Compaq Names Capellas CEO; Gateway Beats Estimates

Compaq (CPQ) named Michael Capellas its president and CEO, replacing at last the ousted Eckhard Pfeiffer, who was booted in April. Capellas comes to the position from elsewhere in the building, leaving his current job of chief operating officer. "In the Internet age ... there is no room for a CEO with a learning curve," Chairman Ben Rosen said in a Reuters interview. Capellas said he would have a product rationalization and restructuring plan ready by Aug. 15 and intends to boost Compaq's direct PC sales to 25% by year-end from the current 15%, and then eventually to 40%.

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Gateway (GTW) posted second-quarter earnings of 56 cents a share, a penny above the 23-analyst First Call view and ahead of the year-ago 38 cents. The PC maker said its Internet service provider unit, Gateway.net, doubled its number of subscribers during the quarter. The company also said it's comfortable with earnings estimates of 67 cents a share for the third quarter. Gateway, which has been rumored to be in acquisition talks with ISP Earthlink (ELNK), said it's not in talks with any specific ISP right now.

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Inflow into U.S. equity funds for the week ended yesterday totaled $92 million, according to AMG Data Services. Small-cap growth and international equity sectors reported outflow of $483 million and $425 million, respectively. Among other categories, taxable bond funds posted inflow of $814 million, money market funds posted inflow of $3.3 billion and municipal bond funds posted outflow of $63 million.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 33.56 -0.3% 10,969.22 +19.5% S&P 500 18.32 -1.3 1360.97 +10.7% Nasdaq 77.32 -2.8% 2684.45 22.4% Russell 2000 3.14 -0.7% 451.49 +7% TSC Internet 21.56 -3.5% 593.75 +46.2% TREASURY BOND CHANGE VALUE YIELD 30-Year 25/32 90 2/32 5.971%

In other postclose news (earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified):

Earnings/revenue reports and previews

American Power Conversion (APCC) reported second-quarter earnings of 22 cents a share, 1 cent better than the three-analyst view and up from the year-ago 18 cents. The company said it plans to close its Fort Myers, Fla., plant, which has 200 employees.

Cylink (CYLK) reported a second-quarter loss of 10 cents a share, 4 cents better than the three-analyst estimate but wider than the year-ago loss of 6 cents. The company said it expects sequential revenue growth to slow in the third quarter and cease in the fourth quarter, citing year 2000 transitions.

Dentsply (XRAY) reported second-quarter earnings of 40 cents a share, in line with the seven-analyst outlook and up from the year-ago 36 cents. The company said it expects to meet estimates for 1999; the current estimate calls for earnings of $1.70 vs. 1998's $1.50.

Komag (KMAG) reported a second-quarter loss of 60 cents a share including charges, apparently topping the four-analyst estimate of a 71-cent loss and the year-ago loss of $4.95. The company said it plans to cut 500 jobs from its workforce of about 1,550, incurring a third-quarter restructuring charge.

Microsoft (MSFT) CFO Greg Maffei told financial analysts at an annual meeting that the company's research and development expenses would rise to about $3.8 billion in fiscal 2000 from $3.1 billion in 1999, Reuters reported.

Mothers Work (MWRK) reported third-quarter earnings of 66 cents a share, 7 cents ahead of the two-analyst view and up from the year-ago 30 cents. The company's same-store sales rose 14.3%.

National Instruments (NATI) reported second-quarter earnings of 33 cents a share, a penny ahead of the six-analyst estimate and up from the year-ago 27 cents. The company also set a 3-for-2 stock split.

Rainforest Cafe (RAIN) reported second-quarter earnings of 16 cents a share, in line with the seven-analyst forecast but down from the year-ago 18 cents. The company said its same-store sales fell 11%.

Redback Networks (RBAK) reported a second-quarter loss of 16 cents a share, 3 cents better than the three-analyst estimate and narrower than the pro forma year-ago loss of 18 cents. The company also set a 2-for-1 stock split.

Sauer (SHS) reported second-quarter earnings of 28 cents a share, 5 cents below the three-analyst forecast and behind the year-ago 41 cents. The company also warned it sees 1999 earnings coming in around 85 cents to 95 cents a share due to a weak agricultural market and soft sales in Europe. The three-analyst view calls for 1999 earnings of 95 cents vs. 1998's $1.06.

Sovereign Bancorp (SVRN) said it expects to post second-quarter earnings slightly above estimates thanks to strong loan originations and lower deposit costs. The 11-analyst prediction calls for earnings of 29 cents a share vs. the year-ago 27 cents.

Starbucks (SBUX) reported third-quarter earnings of 13 cents a share, in line with the lowered 19-analyst expectation and up from the year-ago 11 cents. The company said same-store sales rose 6%. Starbucks plans to open 600 stores worldwide in fiscal 2000, including 350 company-owned stores and 100 licensed stores in North America. The company is targeting a 25% earnings-per-share growth rate in fiscal 2000.

In other earnings news:

Upside Surprises
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts
Alza (AZA)	2Q	33c	32c	29c	11
Asyst Technologies (ASYT)	1Q	-18c	-21c	19c	6
BroadVision (BVSN)	2Q	12c	11c	3c	19
Cheesecake Factory (CAKE)	2Q	25c	23c	17c	13
Clarify (CLFY)	2Q	14c	13c	5c	6
Concentric Network (CNCX)	2Q	-50c	-67c	-70c	6
Datum (DATM)	2Q	4c	3c	1c	3
Digi (DGII)	3Q	29c	10c	45c	4
drkoop.com (KOOP)	2Q	-38c	-42c	-16c	2
DST Systems (DST)	2Q	52c	47c	36c	6
Electronic Arts (ERTS)	1Q	4c	0c	6c	13
First Data (FDC)	2Q	42c	40c	37c	14
Forte Software (FRTE)	1Q	-2c	-4c	-12c	4
General Instrument (GIC)	2Q	24c	22c	19c	15
Halliburton (HAL)	2Q	19c	17c	55c	27
Hyperion Solutions (HYSL)	4Q	17c	13c	63c	12
JDA Software (JDAS)	2Q	3c	2c	18c	6
K-Swiss (KSWS)	2Q	58c	46c	20c	3
LHS Group (LHSG)	2Q	18c	16c	11c	10
Mettler-Toledo (MTD)	2Q	35c	33c	30c	6
Mohawk Industries (MHK)	2Q	72c	69c	59c	7
Nielsen Media (NMR)	2Q	22c	21c	20c	4
Ocular Sciences (OCLR)	2Q	40c	39c	32c	9
Pinnacle Systems (PCLE)	4Q	25c	24c	20c	3
Premisys Communications (PRMS)	4Q	-5c	-8c	20c	5
RadiSys (RSYS)	2Q	33c	31c	4c	7
RTI Intl Metals (RTI)	2Q	1c	-3c	70c	2
St. Jude Medical (STJ)	2Q	44c	43c	38c	31
Sapient (SAPE)	2Q	27c	25c	18c	18
SportsLine USA (SPLN)	2Q	-55c	-56c	-41c	8
Symbol Technologies (SBL)	2Q	30c	29c	25c	10
Synopsys (SNPS)	3Q	67c	64c	48c	12
Trimble Navigation (TRMB)	2Q	20c	12c	8c	1
United Stationers (USTR)	2Q	50c	49c	45c	7
Westell (WSTL)	1Q	-9c	-12c	-18c	3
Zoran (ZRAN)	2Q	10c	5c	-10c	4

Downside Surprises
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts
Avid Technology (AVID)	2Q	10c	22c	37c	5
Black Hills (BKH)	2Q	36c	39c	35c	1
Cinergy (CIN)	2Q	37c	40c	42c	8
Diamond Multimedia (DIMD)	2Q	-30c	3c	-21c	4
Lance (LNCE)	2Q	23c	24c	28c	2
Maxtor (MXTR)	2Q	-51c	-46c	12c	11
Quantum (QNTM)	1Q	5c	10c	2c	12
Reebok (RBK)	2Q	8c	12c	11c	13
Sequent Computer Systems (SQNT)	2Q	-39c	5c	-35c	9
7-Eleven (SVEV)	2Q	6c	7c	6c	3
VerticalNet (VERT)	2Q	-40c	-37c	-28c	6

In-Line Reports
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts
Indus International (IINT)	2Q	9c	9c	1c	2
Ivex Packaging (IXX)	2Q	39c	39c	32c	4
Molecular Devices (MDCC)	2Q	24c	24c	20c	2
Oak Industries (OAK)	2Q	47c	47c	41c	4
Pacific Gateway Exchange (PGEX)	2Q	13c	13c	25c	10
Peoples Energy (PGL)	3Q	20c	20c	23c	6
Sigma-Aldrich (SIAL)	2Q	44c	44c	41c	9
Transaction Systems Architects (TSAI)	3Q	36c	36c	27c	10
Weirton Steel (WS)	2Q	-22c	-22c	12c	2

Mergers, acquisitions and joint ventures

ReliaStar Financial (RLR) agreed to acquire Pilgrim Capital (PFX) for $227 million in cash and stock. ReliaStar, an insurer, will also assume $31 million of asset manager's Pilgrim's debt.

Supervalu (SVU) said its acquisition of Richfood (RFH) received approval from the Federal Trade Commission.

Offerings and stock actions

Goldman Sachs priced InsWeb's (INSW:Nasdaq) 5 million-share IPO top-range at $17. The company provides customized insurance quotes over the Internet. Its price range was raised to $16 to $17 from $11 to $13.

Elsewhere in new issues, Piper Jaffray priced BioMarin Pharmaceutical's (BMRN:Nasdaq) 4.5 million-share IPO top-range at $13. The company develops carbohydrate enzyme therapies for debilitating, life-threatening, chronic genetic disorders and other diseases.

Finally, Credit Suisse First Boston priced Tanning Technology's (TANN:Nasdaq) 4 million-share IPO above-range at $15. The company is a technology services provider. Its expected price range was raised to $12 to $14 from $9 to $11.

Miscellany

Bally Gaming, a subsidiary of Alliance Gaming (ALLY), filed an antitrust suit against International Game Technology(IGT), alleging that IGT's contract with Atlantic City casinos has shut Bally out of a lucrative segment of the gaming world.

CareMatrix (CMDC), an assisted-living services provider, said it will consider going private through a leveraged recapitalization. Abraham D. Gosman, chairman and CEO, said the company will identify an investment banker in the week ahead.

National Steel (NS) reached a tentative pact with the United Steelworkers of America. Terms weren't disclosed.

An advisory panel of the Food and Drug Administration rejected Sunrise Technology's (SNRS) eye laser for farsightedness. TheStreet.com wrote about the company earlier this week.

TBC (TBCC) said its CEO and vice chairman, Louis DiPasqua, will retire Sept. 30.

White Cap (WHCP) said it entered a $240 million agreement to recapitalize the company.

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