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Thursday's Winners & Losers: Lam Research, DTE Energy, StarMedia, Gateway, 3Com

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  • M&A
  • Earnings/revenue
  • Analyst actions
  • Offerings/stock actions
  • Miscellany
  • Updated from 11:38 a.m.

    Gateway (GTW) said after the bell Wednesday that it now expects to break even on an operating-income basis, before including nonrecurring charges, in the first quarter. The company, in the latest in a series of recent warnings, also said it expects unit sales in the quarter to be down slightly from a year ago.

    According to First Call/Thomson Financial, analysts expect the company to earn 17 cents in the first quarter.

    "As for the rest of 2001, we expect to continue operating the business on a break-even basis through the first half of the year, with a planned return to profitability and unit growth on a year-over-year basis during the second half," Ted Waitt, Gateway's chairman and chief executive, said in a statement.

    Gateway also said it will restate its previously reported financial results for the first three quarters of 2000 and revise its full-year results to reflect the retroactive adoption of new accounting principles and a revision in the accounting treatment for certain items. The changes include the adoption of an accounting method requiring that freight charges billed to customers be included in net sales and the related expense be included in cost of goods sold.

    TheStreet.com wrote more about Gateway in a separate story.

    On Thursday morning, Credit Suisse First Boston lowered Gateway's 2001 EPS view to 40 cents from $1.45. J.P. Morgan Chase cut its 2001EPS view to 40 cents from $1.37 a share and downgraded the stock to market perform from long-term buy. Gateway closed down $1.45, or 8.4%, or $15.75.

    Mergers, acquisitions and joint ventures

    The European Union approved Chevron's (CHV) takeover deal of Texaco (TX), saying, "The number of areas where the companies' activities overlap in Europe are limited and where they do, the combined market shares remain below 15%."

    The EU also approved Abbott Labs' (ABT) $6.9 billion acquisition of BASF's (BF) Knoll Drug unit.

    Chevron closed up $1.18, or 1.4%, to $86.84; Texaco was up $1.10, or 1.7%, to $65.20; and BASF was up 63 cents, or 1.4%, to $45.49.


    After Wednesday's Close

    AMR's (AMR) American Airlines unit submitted a formal bid to U.S. bankruptcy court to buy Trans World Airlines (TWA) for $500 in cash and the assumption of all of TWA's facility and aircraft leases.

    It's also being reported that an independent investor group, Jet Acquisition Group, has offered to buy TWA for $889 million.

    And Galileo International (GLC) entered a bid for TWA's 26% stake in the Worldspan reservation system, which AMR has valued at $200 million.

    AMR closed down $1.93, or 5.8%, to $31.32; Trans World was flat at $1.32; and Galileo was down $1.16, or 5.1%, to $21.59.

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    Earnings/revenue reports and previews

    ICN Pharmaceuticals (ICN) reported fourth-quarter earnings of 9 cents a share, missing the two-analyst estimate and way down from year-ago earnings of 49 cents a share.

    The company's 2000 earnings fell on an increase of research and development spending to $19 million from $11 million, a higher tax rate and a temporary slowdown in Ribavirin royalties as physicians await marketing authorization, pending Food and Drug Administration review and clearance.

    The pharmaceutical company's figures exclude ICN Yugoslavia results. ICN continues discussion with governments of the former Yugoslavia to recover its assets, which were illegally seized by the previous administration. ICN closed down $1.35, or 5.1%, to $25.21.

    Tiffany (TIF) dished out fourth-quarter earnings of 56 cents a share, in line with analysts' lowered estimates as well as year-ago earnings. According to a survey by First Call/Thomson Financial, 21 analysts produced a consensus estimate of 56 cents a share, which was lowered from 64 cents a share after Tiffany warned in January that fourth-quarter earnings would be hurt by weak consumer confidence and an unstable financial market.

    Sales for the quarter were $576.4 million, up slightly from $563.2 million last year, while same-store sales dipped 1%. Sales in Tiffany's flagship New York store declined 5% in the fourth quarter and same-store branch store sales gained 1%, the company said. Tiffany also gave a "prudent" projection, saying that first-quarter earnings would be "approximately equal to the prior year" quarter's 20 cents a share.

    Still, assuming that consumer confidence will improve in the second half of 2001, Tiffany projected net sales growth in the "high-single-digit range," with U.S. same-store sales growth in the "mid-single-digit range" and "healthy growth" in other international markets. Tiffany also said it expects annual earnings growth of 10% to 15%. First Call analysts see full-year 2002 earnings of $1.40 a share, compared with 2001 earnings of $1.26, which the company reported Thursday.

    As the economy faces the reality of a slowdown, retailers, especially luxury vendors like Tiffany, have been bracing for softening consumption levels. But analysts believe the luxury sector is poised for strong long-term growth as baby boomers enjoy the fat in their pre-retirement years. TheStreet.com wrote a separate story analyzing the future for luxury retailers. Tiffany closed up 14 cents, or 0.5%, to $31.25.


    After Wednesday's Close

    3Com (COMS) said Wednesday its fiscal third-quarter revenue and earnings would be "substantially lower" than previously forecast due to reduced demand and economic conditions.

    The maker of computer networks products said it expects revenue to be between $625 million and $640 million. The company had projected revenue of $725 million to $750 million during its last conference call in December, according to published reports.

    The company said its third-quarter operating loss, excluding amortization, restructuring and other one-time items, will be between $235 million and $245 million, compared with the projection of $80 million to $100 million the company gave in December. The company did not give loss-per-share figures. Seven analysts polled by First Call/Thomson Financial were calling for a loss of 14 cents a share.

    Two days ago 3Com said it cut about 1,200 employees as part of a larger cost-cutting initiative. "The sudden and substantial slowing of the U.S. economy dramatically impacted the company's revenue and gross margin performance during the quarter,'' the company said in a statement. "3Com is committed to achieving a lower cost structure based on the realities of the current economic climate, while continuing to invest for long-term profitable growth.''

    The company's stock closed down $1.63, or 17.8%, to $7.50.

    BF Goodrich (GR) said earnings for its first quarter are expected to be its lowest of 2001 because of continued softening in the industry and because of when it completed the sale of its Performance Materials unit. The company said it expects results around the level of its fourth quarter, which came in at 75 cents a share. The First Call five-analyst estimate is currently 77 cents a share for the first quarter.

    BF Goodrich said it expects earnings for 2001 of between $3.40 and $3.50 a share. The nine-analyst estimate is $3.43 a share.

    The company also announced that it has completed the sale of its Performance Materials arm to an investor group led by AEA Investors for about $1.4 billion. Net proceeds, after anticipated tax payments and transaction costs, include $1 billion in cash and $172 million in bonds issued by the new company. BF Goodrich closed down 69 cents, or 1.7%, to $39.47.

    Danaher (DHR) CEO George Sherman said his company was comfortable with consensus estimates of 56 cents a share for the first quarter. Danaher makes process and environmental controls and components. Sherman made the comments at an investor conference sponsored by Salomon Smith Barney in New York.

    Sherman stated, "While the slowdown in the U.S. manufacturing sector is broader-based, our cost-reduction actions in preparation for such leave us in a good position to deliver our near-term expectations. While no one can truly predict the length and depth of the current economic woes, we feel comfortable that we will continue to outperform in a difficult economy." Danaher closed up 26 cents, or 0.4%, to $63.70.

    Ingram Micro (IM) reported fourth-quarter earnings of 39 cents a share, down from year-ago earnings of 51 cents a share. Ten analysts surveyed by First Call expected the company, which is based in Santa Ana, Calif., to earn 38 cents a share.

    The technology products wholesaler expects earnings of $22 million to $27 million, or 15 cents to 18 cents a diluted share, for the first quarter ending March 31. Analysts expect the company to earn 32 cents a share. Ingram Micro projected first-quarter revenue of $7.3 billion to $7.6 billion.

    "For the first quarter of 2001, we are experiencing a significant slowdown in demand in the U.S. technology market and expect sales to decline compared to the first quarter of 2000," the company said.

    Thursday, Credit Suisse First Boston cut Ingram Micro's 2001 EPS view to $1.05 from $1.40. The stock closed down $1.35, or 9.8%, to $12.45.

    Longs Drug Stores (LDG) posted fourth-quarter earnings of 63 cents a share, excluding charges. The five-analyst estimate was 56 cents a share. In the year-ago period, the company earned $23.9 million, or 61 cents a share.

    Longs reported sales of $1.1 billion in the quarter, up from $1.05 billion in the year-ago period.

    Longs, which is based in Walnut Creek, Calif., expects earnings in the first quarter to be between 34 cents and 37 cents a share. The First Call estimate is 33 cents a share. The company earned 31 cents in the year-ago period. Longs Drug Stores closed up 5 cents, or 0.2%, to $27.95.

    Starwood Hotels & Resorts (HOT) said it expects earnings to grow about 15% in 2001, but the company presented guidance that would fall a penny short of the consensus estimate for the first and third quarters.

    In the first quarter, the hotel owner expects to earn 30 cents a share. The current estimate carried by First Call/Thomson Financial, which surveyed 15 analysts, calls for earnings of 31 cents. Starwood expects to earn 65 cents, 58 cents and 73 cents in the second, third and fourth quarters, respectively. First Call lists profit forecasts of 65 cents, 59 cents and 71 cents for the last three quarters of the year.

    Starwood expects to earn $2.60 a share for the year. The consensus estimate for 2002 is $2.58. The company presented the guidance to analysts at a conference in White Plains, N.Y., at the company's headquarters.

    Thursday morning, Lehman Brothers raised Starwood's 2001 EPS estimate to $2.26 from $2.24 and its 2002 EPS estimate to $2.60 from $2.55. Starwood closed up 35 cents, or 1%, to $35.25.

    Back to top

    Analyst actions

    Communications chipmaker Broadcom (BRCM) was downgraded to near-term neutral from near-term accumulate by Merrill Lynch analyst Joe Osha, who cited a worsening inventory and demand environment.

    The firm also lowered its 2001 EPS estimate to $1.24 from $1.52 a share as well as its 2002 EPS estimate to $1.82 from $2.11 a share. Merrill's long-term rating is buy.

    Osha noted, "While the company is exceptionally well-run, and has an excellent reputation for execution, we believe it faces a number of challenges that are not fully factored into the stock," including lower-than-expected cable modem chip set shipments and increased competitive pressures.

    He also said that 3Com's (COMS) post-close announcement last night bodes ill, because it's Broadcom's biggest customer, producing 22% of revenue. Osha added that other large clients Motorola (MOT) and Cisco (CSCO) have both reported weakness in their businesses. He said that, combined with 3Com's news, translates into "a challenging several quarters ahead" for Broadcom.

    Salomon Smith Barney followed up the Merrill note with one of its own. The firm downgraded the stock to outperform from buy and lowered its outlook for 2001 EPS to $1.27 from $1.40 and its 2002 EPS outlook to $1.69 from $1.91. Solly also cut the 12-month price target on the stock to $67 from $125.

    Broadcom ended the trading day down $1.63, or 2.5%, to $48; 3Com was off $1.63, or 17.8%, to $7.50; Motorola was up 76 cents, or 5%, to $15.93; and Cisco was up 81 cents, or 3.4%, to $24.50.

    Upgrades

    Cardinal Health (CAH): price target UP to $125 from $102 at J.P. Morgan Chase. Cardinal Health closed down $1.40, or 1.4%, to $100.10.

    Circuit City (CC): fourth-quarter EPS estimate UP to 46 cents from 35 cents a share at Lehman Brothers; and 2000 EPS estimate UP to 70 cents from 55 cents. Circuit City closed down 16 cents, or 1.1%, to $15.01.

    The Limited (LTD): UP to long-term buy from accumulate at Merrill. The Limited closed down 43 cents, or 2.4%, to $17.22.

    Downgrades

    Alaska Air (ALK): 2001 EPS view DOWN to $1.30 from $1.50 at Goldman Sachs. Alaska Air closed down $1.28, or 4.5%, to $27.30.

    Amkor Technology (AMKR): 2001 EPS view DOWN to 80 cents from 95 cents at Credit Suisse First Boston. Amkor Tech closed up 25 cents, or 1.5%, to $16.56.

    IMC Global (IGL): DOWN to market perform from long-term buy at J.P. Morgan Chase. IMC closed down 25 cents, or 1.8%, to $13.50.

    Lam Research (LRCX): third-quarter EPS view DOWN to 30 cents from 46 cents at CSFB; 2001 EPS view DOWN to $1.56 from $1.80 a share; and 2002 EPS view DOWN to 95 cents from $1.10. Lam closed up $1, or 4.7%, to $22.50.

    Merrill Lynch (MER): price target DOWN to $82 from $87 at Lehman. Merrill closed up 10 cents, or 0.2%, to $60.

    Microchip Technology (MCHP): 2001 EPS view DOWN to $1.18 from $1.27 at CSFB; 2002 EPS view DOWN to 85 cents from $1.37; and price target DOWN to $30 from $38 at CSFB. Microchip Tech closed down 69 cents, or 2.9%, to $23.19.

    StarMedia Network (STRM): price target DOWN to $9 from $11 at CSFB. StarMedia closed up 31 cents, or 10.4%, to $3.31.

    Initiations

    Floware (FLRE): NEW buy at Solly; 12-month price target: $15. Floware closed down 31 cents, or 3.4%, to $8.94.

    Mesa Air Group (MESA): NEW buy at Goldman. Mesa Air Group closed up 19 cents, or 1.9%, to $10.19.

    Williams (WMB): NEW buy at Solly; 12-month price target: $54. Williams closed up $1.53, or 3.7%, to $43.23.

    Group Moves

    J.P. Morgan Chase downgraded two brokerage stocks:

    • Goldman Sachs (GS): DOWN to market perform from buy. Goldman closed down 14 cents, or 0.2%, to $91.61.

    • Morgan Stanley (MWD): DOWN to market perform from long-term buy. Morgan Stanley closed down $1.53, or 2.4%, to $63.60.

    Back to top

    Offerings and stock actions


    After Wednesday's Close

    DTE Energy (DTE) said its board has authorized a buyback of up to 20 million shares. DTE closed up $1.04, or 2.9%, to $37.35.

    Back to top

    Miscellany

    Corning (GLW) said it plans to lay off 825 employees from its photonic technologies division because of decreased demand and softness in the telecommunications industry.

    The Corning, N.Y., communications technology firm, the world's top maker of fiber-optic cable, said the work force reduction at its Pennsylvania and New York plants is in line with its previous warning of slowing growth of its photonic business.

    On Feb.16, Corning projected 50% revenue growth for its photonic technologies businesses, down from previous expectations of 75% to 90% growth. The company nevertheless maintained its first-quarter earnings guidance of 28 cents to 31 cents a share at that time.

    The company, which invented fiber-optic cable more than 20 years ago, did not provide any earnings projections this morning, but said the job reductions would not affect its optical fiber business, "where demand has remained strong in the first quarter." Corning closed up $3.21, or 11.9%, to $30.25.

    Dow Jones (DJ) announced that you'll be paying 25 cents more for The Wall Street Journal. Starting April 2, the publishing company will be raising the Journal's cover price to $1 to help cover costs since it, too, has been hit by the slowdown in advertising. Dow Jones said it hasn't raised the single-copy price in more than 10 years. Dow Jones closed up $1.29, or 2.1%, to $62.89.


    After Wednesday's Close

    Carnival (CCL) said its Holland America Line unit was subpoenaed by a U.S. federal court to submit documents involving air emissions from its ships in Alaska. Carnival closed down $1.08, or 3.2%, to $32.26.

    Janssen Research Foundation, a unit of Johnson & Johnson (JNJ), received approval from the Food and Drug Administration to market Reminyl, a drug for treating Alzheimer's disease.

    Reminyl, which is derived from daffodil bulbs, can either delay or stabilize Alzheimer's symptoms. Janssen developed the drug under a development and licensing agreement with Shire Pharmaceuticals (SHPGY).

    The drug has already been approved in 21 countries, including most major European markets. Janssen and J&J unit Ortho-McNeil Pharmaceutical will jointly market Reminyl in the U.S. The stock closed up $1.75, or 1.8%, to $99.08.

    Kana Communications (KANA), which makes e-business software, said it has eliminated 220 employees, or 20% of its work force, in an effort to cut annual expenses by $30 million to $40 million. Kana Communications closed up 16 cents, or 5.1%, to $3.22.

    Walmart.com, a majority-owned affiliate of retail giant Wal-Mart (WMT), laid off 24 employees, or about 10% of its workforce, in an effort to conserve cash.

    The cuts came mostly from the company's marketing and merchandising departments, according to reports. Walmart.com still has job openings in its creative and operations departments. Wal-Mart closed down $1.75, or 3.5%, to $48.34.

    Warner Music Group, a division of AOL-Time Warner (AOL), said Russ Thyret, chairman and chief executive of Warner Bros. Records, has left the company.

    Phil Quartararo, president of Warner Bros. Records, will assume responsibility for the company's daily operations.

    Thyret has been chairman and CEO since August 1995. He joined Warner Records in 1971. Thyret's plans weren't provided, and no reason was offered for his resignation. AOL-Time Warner closed down 3 cents, or 0.1%, to $44.

    By the Numbers

    5 Biggest NYSE Percent Winners
    Name Price Change %
    International Rectifier (IRF) 39
    6

    18.2%
    Vesta (VTA) 7.85
    1

    14.6%
    Callon Petroleum (CPE) 12.05
    1.35

    12.6%
    KCS Energy (KCS) 5.05
    .55

    12.2%
    Corning (GLW) 30.25
    3.21

    11.9%

    5 Biggest NYSE Percent Losers
    Name Price Change %
    Fleetwood (FLE) 8.95
    3.10

    25.7%
    Consolidated Stores (CNS) 12
    3.51

    22.6%
    Washington Group (WNG) 8
    1.28

    13.8%
    China Mobile (CHL) 23.31
    3.34

    12.5%
    Brilliance China Automotive (CBA) 25.51
    3.34

    12.5%

    5 Biggest Nasdaq Percent Winners
    Name Price Change %
    Intergraph (INGR) 10
    2.8125

    39.1%
    Metasolv (MSLV) 21.875
    4.875

    28.7%
    HNC Software (HNCS) 29.75
    6.4375

    27.6%
    American Contract (ACTV) 15.1875
    3.0625

    25.3%
    Rigel (RIGL) 5
    .96875

    24%

    5 Biggest Nasdaq Percent Losers
    Name Price Change %
    Travelocity (TVLY) 15
    7.25

    32.6%
    SBS (SBSE) 16.125
    5.875

    26.7%
    PacifiCare (PHSY) 30.90625
    8.21875

    21%
    Somera (SMRA) 7.5625
    1.6875

    18.2%
    3 Com (COMS) 7.5
    1.625

    17.8%

    The data on NYSE and Nasdaq percent winners and losers are filtered to exclude stocks whose previous day's volume was less than 25,000 shares; whose last price was less than 5; and whose net change was less than 1/2.

    5 Biggest Dow Point Winners
    Name Price Change %
    IBM (IBM) 106.05
    6.15

    6.16%
    Johnson & Johnson (JNJ) 99.08
    1.75

    1.80%
    Alcoa (AA) 36.48
    0.72

    2.01%
    General Motors (GM) 53.98
    0.66

    1.24%
    Intel (INTC) 29.125
    .5625

    1.97%

    5 Biggest Dow Point Losers
    Name Price Change %
    3M (MMM) 109.60
    3.15

    2.79%
    3M (MMM) 109.60
    3.15

    2.79%
    Boeing (BA) 59.65
    2.55

    4.10%
    SBC Communications (SBC) 45.50
    2.20

    4.61%
    Procter & Gamble (PG) 68.65
    1.85

    2.62%

    Dow point gain and loss data are based on New York closing prices and do not reflect late composite trading.

    Large-Cap Nasdaq Movers
    Name Price Change %
    Cisco (CSCO) 24.5
    .1875

    0.79%
    Dell (DELL) 21.5
    .75

    3.43%
    Ericsson (ERICY) 8.40625
    .09375

    1.14%
    Intel (INTC) 29.125
    .5625

    1.97%
    Microsoft (MSFT) 59.40625
    1.0625

    1.80%
    Oracle (ORCL) 21.375
    1.375

    7.24%
    Qualcomm (QCOM) 61.1875
    4.875

    8.90%
    Sun Microsystems (SUNW) 20.0625
    .4375

    2.21%
    WorldCom (WCOM) 15.875
    .875

    5.26%
    Yahoo! (YHOO) 24.4375
    .1875

    0.79%

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