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The Boston Globe OnlineBoston.com The Best in Massachusetts Business
MARKET VALUE

Familiar faces reemerge as high-tech firms falter

Despite not-so-great year, the state's old standbys hold their positions on the Market Value 100

By D.C. Denison, Globe Staff, 5/21/2002

   

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It's low tide in the Massachusetts economy, and we're getting a whole new view of the waterfront.

That's the impression one gets from this year's Market Value 100. Now that the technology boom has receded, the basic features of our economic landscape have been revealed. And they look strangely familiar.

FleetBoston Financial Corp., a bank, now has the highest valuation of any company in Massachusetts. And number two is Gillette Co., a consumer products company whose primary product is razor blades.

Not that Fleet had a particularly good year. But as telecom and technology-driven firms continue to drift south, it's the traditional, old-school companies that are reemerging with higher profiles. So while EMC Corp., the two-time Massachusetts market value leader, has sunk to number three, the old standbys -- including State Street Corp., Raytheon Co., and John Hancock Financial Services Inc. -- have managed to hold their positions near the top. The Market Value 100 measures performance as of March 31, 2002.

"We're definitely in fallback mode," said Fred Breimyer, chief economist at State Street Corp. in Boston. "The high-tech companies that were supposed to transform the economy with their technologies didn't deliver on that promise, and now we're back to the established players."

One of those is Framingham-based TJX Cos., the off-price retailer of apparel and home fashions. Two years ago, the company was the the 15th-largest in Massachusetts, with a market capitalization that approached $7 billion. Last year, it rose to number nine, with a market cap of $9 billion. This year, TJX has moved up another notch in the rankings and added $2 billion to its value.

Contrast that with Sonus Networks, which slid from being the 17th-largest company a year ago to 63d this year, as its market value deflated from $4 billion to slightly more than half a billion.

Sycamore Networks experienced a similar tumble, from number 22, with a market cap of $2.7 billion, to number 45, with just over $1 billion.

Some of the declines have been stunning.

Akamai Technologies Inc., the Cambridge-based Internet optimizer, went from being a $14 billion company two years ago down to $932 million last year, and to $465 million this year. In the process, it fell from number eight to number 71.

CMGI Inc. went from $31 billion to $529 million during that same period, as it slid from number four to number 64.

"Boring is back. Value investing is back," said Nicholas Perna, an economist in Ridgefield, Conn. "What's important are good business models, good products, solid sales, and revenues. That's what investors are looking for."

Although many of the established Massachusetts players didn't have great, or even good years in 2001, they were less susceptible to the broad downturn in the stock markets. As a result, they provided a valuable buffer to the fluctuations of the highfliers whose fortunes have swung so wildly over the last three years.

Companies such as Staples Inc., the office retailer, Cabot Corp., the specialty chemicals company, and Eaton Vance, the financial services firm, have provided a ballast that has kept the Massachusetts economy from yo-yoing over the last few years.

Eaton Vance, which has $59 billion in assets under management, is much smaller than the Boston mutual-fund powerhouses Fidelity Investments and Putnam Investments. But Eaton Vance was able to grow during a tough year and boosted its revenue by $55 million, to $486 million. Its market capitalization didn't rise dramatically -- from $2.1 billion to $2.8 billion -- but it was enough to move the company up 10 spots, from number 29 to number 19.

Then there's the influence of the traditional tech firms that predate the Internet boom, companies such as Teradyne Inc., Boston Scientific Corp., and Analog Devices Inc.

Analog Devices, in Norwood, a leading manufacturer of precision high-performance integrated circuits used in analog and digital signal processing applications, experienced a bubble in 1999 and 2000 and a dip last year, but the long-term trend is up. And it has a lock on the number five spot, although its market capitalization has risen from $13 billion a year ago to $16.4 billion today.

Biotech and medical devices have also held their market value rankings in tough times. True, Biogen Inc. lost substantial market value, from $9.5 billion a year ago to $7.2 billion this year. But Boston Scientific, Genzyme Corp., and Millennium Pharmaceuticals Inc. have all stayed in the top 15 during the last two years.

Economist Perna is not surprised.

"The biotech firms actually have products, or potential products," he said, "whereas the dot-coms had ... hopes?"

Massachusetts companies that rely on retail sales also did surprisingly well.

Stride Rite and Tweeter Home Entertainment Group, for example, both rose in market value during the last year. And the retail sector was strong enough to produce a new entrant on the market value list: J. Jill, the specialty retailer of high-quality women's apparel, accessories, and footwear, entered the list for the first time, at number 87 and with a market value of $341 million.

"The performance of the retail-oriented companies tells us that the average consumer has been relatively isolated from the boom and bust of the technology sector," said State Street's Breimyer. "We're are also seeing the value of our diversified economy here in Massachusetts."

So if you're looking for the winners on this year's Market Value 100, look to the traditional, solid performers. Unfortunately, as the standard disclaimer reminds us, "Past performance does not guarantee future success."

"It's important not to think it won't change again," Perna said. "The tech companies have fallen hard, but before that they were in the stratosphere. They are more volatile, so they are the most likely to leap ahead big time."

D.C. Denison can be reached at denison@globe.com.


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