FTSE tech stocks to be ditched

The FTSE index is aiming to bounce back from today's three-year low by ditching several household technology names on Wednesday in its quarterly reshuffle.

The index dropped 3.4 per cent to under 4,900 this afternoon, its lowest level since October 1998. The FTSE Techmark dropped 4 per cent to 1,300.

Struggling equipment giant Marconi is a prime candidate for relegation as it flounders at 185 in the FTSE index .

Marconi shareholders have seen their stock plummet from a 52-week high of £12.50 to trade at under 31p today.

Also destined for the FTSE 100 scrap heap are Colt and Spirent, both down over seven per cent this afternoon, and Telewest which fell 9.64 per cent.

On the FTSE 250 index Bookham Technology, Guardian IT and Thus are certain to be relegated, after dropping to numbers 477, 451 and 389 respectively.

Parthus, Psion and Ncipher also seem to be on their way out of the FTSE 250 after seeing their market values drop over ninety per cent in the past year and half.

Baltimore - an FTSE 100 player this time last year - was sent marching last week to the FTSE small cap index.

A range of old economy players including Enterprise Oil, Severn Trent water, P&O, and the newly merged Halifax and Bank of Scotland group are set to take over.

The change of guard has been welcomed by some analyst houses, including Merrill Lynch, who claim the traditional blue chips will stabilise the index.

But Morton Herholdt, research analyst with Barclay Stockbrokers, remains a little more cautious.

"There are still quite a few technology companies further down the index. The traditional blue chips may be less likely to drop their value by 20 per cent, as we've seen the tech stocks do, but as long as the outlook remains uncertain market behaviour will continue to be volatile. We're not yet back to the days where the FTSE only ever moved a fraction of a per cent," he said.

Tony Locke, senior analyst with Bloor Research, also agreed the old economy players will not guarantee the FTSE a quick fix-up, and warned that investors had taken the technology backlash too far.

"The rebalancing of the market has gone a bit far. IT has become the fall guy. Some companies do have issues, but the sector has a whole is now paying for the over-hyping of the market,"

The new FTSE index will be determined by share values at the close of business tomorrow, although changes to the index will not begin until 24 September.