State tech stocks take a shellacking; Nasdaq rout hits locally.(BUSINESS)

Minnesota might not have a big presence on the Internet, but shares in the state's few Internet companies tumbled Tuesday as the sell-off in technology stocks continued for a second day.

At one point, the Nasdaq index was down some 575 points at midday, before rallying to close at 4,148.89, down only 74.79 for the day. Nasdaq is home to many technology stocks, and their popularity pushed the index above 5,000 on March 9.

Since then, it's mostly been a downhill ride for tech stocks in general, and Internet companies, most of which are unprofitable, in particular.

Eden Prairie-based Net Perceptions, for example, began Tuesday at $30.63, fell as low as $17, and clawed its way back to close at $23.63.. Still, it's down $13.31, or 36 percent, since Friday, and 48 percent since March 24, when the developer of electronic commerce software sold 2.6 million shares for $45.25 each.

"It's a big pill to swallow," said Michael Gorman, managing partner of St. Paul Venture Capital, which owns about 800,000 shares of Net Perceptions. But Gorman said recent market sentiment in no way reflects the prospects for Net Perceptions.

"Net Perceptions is a great long-term investment because they are going to play a fundamental role in shaping e-commerce," Gorman said.

But sharp declines in the stock of Internet companies can hurt companies as much as investors. Companies such as Net Perceptions have used their high-flying stocks to acquire other tech companies, and stock options have been an important tool for recruiting and motivating employees. Because technology shares have fallen so far so quickly, employees may hold options that are worthless until, or unless, the stock recovers.

"Our employees are all focused on building a great long-term business, but the gyrations and the long-term moves are definitely a distraction," said Perry Steiner, president of Digital River.

Shares of Digital River, which helps software publishers and retailers sell their programs online, have slipped a comparatively modest 16 percent in the past two days, but the company's stock is down almost 50 percent since March 1.

Though Steiner said Digital River has been the victim of "irrational" selling, he also said he thinks the company stands to gain if investors start eyeing Internet stocks more critically.

"Maybe this is the start of the day of reckoning for Internet companies, where investors separate the good solid companies from the great pretenders," Steiner said.

Ancor Communications, which certainly hopes not to be included among the latter, saw its stock price rise 1,596 percent in 1999, but is down 17 percent since Friday and more than 50 percent for the year.

But not all Minnesota technology stocks fell Tuesday. Shares in Minneapolis-based Retek Inc., a software developer that gets little revenue from the Internet, rose $2.69, or 8 percent, to close at $36.50. However, that probably comes as little comfort to investors who paid $66.50 for the stock on March 9.

Techs tumble

Technology stocks, once the darlings of investors, have turned ugly during the past week. Since it first cracked 5,000 on March 9, the Nasdaq composite index has declined 17.8 percent. Among the biggest Minnesota tech stock losers:

 - eBenX Inc.  3/9  $61.00  4/4  $24.63  -59.6%  (See microfilm for chart.)    - Net Perceptions Inc.  3/9  $56.13  4/4  $23.63  -57.9%  (See microfilm for chart.)    - Retek Inc.  3/9  $66.50  4/4  $36.50  -45.1%  (See microfilm for chart.)    - Digital River Inc.  3/9  $32.63  4/4  $18.06  -44.6%  (See microfilm for chart.)    - Local Nasdaq decliners since March 9    Stock              Tues. close  Pct. chg#    eBenX Inc.           $24.63      -59.6  Net Perceptions Inc.  23.63      -57.9  Optical Sensors Inc.   1.75      -52.9  Orphan Medical Inc.    8.94      -46.8  Bio-Vascular Inc.      4.38      -46.7  Retek Inc.            36.50      -45.1  Digital River Inc.    18.06      -44.6  Ault Inc.              6.25      -43.2  Integ Inc.             3.00      -40.7  NetRadio Corp.         3.63      -39.4  Computer Network      15.75      -37.2   Technology Corp.  Ancor Communications  34.00      -35.8  intelefilm Corp.       3.06      -35.5  Stratasys Inc.         7.19      -35.0  Galagen Inc.           2.66      -33.6  Urologix Inc.          6.38      -32.9  Homeservices.com       8.81      -32.2  Fieldworks Inc.        1.88      -31.8  ValueVision Int'l     33.50      -30.7    # Percent change from March 9      - Nasdaq composite index  Daily closes  3/9  5,046.86  4/4  4,148.89  (See microfilm for chart.)