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BEARS
2.  A R T   T E C H N O L O G Y   G R O U P

Trying to stem slide

    Globe 100
Bulls:
  1. Clean Harbors
  2. Hologic
  3. NMT Medical
  4. DeWolfe
  5. Indevus Pharmaceuticals

Bears:
  1. Sonus Networks
  2. Art Technology Group
  3. Praecis Pharmaceutical
  4. American Tower
  5. Dusa Pharmaceutical

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There's no mystery behind the dramatic decline of Art Technology's stock price. The former high-flying dot-com has been wrestling with the same forces that have beaten down the entire Internet sector: a glut of competitors, the increasing commodification of products, and a dearth of corporate IT spending.

Against that background, ATG's 83 percent stock-price drop, from $12 to $2.06 as of March 31, almost makes sense.

This doesn't make the decline any easier to take, of course, and ATG has spent the last year trying mightily to stem the slide. The question remains, however: Will investors notice?

In 2001, for example, ATG laid off 350 people in a bid to streamline operations. It also began porting its personalization and e-commerce applications, originally designed to run on its Dynamo application server, to competitors' application servers. The effect on the stock price: It sank from $12 to below $5. By early October, it had sunk to 61 cents.

In late October, ATG promoted president Paul Shorthose to chief executive and moved company founder and former CEO Jeet Singh to cochairman. Shorthose promptly instigated another round of layoffs, about 160, and said his priority would be to control costs and slim the company down to a more competitive form. He also said ATG would be profitable by the second half of 2002. The stock rebounded to $5 early in 2002, then started a slow decline down to around $2.

Last month, ATG announced its first-quarter 2002 net loss had narrowed by more than 78 percent, from $12.9 million a year earlier to $2.8 million. Total revenues for the quarter were down 37 percent from the previous year, but the company had added 27 customers, three of them million-dollar deals.

Again Art Technology Group predicted it will achieve profitability by the second half of 2002. What the company could not predict: Will investors notice?

D.C. DENISON


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