All Eyes On Greenspan

Expect a mixed day at best for Internet stocks on Monday as investors focus ahead on Federal Reserve chairman Alan Greenspan’s testimony on Tuesday before the U.S. Senate.

‘Net tickers are looking for help in stopping a downward spiral that began, ironically, almost as soon as the Fed announced on Jan. 31 that it would reduce short-term interest rates by a half-point, less than a month after a previous half-point cut.

A year ago many Internet investors thought of Greenspan as an old-economy crank, someone whose grumpy insistence on raising interest rates was creating a bothersome drag on skyrocketing ‘Net stock prices.

Now he is widely seen as the best hope for the U.S. economy – and Internet companies – to avoid the pitfalls of a recession, even by those who blame Fed policy for triggering the current slowdown. Which is why his remarks before the Senate will be interpreted and scrutinized by investors anxious to determine where the economy is headed.

Of course, they really don’t need Greenspan to provide that insight, not when they can draw their own conclusions based on the steady stream of data indicating the economy is at near-zero growth. Indeed, more of those numbers will be available this week, including January retail sales, January’s producer price index and December business inventories.

But if investors are looking for a hero to ride into town, the only candidate on the horizon is former black-hat Greenspan.
On Tuesday, he may indicate whether more interest-rate reductions are in the offing. The Fed’s next scheduled meeting is March 20, but if there is a spate of continuing bad economic news or falling stock prices, don’t be surprised to see a cut come before then.

Fallout Litters Critical Path

It didn’t take long for heads to roll in the Critical Path case.

On Feb. 2, the messaging services outsourcer stunned the market by announcing that two of its top executives – the president and VP of worldwide sales – were being placed on “administrative leave” as the company investigated whether Q4 revenues had been exaggerated.

A week later, both were gone.

Joining president David Thatcher and sales VP William Rinehart on their way out the door was CEO Doug Hickey, who told the Wall Street Journal that he and the board of directors decided his resignation would be in the best interests of the company.

Give CPTH’s board high marks for dealing quickly with the reported accounting irregularities, which were discovered by the company’s CFO. But as I wrote last week, whatever the result of the probe, CPTH shares are dead in the water.

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