Investment flight from tech stocks intensifies

Technology, media and telecoms stocks nosedived in Europe yesterday as the drip of bad news continued to erode investor confidence in the formerly highflying sectors.

The Techmark 100 index in London fell by a record 8.7 per cent to 3,052, little more than half the March peak. The technology-rich Neuer Markt in Frankfurt and Nouveau Marche in Paris also suffered heavy falls.

In Dublin, the ISEQ index fell back 1.34 per cent to 5,323.85, with Eircom experiencing a sell-off that saw it fall to €3.65 before closing at €3.72.

Investors, already nervous after interest rate rises, continued to absorb the dose of reality from the collapse of Boo.com, the British e-tailer, and heavy losses from Equant, the French network communications company.

Mr Richard Davidson, European equity strategist at Morgan Stanley, said: "The clouds have been gathering for a little while. What we are seeing is that investors are starting to reduce their positions in technology."

Caught in the fall-out was United Pan-Europe Communications, the Dutch-based cable communications company, which yesterday valued Chello Broadband, its Internet service provider, at about €4 billion (£3.2 billion), less than half the level originally expected. It will issue 27 million shares, representing about 10 per cent of Chello, priced at €13-€17. UPC's shares fell 21 per cent.

Mr Roger Lynch, Chello chief executive, said it had deliberately taken a cautious approach to pricing. "It was never our attention to grab the last dollar."

Yes TV, the British video company, was yesterday on the verge of pulling its £560 million (€711 million) IPO. It had already delayed the offering and cut the price.

Big European telecoms operators were hit, with Deutsche Telekom down 7.9 per cent and France Telecom down 8.8 per cent. Vodafone, the British mobile operator, was down 8.6 per cent.

One investment banker also attributed the fall to the high prices telecoms company would have to pay for the next generation of mobile phone networks.

"The auctions in the UK started it, but now figures are out this week showing the real impact on the sector. They could account for about 10 years of profits for the whole sector."

Mr Neil Williams, global strategist at Goldman Sachs, estimates that €130 billion will be raised from the sale of third generation mobile phone licences.

Internet shares suffered in the wake of Boo.com's collapse. In Paris, LibertySurf, the Internet service provider, lost more than 12 per cent, while in London, Lastminute.com, the online travel agent, fell 13p to a new low of 141p.

Ms Anja Stemmer, Munich-based analyst for Jupiter Communications, said: "One of the reasons that Boo.com's failure may have scared investors off is because it was one of the best-funded Internet retailers around. The fact that high profile investors pulled the plug is telling."

In Britain, shares of technology and telecom companies continued to decline, as investors switched out of these higher-valued issues in favour of old-economy shares. Baltimore Technology shares led the FTSE 100 lower, slumping 41.5 pence, or 8.5 per cent, to 447.50p. Other decliners in London included telecom-equipment maker Marconi, down 39p, or 4.5 per cent, to 838p, which announced a 14 per cent decline in fiscal 2000 net income to £522 million sterling, compared with £607 million the previous year. In New York, the slide in US technology and telecoms stocks continued in thin trading, wiping another 3.5 per cent from the Nasdaq composite by early afternoon. The fall took Nasdaq's losses to 8.5 per cent since Tuesday, when the Fed raised interest rates, and left it 33 per cent below its early-March record.