BEA Systems (BEAS)

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Software Stocks Rally, See Light at End of Tunnel

NEW YORK (Reuters) - Software stocks rallied during the day on Wednesday as lower interest rates, cautiously positive management statements and user group meetings, melded in the minds of investors beginning to believe the worst may be over, analysts said.

But by the end of the day, the euphoria waned and many double-digit rises closed as modest increases.

The Goldman Sachs software index (GSO.0), which had risen more than 4 percent during the day, closed up 1.06 percent, above the less than marginal rise the overall tech-laden Nasdaq composite recorded for the day.

``Everyone's still talking about activity levels,'' Merrill Lynch software analyst Chris Shilakes said. Merrill is holding a two-day software conference in Monterey, California, where 60 companies were scheduled deliver presentations to investors.

``They're saying the pipeline does seem to have firmed up some,'' Shilakes added. ``That seems to be the consistent message.''

Stocks with the biggest boosts during the past two days were those battered the worst during the past year.

``The whole supply chain sector is up,'' Credit Suisse First Boston analyst Brent Thill said. ``There's a notion the industry is beginning to see the bottom of the trough or probably not any more deep crevices.''

Shares of Commerce One, which held a users meeting in Santa Clara, California Wednesday, gave up most of its gains, and closed up a penny to $3.02 after rising as high as $3.52 during the day. Shares of i2, whose chief executive spoke at the Merrill conference, closed up 27 cents, or 4 percent, to $6.42.

Manugistics rose $1.49, or 16 percent, to $10.56. Ariba Inc. (Nasdaq:ARBA - news) was up 23 cents, or 5 percent, to close at $4.60. PurchasePro closed up 9 cents, or 16 percent, to 66 cents.

``People think they are going to survive, which was not so certain a couple of months ago,'' Goldman Sachs software analyst Thomas Berquist said.

PLAYING CATCH-UP

Most of those stocks once traded above $100 a share and within the past year have lost about 90 percent of their value.

``They're playing some catch-up,'' Bob Austrian, Banc of America Securities analyst, said.

Last week, executives from such companies such as Serena Software Inc.(Nasdaq:SRNA - news) and Manugistics said they were cautiously optimistic that the worst was over. In addition, on Tuesday the U.S. Federal Reserve (news - web sites) cut interest rates a half a point to 2 percent, their lowest level in 40 years. Investors hope that will make it cheaper for businesses to borrow money to buy new technology, such as software, analysts said.

In addition, infrastructure and network software stocks such as BEA Systems Inc.(Nasdaq:BEAS - news), Akamai Technologies Inc (Nasdaq:AKAM - news), SilverStream Software Inc.(Nasdaq:SSSW - news) were swept along in the wave of enthusiasm.

Other makers of applications -- software that performs specific jobs, such as automating selling, content management and analyzing buyer behavior --- also saw their stocks rally.

Siebel Systems Inc.(Nasdaq:SEBL - news) was up 2 percent, or 41 cents to $22.19 Vignette Corp.(Nasdaq:VIGN - news) shares rose about 1 percent, or 4 cents to $5.22 and Brio Software Inc.(Nasdaq:BRIO - news) shares closed up 7 percent or 9 cents, to $1.39.

``The September quarter was the low watermark fundamentally,'' Austrian said. ``We've had a lot of rate cut fiscal stimulus. The applications group was down sharply through September. They've rallied well over the past two days.''

http://dailynews.yahoo.com/h/nm/20011107/tc/tech_software_stocks_dc_2.html