Editor’s note: Local Tech Wire this week is running a series of stories about the stock market wipeout and what impact this will have on entrepreneurs. Today, LTW examines what’s happened to public companies. The bad news is, the stocks keep dropping. That means an even worsening slowdown for the entire tech industry – large and small firms. Thursday, LTW takes a look at the big losers on the Street.When asking a quantitative analyst how publicly-traded high tech firms based in Georgia and North Carolina have fared since Jan. 1, it almost makes the hair on the back of one’s neck stand up when he responds with laughter.

Of course Gary Tapp, who analyzes lists that examine how the markets are affecting different sectors of the U.S. economy for SunTrust Robinson Humphrey Capital Markets in Atlanta, isn’t laughing because he finds the site of a crashing U.S. economy funny.

It’s more of a nervous laugh. The kind that tends to escape from people witnessing dire circumstances where no end is in sight.

The best way to relate just how badly the stocks have performed this year of publicly traded technology companies headquartered in Georgia and North Carolina is to put it into numbers:

From Jan. 2 – July 22 the market capitalization (share price times the number of outstanding shares) of Georgia techs plunged 42 percent from $95.45 billion to $53 billion.

North Carolina companies nose-dived 49 percent from $27.3 billion to $14 billion, according to research conducted by Local Tech Wire.

“It’s not been fun to watch,” Tapp says. “There are not a lot of bright spots right now. In the tech sector there’s almost nothing positive. Up until last week or so the strongest sectors were some parts of the consumer discounting sector (WalMart, Target, et al) and some parts of healthcare.”

Recovery? What recovery?

Earlier this year – for a while at least – the market was starting to recover from the crash of 2001. But that was before the recent wave of accounting scandals began to swell when WorldCom officials revealed they had misstated earnings by $3.9 billion.

Now, Rajeev Dhawan, director of the Economic Forecasting Center for Georgia State at the Robinson College of Business, says the question isn’t when the recovery will begin but what is going to happen to the stock market during the next three to six months.

“If you look at the economy there was a nascent and fragile recovery during the first part of this year,” Dhawan says. “Now, the biggest trouble is not a lack of financing. Venture capital firms and investors are willing to put money into companies that have proven profit margins and sound business plans, but they are worried about demand for products and services from the larger companies.

“Even if the economy improves, chief financial officers are not willing to spend money right now. So if no one is spending the only player left is the government. I think a couple of years will have to go by before the normal psychology of the market returns.”

A matter of need

Mike Robinson, CFO of Charlotte-based telecommunications service provider US LEC, says it’s not a matter of not wanting to spend corporate dollars on new services and equipment; it’s a matter of not needing to add on to existing technologies.

“We have to grow into our shoes before we can buy new ones,” Robinson says. “I don’t think many CFOs wake up in the morning and say, ‘I’m not going to spend any money today.’ US LEC was fortunate that we were able to finish the build out of our network before the economy turned.”

Robinson added that lately he’s noticed that stories running in CFO Magazine have discussed the trend of companies reigning in spending.

Regaining trust

Jeff Barber, who heads the Carolinas technology practice of PricewaterhouseCoopers, says he is seeing the audit committees of Triangle public companies he works with starting to revisit their charter to make sure they have the appropriate accounting services in place for making sure their financial audits are not misleading. But he also added an interesting footnote.

“If we see an area in a company’s financial statement where we feel they could add a little more transparency we’ll point that out for them” Barber says. “But they also need to adhere to generally accepted accounting principles, and if you’re going to be transparent you need to disclose that.”

Barber adds that the one thing publicly-traded companies need to do at this point to re-gain investor trust is to come clean with their accounting practices, but that investors should never solely rely on outside research when making investment decisions.

“A lot of it is taking an interest in reading the information included in a company’s Securities and Exchange Commission filings and trying to understand it in the same way a large institutional investor would,” he says. “The average investor probably doesn’t do that stuff as much as they should. A lot of those CFOs from companies that are now in trouble for misleading earnings statements are probably part of the problem rather than simply having a lack of knowledge about what’s going on. But assuming that most CFOs are honest public companies should be able to gain investor trust back in time.”