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Market madness has little impact on most companies

Philip Livingston watched shares in Catalina Marketing Corp. drop more than $4 a share Monday.

As a Catalina employee, Wall Street's wipeout hurt him and others who own company stock and options in the St. Petersburg coupon and marketing company.

But as Catalina's chief financial officer, Livingston wasn't particularly worried by Monday's market madness.

"I don't think anybody will say they're having a fun time today," Livingston said as the stock market plummeted Monday afternoon. "But as a company, (the stock drop) doesn't really impact us financially."

Stock prices for publicly traded companies like Catalina are just one measure of a company's performance. Wall Street watchers look at a company's overall health, including its earnings and sales growth over time, when deciding whether it's a healthy prospect for investors. So a day of bad news on Wall Street doesn't necessarily derail a company's financial health.

To be sure, companies do adjust long-term plans when they study some of the underlying economic factors that helped prompt Monday's 554-point drop in the Dow Jones Industrial Average. For instance, some that do a lot of business in the Far East might need to analyze their plans for that region.

But the actual drop in a company's stock price won't be the single factor that changes a company's course. "Really, when it comes to the day-to-day operations, a company doesn't really care what happens with their stock," said Christopher Ma, who teaches about the stock market at Stetson University in Deland. As the Rowland and Sarah George Chair of Investments at Stetson, Ma helps advise a group of students on how to manage a $2-million investment portfolio that was donated to the school.

The value of the portfolio, which is equally divided between stocks and bonds, dropped by a few percentage points Monday. But since it is still generating a 23 percent return this year, Ma isn't suggesting his students make any big changes because of Monday's market drop.

"A 7 percent drop is significant, but it's not something that's going to affect the overall structure of the market," Ma said. "This is just a temporary blip that I think will be worked out in a couple of weeks from now."

Privately held companies that are thinking about selling shares to the public take heed when the market tumbles. A big market drop the day of a stock offering can dash a company's hopes for raising a certain amount of funds, which are used to finance projects such as new manufacturing or the launch of new products. But companies can postpone initial public offerings until the stock markets return to calmer trading patterns.

Stock price also is important to public companies that are planning secondary stock offerings or that want to use their stock to acquire other companies.

For some public companies, big drops can mean it's time to buy back their own shares. After the October 1987 market crash, many big companies _ ranging from General Motors Corp. to Fortune Financial Corp. of Clearwater _ announced stock buyback programs.

When stock prices are low, companies often view their own shares as a bargain, so they announce plans to buy back millions of dollars worth of stock. This benefits all shareholders because it reduces the number of shares outstanding, boosting the value of shares.

"You want to buy low and sell high," Ma said. "Whether you're an individual or a company, that doesn't change."