High and Low

A classic case of jitters

Even as the stock market edged downward this year, one stock shot up sensationally. Between January and mid-September, the shares of a little-known company called Savin Business Machines Corp., of Valhalla, N.Y., increased 158% in value on the New York Stock Exchange, reaching a high of $50. Suddenly Savin's stock collapsed; by the middle of last week its price had been cut nearly in half, to $27.25, and a modest rally brought it back only to $28 Friday. The drop was a classic case of how jittery stock traders can be panicked by a bit of nonnews.

The rout was begun, quite unintentionally, by William E. Conway, president of Nashua Corp., of Nashua, N.H. Nashua and Savin both distribute plain-paper copying machines made by Ricoh Co. of Japan--Savin in the U.S., Nashua everywhere else except in the Far East, where Ricoh has its own sales force. Meeting with security analysts in Boston, Conway remarked that Ricoh might some day decide to set up its own sales system in the U.S. and other overseas markets.

That comment should not have surprised anyone. Both Savin and Nashua have carefully warned their shareholders for more than a year that Ricoh might eventually sever the relationship, and Conway said nothing to indicate that a break might be imminent. Nonetheless, when an article about Conway's talk appeared in the Wall Street Journal, a heavy sell-off started in both Savin and Nashua stocks (Nashua, a more diversified company, at worst fell from $27.75 to $19).

Savin President Robert K. Low told a reporter for the Wall Street Journal that 85% of the drop was due to the W.S.J. article about Conway's remarks. Low acknowledged that Savin was having a dispute with Ricoh about royalties on the copiers, but added that Ricoh was continuing to deliver machines under a contract that runs until 1989. The Dow Jones ticker, operated by the company that publishes the W.S.J., ran an item, but initially omitted the point about the contract, since both Low and the reporter agreed that it was old news. Later the ticker did add information about the contract--but by then there had been additional heavy selling. Low asked the New York Stock Exchange to suspend trading in Savin during the afternoon of Sept. 30. Last week Savin ran an ad in the W.S.J. explaining the situation with Ricoh.

That stemmed the tide--but only briefly. Then, after Nashua and Ricoh officials held a meeting, Nashua announced that it did not expect an interruption in the shipments of the Japanese machines. Some traders interpreted this as a sign that there were uncertainties about deliveries--else why would there have been a meeting?--and still more selling hit Nashua and Savin.

In Tokyo, Ricoh remained officially silent. But industry insiders say it is only a matter of time until the Japanese company sets up its own sales outlets in the U.S. By then, however, Savin and Nashua may well be making their own machines--in competition with Ricoh.

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