The recent stock market volatility has created uncertainty among investors, leading to a rather steep slide in wireless stock value, say financial analysts following the wireless industry.
Paging stocks have been hit particularly hard, some are trading more than 50 percent below their value from just two months ago. The paging industry has two additional strikes against it in this troubled market past other wireless stocks. One is uncertainty over the future need for pagers and the other is uncertainty of its pricing.
Paging Network Inc.’s stock value bottomed out at $4.50 Oct. 16 from a high of $14 in July. It rose to $4.75 by press time. PageMart Wireless Inc., which had been cruising around $9 through August fell to $5.62 at press time.
Arch Communications Inc. dove from more than $4 in August to less than 80 cents by mid-October and hovered at 87 cents at press time. The poor stock performance has affected the company’s proposed acquisition of MobileMedia Communications Inc., a deal made up primarily of stock. MobileMedia recently delayed a bankruptcy court hearing to take another look at the deal’s structure in light of the recent market activity.
Metrocall Communications Inc.’s stock was flat in the high $6 range throughout most of August until it began a slow decline toward the end of the month, reaching $3.50 at press time.
Even Wall Street’s favorite paging carrier, SkyTel Communications Inc., was not immune to the investor flight. At $24 in July, SkyTel stock fell to $13 by Oct. 16 and rallied to $15 by press time.
Chris Larson, vice president and senior wireless telecom analyst at Prudential Securities Inc., blamed the falling values on investor unease in an uncertain market. “Anything that needs financing right now, investors don’t want to hear about it,” he said.
When investors start tightening their belts, they save their cash for what they consider sure things, and nobody would call paging stocks a sure thing right now.
“I think it’s more of a market thing than anything else,” Larson continued. “The companies haven’t changed. The market has … It’s not a kind market to small cap stocks. It’s not a kind market to negative earnings stocks. It’s not a kind market to companies that need financing.”
The market volatility has affected all public companies to an extent, but paging-and most wireless stocks for that matter-have been hit harder, for these reasons, he said.
“I’m not trying to say the paging industry is going the way of the dinosaur,” Larson said. “But in times of negative sentiment, that’s going to bubble to the top … In times of market turmoil, bad stuff will be magnified.”
Then there is the issue of pricing.
“When investors hear pricing competition and paging together, they head for the door,” as many were stung in the pricing wars of 1996.
Larson downplayed the effect of the upcoming 3Q reports as having any additional effect. “I don’t think negative or poor third-quarter results will have any effect, it’s more market sentiment.”
On the flip side, positive quarterly results also have had little effect. SkyTel released third-quarter earnings last week that pointed to fourth-quarter profitability, but saw little movement in its stock value.
“Good news doesn’t always mean a turnaround,” said Jeanine Oburchay associate director at Bear, Stearns & Co. While one paging company may be doing well, the fact it is a paging company-and therefore of uncertain worth-is the biggest strike against it.
If anything, low stock prices themselves may affect their rebound by enticing bargain hunters.
However, “if you’re out there bargain hunting, paging companies don’t always pop into mind first,” Oburchay said.
