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BEHIND THE NEWS: Amid stock market's slide, a high-flier gets grounded

June 19, 2006

In late April, Brightpoint Inc. investors had every reason to feel giddy. Shares of the wireless phone wholesaler were up 85 percent for the year, after advancing 113 percent in 2005.

Today, those heady days seem like a distant memory. Since reaching a high of $28.50 April 27, Brightpoint's shares have lost 50 percent of their value, lopping more than $700 million off the company's market value.

"Clearly, wireless is out of favor on Wall Street and has been for the last several weeks," said Robert Laikin, Brightpoint's chairman and CEO.

Indeed, about everything is suddenly out of favor, and stocks that had been the highest-fliers-like Brightpoint-are getting savaged the most.

Major stock indexes now are even or down for the year, and the threeyear rally in stocks is history. A little more than a month ago, the Dow Jones industrial average had risen 7.3 percent in 2006, and the S&P 500 index had advanced 4.4 percent.

The Bloomberg Indiana Index remains in positive territory for the year, up 3.1 percent. But as of May 10, it was up 9.9 percent.

Inflation worries

What's behind the plunge? In part, investors are disappointed the Federal Reserve is poised to continue raising interest rates in a quest to quell rising concerns over inflation.

Higher rates raise borrowing costs, putting downward pressure on economic growth. Until inflation fears shot up in recent weeks, many market observers thought the Fed was done raising rates after hiking them 17 times in a two-year span.

"The real concern out there that's starting to develop is the Fed starts to overdo it, and they really impair the economy," said Mark Cremonie, senior investment manager for Signal Capital Management, a unit of Evansville-based Old National Bancorp.

Industry-specific issues also are affecting stocks, of course, and for the wireless industry it's the perception that torrid growth is slowing.

Another concern for Plainfield-based Brightpoint in particular: It's not a huge distributor for the wireless carriers that grew fastest in the latest quarter.

Analysts also would like to see it expand its relationship with Chicagobased Motorola, the world's No. 2 cellphone maker.

But don't think for a moment the wheels have come off the company.

"We are doing fine," Laikin said.

Distribution deals

In fact, analysts say, the company has landed some major business of late. For example, it won deals with California-based Intel Corp. to distribute notebook computers and with California-based Walt Disney Co. to distribute phones for Mobile ESPN and Disney Mobile.

"We continue to believe that the company is well-positioned to benefit from growth in wireless handsets, as well as favorable wireless trends," SooAnn Roberts, an analyst with Kaufman Bros. Equity Research, said in a report.

At times like this, it pays to have a little perspective.

Even with the slide, Brightpoint shares are down a relatively modest 7 percent for the year. And since the start of 2004, they're still up 125 percent.

But that doesn't mean the falling stock price has been easy on the company's 1,700-person work force.

"When the stock is either very high or very low, employees in general like to spend too much time looking at the stock price," Laikin said.

"My message to employees is, 'Quit looking at the stock price. Continue executing your plan and your strategy. The stock price will figure itself out over time.' "

Market scorecard

This year isn't shaping up as a washout for all state stocks.

Indianapolis-based software maker Interactive Intelligence Inc. remains up 93 percent in 2006.

Shares of Fishers-based Marsh Supermarkets Inc. are up more than 40 percent, thanks to a buyout deal struck with Florida-based Sun Capital Partners and the possibility another buyout group will continue courting the company.

In total, 45 Hoosier stocks tracked by IBJ remain in positive territory for the year. That compares with 38 posting declines.

Among the notable losers: Indianapolis-based Finish Line Inc., off 28 percent; and Indianapolis-based Emmis Communications Corp., down 20 percent.

Other companies posting big declines were among the biggest gainers last year. Indianapolis-based Well-Point Inc., for instance, is off 12 percent after advancing 39 percent in 2005. Indianapolis-based Hurco Cos. has shed 15 percent after appreciating 87 percent last year.
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