Insider Buying Hints At Revival

Are Henry Schacht and his Lucent Technologies Inc. colleagues sending a message to the IT community? The Lucent chairman bought $1 million in company stock last month. Four other top executives, including CEO Patricia Russo, also bought hundreds of thousands of dollars of stock in the beleaguered telecom equipment maker last month at prices between $1.42 and $1.55 a share. It was the first time in nearly five years that company insiders purchased so much Lucent stock. Lucent provided no loans to the execs to buy the shares. "It's a clear vote of confidence in the long-term prospects of the company," a Lucent spokeswoman says.

Lucent executives aren't the only tech honchos who've recently bought their companies' stocks. Bigwigs at Advanced Micro Devices, Akamai, Ciena, Computer Associates, IBM, McData, Nortel, and Novell, among others, are on buying sprees that began earlier this summer, according to research firm Market Profile Theorems' analysis of Securities and Exchange Commission filings.

Theorem research director Michael Painchaud says he's been tracking company insiders' stock trades for 13 years and has never seen such buying activity by tech-vendor execs. Among the 10 sectors Theorem tracks, technology usually ranks at or near the bottom for the volume of company-insider buying. But, beginning last fall, insider buying in the tech sector edged up, and by summer the tech industry jumped to the top of the list. Insiders have a great deal more information about their companies than other investors, so they tend to make more sound investment decisions, Painchaud says. "Technology executives have much more faith in their businesses today than they had two or three years ago. They're seeing the worst is behind them."

Lakshman Achuthan, managing director at Economic Cycle Research Institute, sees merit in Painchaud's analysis. "If insiders are of a mind that their own companies are a reasonable place to put their own money," Achuthan says, "then that's somewhat comforting."