rhythms NetConnections (OTCBB: RTHM, $0.195) hit a 52-week low while Priceline.com (Nasdaq: P, $7.71) hit a 52-week high.

Visual Networks (Nasdaq: VNWK, $7.67) announced it would cut costs by closing its New York City office and eliminating 40 jobs in conjunction with the closure.

Rhythms NetConnections' announced that its common stock would begin trading on the OTC Bulletin Board as a result of formal delisting by Nasdaq.

Priceline.com announced the addition of resorts to its "name your own price" travel offerings.

*Epoch Partners tracks more than 2,300 publicly traded companies and their associated holdings at our Online Partners: Charles Schwab & Co, TD Waterhouse and Ameritrade.
²Epoch Securities has been an underwriting manager or co-manager of the company in the last three years.