Eircom loses €353m in volatile trading

On a bad day for Irish shares some €353 million (£277.8 million) has been wiped off the value of Eircom as the stock fell 16 cents to close at €3.72 yesterday.

Eircom opened at €3.70, down 18 cents overnight, as sentiment turned against the technology and telecoms sector.

In volatile trading the shares fell to a low of €3.65 on the day before recovering to go to €3.73 and then slipping again to close at €3.72.

At €3.72 Eircom is 18 cents below its July 1999 flotation price of €3.90, some €1.08 down on its high for the year of €4.80 and well off its all-time high of €5. But the shares are still above their low level so far this year of €3.56, reached in mid April.

Eircom suffered yesterday from the weakness in the international technology sector. But the shares have been weak for some months largely because of the overhang of the 35 per cent KPN/Telia stake which is on the market. The share price weakness is anticipating a secondary placing of these shares on the market.

Other options to find a new owner for the shares - such as a trade sale or a new investment partner - have been unsuccessful.

Eircom shares, floated in July 1999 at a premium of 30 per cent to the sector, are now trading at a discount of about 25 per cent to the sector. The company is due to report annual results next week.

Stockbrokers ABN Amro forecasts a pre-tax profit figure of €311 million excluding exceptional items. The results will include an exceptional gain of €407 million on the sale of cable company, Cablelink.

Pre-tax profit in the year to March 1999 was €119 million, depressed by €84 million of transformation and redundancy costs ahead of flotation.

In a trading update in March, Eircom announced plans to hive off almost a third of its staff over the next three years. Some staff will be redeployed to new joint venture service companies while others will be offered voluntary redundancy in moves affecting up to 3,500 employees.

These plans will cost up to €406 million and should deliver annual cost savings of €76 million. At that time Eircom said it was considering plans to float off its Internet-related businesses which include ISPs Eircom Net and Indigo.

On a highly volatile Nasdaq market in the US Irish companies suffered sharp share price falls. By mid afternoon trading in the US market, Baltimore had dropped 15 per cent to $12. The shares closed down $2.18 3/4 at $12.

On the FTSE in London, Baltimore, which is in imminent danger of being removed from the index of the top 100 companies on June 7th, closed 14 per cent down at £4.19 sterling.

On Nasdaq SmartForce was 13 per cent down at $39 1/8 by mid afternoon. The shares closed $5 lower at $19. Against the trend Riverdeep moved ahead. The shares were up almost 4 per cent by lunchtime to $24.50. They closed $1 up at $24.62 1/2.