midday03-07-00

TheStreet.com's MIDDAY UPDATE

March 7, 2000

http://www.thestreet.com

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Market Data as of 3/7/00, 12:57 PM ET:

o Dow Jones Industrial Average: 9,910.52 down 259.98, -2.56%
o Nasdaq Composite Index: 4,962.67 up 57.82, 1.18%
o S&P 500: 1,376.14 down 15.14, -1.09%
o TSC Internet: 1,287.76 up 35.02, 2.80%
o Russell 2000: 605.16 up 3.52, 0.59%
o 30-Year Treasury: 101 06/32 down 7/32, yield 6.162%

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In Today's Bulletin:

o Midday Musings: Battering of P&G Illustrates Impatient Market Mood
o Herb on TheStreet: Talking Tupperware, Data Transmission and Iridiocy

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Also on TheStreet.com:

Wrong! Dispatches from the Front: Those Ailing Aisles

The Procter & Gamble news is a license to downgrade everything you buy in the supermarket, Cramer fears.

http://www.thestreet.com/comment/wrong/896232.html

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Tech Savvy: The 802.11B Vision: Not-So-Local Local Area Networking, Sans Wires

Lucent and its partners want to create a wireless-data world pretty much wherever you go.

http://www.thestreet.com/comment/techsavvy/895859.html

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Retail: Borders' Sickly Stock Price Shows Why LBOs May Be Retailers' Next Fad

Undervalued retailers may see advantages to going private.

http://www.thestreet.com/stocks/retail/895347.html

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Dear Dagen: Telecom Funds Offer Internet-Like Returns but With a Track Record

Most have been around five years or more -- since the dark ages of the Internet.

http://www.thestreet.com/funds/deardagen/896258.html

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Midday Musings: Battering of P&G Illustrates Impatient Market Mood

By Thomas Lepri
Staff Reporter
3/7/00 12:56 PM ET

For a while there it looked like the "old economy" might not have lost all of its relevance to the technology sector.

Major Indices INDEX CHANGE % VALUE Dow 260.14 -2.6% 9910.36 S&P 500 15.50 -1.1% 1375.78 Nasdaq 53.59 +1.1% 4958.44 Russell 2000 3.16 +0.5% 604.82 TSC Internet 29.33 +2.3% 1282.07 NOTE CHANGE PRICE YIELD 10-Year Treasury 3/32 100 23/32 6.400%

Things were looking very sweet before Procter & Gamble (PG) started trading this morning. News that Deutsche Bank and Dresdner Bank were in merger discussions had Frankfurt's exchange humming along nicely. And back home, VeriSign's (VRSN) plans to pay a huge premium for Network Solutions (NSOL), along with a handsome upward revision of fourth-quarter productivity, were sending the Nasdaq Composite Index through the 5000 mark for the first time ever.

Then P&G, which warned of a third-quarter earnings shortfall, opened down 30 points. That blow momentarily knocked ILX Systems terminals offline all over Wall Street and took all of the major proxies off their highs. The Dow Jones Industrial Average immediately fell below the 9900 level, while the Nasdaq, which had been up more than 50 points in the moments before P&G started trading, soon sank into negative territory.

"You've got to think it's a hell of an overreaction for losing a little growth," said Jay Meagrow, vice president of trading at McDonald in Cleveland. But "if you're not growing 20 to 30%, and say you'll miss on anything -- come on."

Lesson learned. Right now, it looks like the early selloff is shaping up to be just another buying opportunity in the hyperactive tech sector. The Nasdaq was up 54, or 1.1%, to 4958. The Dow, meanwhile, was off 260, or 2.6%, to 9910, while the S&P 500 was down 15 1/2, or 1.1%, to 1376.

'Why Buy 7% Growth?'

"If there's ever an [example] of why money flows are going toward tech, it's because on the face of things, today looks like an outrageous merger between Network Solutions and VeriSign, and the destruction of a traditional old-economy company," said Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum. "Why buy something with 7% growth and a 20 P/E when there's no money flow there?"

And P&G is indeed looking extremely nontech today. The company warned that its third-quarter earnings would come in 10% to 11% below the 72 cents a share it earned last year. The 13-analyst consensus was for earnings of 78 cents.

The company blamed the coming shortfall on a number of things, including the delay of U.S. approval for its osteoporosis drug Actonel, competition in South America, and higher European production costs. But perhaps most notably, P&G said that higher-than-anticipated prices of pulp and petroleum would hurt its bottom line.

Merrill Lynch downgraded the entire household products sector on the news, noting that the P&G blowup "carries broader fundamental implications for the group which will likely keep interest in the sector and therefore group valuation muted for the foreseeable future due to escalating raw material costs and competition in emerging markets, in particular." Merrill then took a deep breath and promised to swear off run-on sentences in the future.

So it would seem that rising commodities prices finally are starting to hurt some bottom lines. But it remains to be seen whether and when damaged bottom lines in the old economy will make their presence felt in tech.

"It will tend to have an effect on capital spending," said Hyman. "That's the concern. It will delay marginal spending, because of lowered earnings expectations. But nothing's going to stop the buildout of telecom. That's there, and it's happening on a global basis.

Oil prices were soaring anew, with crude for April delivery trading at $33.48 a barrel at the New York Mercantile Exchange, up from $32.18 yesterday. That was sending oil and oil service stocks flying, with the American Stock Exchange Oil & Gas Index up 4.1% and the Philadelphia Stock Exchange Oil Service Sector Index up 5.5%.

Paper stocks were selling off despite P&G's partial blaming of increased pulp prices for its earnings difficulties. The Philadelphia Stock Exchange Forest & Paper Stock Index was down 2.7%.

Small-cap and Net measures were higher, with the Russell 2000 up 3, or 0.5%, to 603 and the TheStreet.com Internet Sector index up 29, or 2.3%, to 1282.

Market Internals

Breadth was negative, especially at Broad and Wall, while volume was strong.

New York Stock Exchange: 1,046 advancers, 1,804 decliners, 728 million shares. 98 new 52-week highs, 210 new lows.

Nasdaq Stock Market: 1,952 advancers, 2,129 decliners, 1.2 billion shares. 370 new highs, 78 new lows.

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For a look at stocks in the midsession news, see Midday Movers, published separately.

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Herb on TheStreet: Talking Tupperware, Data Transmission and Iridiocy

By Herb Greenberg
Senior Columnist
3/7/00 6:30 AM ET

Burp: I love to ask my sources what stocks they like as well as which ones they don't. (No, I'm not changing my stripes! Just looking for companies that have been left for dead in this frenzy.) One stock (of all stocks) that is high on one savvy money manager's list: Tupperware (TUP).

Now that I've lost a chunk of my potential readers: I say "of all stocks" because for years, Tupperware has not been able to get out of its own way. As far back as the mid-'80s, when it was owned by Kraft Foods, it was always dragging down Kraft's financial performance. What was clear to anybody outside the company was that selling products exclusively through parties had lost its effectiveness. (As a Chicago Trib reporter covering Kraft back in those days, I was among those who wondered, "Haven't you guys heard the 1950s are over?!")

Almost every critic wondered the same thing: Why not sell Tupperware in retail stores? (The company always responded that it would undermine its sales force.)

Well, Tupperware finally got the message. It now sells some of its products over its Internet site, through sales reps' Internet sites and in retail kiosks. "Despite a series of management missteps and some severe economic hardships in some of their emerging markets over the past two years," says our money-mangement source, "the company still has a much-revered brand name and one that consumers continue to pay for."

The stock's current price of 16 5/16, he says, ignores several hundred acres (half of which is developable) in Orlando, Fla. But he also dosen't believe it reflects accelerating revenue growth, the new sales chanels and a three-year cost-cutting program that is expected to remove $50 million in expenses by next year.

Bottom line, according to this investor, who owns Tupperware: Financial performance should start to show a sharp improvement in the second quarter. (Ah, but if it does, will anybody care?)

Saved by the buyout: So much for a column here a month ago suggesting that Data Transmission (DTLN), an electronic provider of stock-and-commodity quotes, which has been on the auction block for nearly a year, couldn't find a buyer. Yesterday, the company announced that it has signed a definitive agreement to be acquired by VS&A Communications Partners III. Short-sellers badgered the company for what they thought were weak growth prospects and the long, drawn-out search for a buyer. Final tally for the shorts, many of whom bought in at around the price of the transaction: 29. A wash.

Iridiocy: Even after filing for bankruptcy, Iridium's stock (on the pink sheets) traded as high as 5 last week on hopes, by investors, that Craig McCaw would save the day. Never mind that, even under the very best circumstances, stockholders would've gotten zip. Now McCaw says he has no plans to buy the stock. That sent Iridium's stock down to 1.8 which, according to some traders, is 1.8 higher than it should be.

IPO insanity: I've been skeptical of individuals climbing aboard the IPO bandwagon. When you read Frederick H.'s letter, you'll see why:

Prior to Palm (PALM) Thursday, I listened to an avalanche of media, TV and online hype about the IPO of the decade.

Everyone had to do anything they could to get in on the deal. I am new at this online investing, leaving most of it to my accountant, who has done very, very well YTD for me.

Anyway, I was led to believe that no one but the "investors in the know" would have a prayer of buying PALM at the opening. So I put in a limit order of 150 shares at 200. At 9:32 a.m., my order was filled at 140 a share and by the time I was able to get a current price, it had dropped so low I felt I couldn't sell. Now I'm looking at a $9,000 loss if I sell and wondering what to do with it. Sell, take the loss and put the remaining into 3Com (COMS) or just hold?

Beats me, but this is the very reason individuals are nuts to try to buy into IPOs, especially hot ones, unless they're getting in on the ground floor. (And even then it's not necessarily the wisest investment.) If you can't get in at the initial price, many pros say you might as well wait until it trades and settles down rather than chase it on day one. (And be happy that Palm never traded as high as 200!)

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at [e-mail]. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

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