A Roller-Coaster Ride For CRM Stocks

A Roller-Coaster Ride For CRM Stocks
Late-week gains were dashed in early trading Friday; will the sector see stable growth soon?

by Martin Schneider

During a busy week of trading on Wall Street, many CRM vendors and related companies saw their modest gains stripped away in Friday's early-morning trading. But analysts posit that stability is on the way in 2003.

After a positive earnings report from Hewlett Packard, tech stocks rallied Thursday, but after a bad outlook from the chip manufacturing and hardware sector, they quickly slumped after Friday's opening bell.

The big gainers on Thursday included Firstwave Technologies Inc., which gained over two points on the day, as well as J.D. Edwards & Co., PeopleSoft Inc., and SAP AG, all with small percentage gains.

PeopleSoft gained surprisingly despite being downgraded by Salomon Smith Barney to underperform status, along with Siebel Systems Inc. In midday trading Friday, however, both PeopleSoft and Siebel lost most of Thursday's gains.

Analysts say that despite the recent volatility, in recent months the market has shown some signs of recovery, and 2003 looks to bring some stability, if not growth to the CRM sector, though admittedly not much.

L Lill, a group vice president at Gartner Group, says his company recently completed a study that indicates CRM spending will increase in 2003, but will not be at the level it was a few years ago. "At least the downhill slide is finally over," Lill says.

Lill notes that Gartner's studies indicate that companies will probably be investing mostly in efforts to integrate back-end operations with their preexisting CRM applications. This focus could hurt some vendors that depend on licensing sales and slow corporate adoption of new CRM applications for financial success in 2003.

Research firm IDC released a study this week that proclaimed 2002 the "worst year in the history of IT." In the report IDC claims that the worldwide IT industry suffered its largest decline ever in 2002, with a growth rate of negative 2.3 percent. However, IDC expects the $875 billion dollar IT industry to recover from this low point, with a 2003 growth rate of more than 5 percent.

"Although the industry as a whole won't return to the kind of growth enjoyed before the downturn, there will be a number of bright spots over the next several years," says Stephen Minton, director of worldwide IT markets and strategies at IDC. "Innovation and value will be important drivers that lead the industry back to health."

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