Company Report: GTW, AOL, FTE, NVS, WJCO, OCLR, HAND, SLE, More

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M&A Earnings/revenue Analyst actions Offerings/stock actions Miscellany

Gateway(GTW Quote) said it would use a processor from chipmaker Transmeta to run Web appliances it is making with America Online(AOL Quote). Gateway said it tapped Transmeta to provide the operating system for the products, turning away from the combination of Intel(INTC Quote) hardware and Microsoft(MSFT Quote) software. Gateway climbed 5 11/16, or 12.2%, to 52 1/2; America Online added 5 1/16, or 10.4%, to 53 9/16; Intel hopped 8 3/16, or 7%, to 125 3/4; Microsoft increased 1 15/16 to 63 3/8.

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France Telecom(FTE Quote) said it would buy British-based mobile phone company Orangefrom Vodafone AirTouch (VOD Quote), in a deal valued at $37.32 billion. France Telecom hopped 8 9/16, or 6.5%, to 139 9/16, while Vodafone AirTouch increased 4 7/16, or 10.6%, to 46 7/16.

Mergers, acquisitions and joint ventures

CIBA Vision, the eye care unit of Novartis (NVS Quote) and Wesley Jessen VisionCare(WJCO Quote) announced an agreement whereby CIBA Vision will acquire Wesley Jessen for $38.50 a share in cash, or about $785 million. The offer represents a premium of about 17% over the closing price of Wesley Jessen's shares on May 26. Wesley Jessen VisionCare gained 3 11/16, or 11.1%, to 36 7/8, while Novartis slipped 1/8 to 37.

CIBA Vision will begin a cash tender offer within five business days for all outstanding shares of Wesley Jessen common stock. Upon completion, the combined company will be the world's second largest contact lens company.

As a result of the agreement with CIBA Vision, Wesley Jessen terminated its previously announced merger agreement with Ocular Sciences(OCLR Quote) and paid Ocular Sciences a $25 million termination fee. Also, Wesley Jessen postponed indefinitely its annual shareholder meeting scheduled for June 23. Ocular Sciences staggered 1 3/4, or 11.7%, to 13 1/4.

Bausch & Lomb(BOL Quote) said it would withdraw its $35.55-a-share hostile takeover bid for Wesley Jesson. Bausch & Lomb CEO William Carpenter said it wouldn't sweeten its offer but said that it would consider renewing its offer if the Wesley Jesson/CIBA deal does not go through. Bausch & Lomb lifted 1/16 to 72.

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Adaptive Broadband(ADAP Quote) entered into an agreement with Comtech Telecommunications(CMTL Quote) to sell its EFData division for $61.5 million in cash. Adaptive Broadband will retain certain current assets of the business totaling approximately $6.3 million.

Adaptive Broadband expects to recognize a net book gain on the divestiture and expects to retain all of the cash due to the company's deferred income tax benefits. Two other divisions are in the process of being divested and the results of all three transactions will be combined and reported. The EFData transaction is expected to close by June 30. Adaptive Broadband boosted 4 9/16, or 24.8%, to 23.

Barnes & Noble.com (BNBN Quote) said it has purchased a minority interest in notHarvard.com. Barnes & Noble.com said the two companies would form Barnes & Noble University, which would offer free online education. The terms call for Barnes & Noble.com to become the major distributor of notHarvard.com's eduCommerce course materials. Barnes & Noble.com rose 5/8, or 7.1%, to 9 3/8.

E*Trade and Ernst & Young signed a letter of intent to establish a new company that will provide financial advice for investors by creating a personal electronic advisory service for E*Trade's growing 2.6 million customer accounts. The companies will each contribute $25 million to the joint venture. E*Trade advanced 1 1/16, or 7.1%, to 15 15/16.

Guilford Pharmaceuticals(GLFD Quote) said it has agreed to buy Gliatech(GLIA Quote) for roughly $203 million. According to the terms, Guilford would exchange 1.38 of its share for each share of Gliatech. Guilford Pharmaceuticals lost 1 3/8, or 8.9%, to 14 1/8, while Gliatech gained 2 3/8, or 14.5%, to 18 3/4.

InterNAP Network Services(INAP Quote), an Internet connectivity provider, signed a definitive agreement to acquire CO Space, a leading co-location service provider. The acquisition will give InterNAP the ability to accelerate the delivery of its IP connectivity service to customers with co-location requirements.

Terms of the agreement call for InterNAP common stock, with an aggregate value of approximately $244 million, to be exchanged for all outstanding shares and rights to acquire shares of CO Space's capital stock. The number of shares to be issued is subject to a "collar" with a maximum of 8.8 million shares of InterNAP common stock and a minimum of 7.2 million shares to be issued for CO Space. The acquisition, which was approved by the boards of directors of both companies and is expected to close by the end of the third quarter of 2000, is subject to certain closing conditions, including approval by CO Space's stockholders and approval under the Hart-Scott-Rodino Antitrust Improvements Act. InterNAP closed up 4, or 15.6%, to 29 5/8.

Lucent (LU Quote) is negotiating a possible acquisition of privately held optical networking companyChromatis Networks, for roughly $5 billion in stock, reported The Wall Street Journal. Lucent lifted 2 7/16 to 58 3/16.

Nokia(NOK Quote) signed a deal to supply KPNQwest(KQIP Quote) with digital subscriber line equipment and technology for the supply of high-speed broadband access services in Europe.

According to a release from Nokia, in the first phase of its European expansion plan, KPNQwest will launch full commercial services in Germany during the third quarter. Nokia boosted 4, or 8.3%, to 52, while KPNQwest advanced 4 5/8, or 15.5%, to 34 9/16.

Nova Chemicals (NCX Quote) said it sold its remaining Dynegy (DYN Quote) shares for $45.8 million and said it sees $605 million in post-tax proceeds from its divestiture of Dynegy. Nova Chemicals decreased 7/8 to 20 1/2, while Dynergy slid 1/8 to 74 1/2.

SBC Communications(SBC Quote) announced partnerships as part of its plan to broaden its 13-state territory and provide nationwide telecommunications services. According to The Wall Street Journal, SBC has entered deals to lease fiber capacity with Metromedia Fiber Network(MFNX Quote) and FPL Group (FPL Quote)

SBC President Ron Blake said its agreement with Metromedia is worth about $460 million, while its 20-year pact with FPL is valued at $100 million. The terms of SBC Communications' merger with Ameritech call for SBC to expand outside of its home territory, the Journal reported. SBC climbed 1 5/8 to 44 1/4; Metromedia Fiber Network advanced 5 11/16, or 22.3%, to 31 3/16; FPL Group missed 5/8 to 49 1/8.

Scientific-Atlanta(SFA Quote) and Adelphia(ADLAC Quote) have entered a deal which calls for Adelphia to pay more than $550 million for Scientific-Atlanta's digital set-tops and cable modems. Scientific-Atlanta improved 6 3/16, or 12.2%, to 57, while Adelphia ascended 4 1/8, or 10.6%, to 43 1/8.

Japan-based NTT DoCoMo is negotiating purchase of an equity interest in VoiceStream Wireless(VSTR Quote). The terms of the deal were not announced yet, but it could total billions, reported The Wall Street Journal. VoiceStream Wireless hopped 19 1/2, or 19.4%, to 119 7/8.

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Earnings/revenue reports and previews

Furniture Brands(FBN Quote) warned investors that it expects to post second-quarter earnings of 60 cents to 61 cents a share, missing the nine-analyst estimate of 63 cents a share. The company blamed the shortfall on softness in its incoming orders. Furniture Brands lost 3 1/16, or 16%, to 16 1/8.

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Analyst actions

Lehman Brothers this morning initiated coverage of the PC and semiconductor industry. The initiations come after analyst Dan Niles, late of Robertson Stephens, last week joined the firm. Compaq(CPQ Quote), Dell(DELL Quote) and Micron Technology(MU Quote) were launched with buy ratings; Advanced Micro Devices(AMD Quote) and Gateway(GTW Quote) were launched with outperform ratings and Apple (AAPL Quote) was launched with a neutral rating. Compaq added 1/4 to 26 9/16; Dell moved up 1 5/8 to 44; Micron Technology hopped 3 1/2, or 5.4%, to 68 1/8; AMD jumped 11, or 14.9%, to 85; Gateway rose 5 11/16, or 12.2%, to 52 1/2; Micron Electronics advanced 59/64, or 11.2%, to 9 11/32; Apple lifted 1 3/16 to 87 9/16.

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Goldman Sachs downgraded the shares of Office Depot (ODP Quote) to market performer from outperform. Merrill Lynch also downgraded the stock to long-term accumulate from long-term buy. Office Depot slipped 5/8, or 8.2%, to 7.

Upgrades

eSpeed (ESPD Quote): UP to strong buy from buy at Chase Hambrecht & Quist. eSpeed rose 3 3/8, or 14.1%, to 27 1/4.

Mastec (MTZ Quote): UP to strong buy from buy at Banc of America Securities. Mastec increased 3 5/16, or 5.3%, to 65 7/8.

SDL (SDLI Quote): UP to strong buy from buy at Thomas Weisel Partners by analyst Max Schuetz. SDL soared 24 1/8, or 12.2%, to 221 7/8.

Starwood Hotels (HOT Quote): UP to market outperform from market perform at Goldman Sachs. Starwood Hotels added 1 5/16 to 29 3/4.

Downgrades

American Freightways (AFWY Quote) fell 1/16 to 14 3/4: DOWN to hold from buy at Credit Suisse First Boston.

Millennium Chemicals(MCH Quote) shares rose 5/8 to 20 7/8: DOWN to neutral from attractive at Bear Stearns.

Splash Technologies(SPLH Quote) tumbled 3 3/8, or 30%, to 7 7/8: DOWN to buy from strong buy at U.S. Bancorp Piper Jaffray.

Initiations

Crown Media (CRWN Quote) climbed 11/16, or 6.9%, to 10 11/16: NEW buy at Salomon Smith Barney; price target: 20.

Orchid Biosciences (ORCH Quote) shares got a lift, up 1 7/16, or 13.6%, to 12: NEW buy at Credit Suisse First Boston; price target: 30.

Pure Resources(PRS Quote) was off 1/8 to 14 5/8: NEW market performer at Donaldson Lufkin & Jenrette.

Software Technologies(STCS Quote) edged up 5/16 to 17 1/16: NEW buy at DLJ; price target of 30.

Sonic Innovations (SNCI Quote) shares sank 11/16 to 18 9/16: NEW buy at Deutsche Banc Alex. Brown.

SPX(SPW Quote) grew 4 3/8 to 102: NEW buy at Lehman Brothers; price target of 225.

StarMedia Network (STRM Quote) hopped up 1 3/16, or 7.9%, to 16 1/4: NEW buy at CSFB; price target: 29.

ViroLogic (VLGC Quote) soared 1 1/8, or 20.9%, to 6 1/2: NEW strong buy at CIBC World Markets; price target: 17.

Group Moves

Morgan Stanley Dean Witter upgraded three communication companies this morning:

• Acme Communications (ACME Quote) jumped 1 7/16, or 16.1%, to 10 3/8: UP to strong buy from outperform.

• Comcast(CMCSA Quote) shares climbed 2 7/8, or 9.2%, to 34 1/8: UP to strong buy from outperform.

• Cox Communications(COX Quote) was up 2 5/8, or 6.6%, to 42 7/16: UP to outperform from neutral.

Credit Suisse First Boston initiated coverage of three leisure and gaming companies with buy ratings:

• Carnival (CCL Quote) shares were up 2 1/4, or 9%, to 27 3/16.

• Royal Carribean(RCL Quote) shares grew 1 1/2, or 6.5%, to 24 3/4.

• Steiner Leisure(STNR Quote) was off 3/8 to 22 1/8.

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Offerings and stock actions

Handspring(HAND Quote), a rival to the hand-held computer Palm(PALM Quote), said it lowered the expected price range for its 10 million-share IPO to $17-$19 a share, from $19-$22. Credit Suisse First Boston is serving as the deal's lead underwriter.

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Miscellany

The Food and Drug Administration gave GelTex Pharmaceuticals(GELX Quote) and Sankyo Parke Davis marketing approval for Welchol, a nonabsorbed, lipid-lowering agent. GelTex Pharmaceuticals moved up 1 1/4, or 7%, to 19 1/8.

The FDA approved Welchol, administered alone or in combination with an HMG-CoA reductase inhibitor, as adjunctive therapy to diet and exercise for the reduction of elevated LDL cholesterol in patients with primary hypercholesterolemia. Clinical studies demonstrated that Welchol reduced total cholesterol, but increased HDL, or "good," cholesterol.

Sara Lee(SLE Quote) said it will reshape its portfolio by taking some of its well-known brands public or by divesting them in an effort to focus on a smaller number of businesses that it believes have the potential to expand globally. Sara Lee climbed 5/16 to 18 7/8.

Sara Lee said it will conduct initial public offerings for its Coach leather goods business and PYA/Monarch food service distribution operation before Dec. 31. After the IPOs, Sara Lee will own at least 80.1% of each business, but said it will dispose of the remaining ownership in those businesses within 18 months. The company said it will negotiate the sale of its Champion athletic apparel business and International Fabrics operation separately. International Fabrics is a part of Sara Lee's Courtaulds division, a U.K. apparel maker that Sara Lee bought recently.

Sara Lee said net effect on fiscal 2001 earnings from the reshaping will be positive and that the exact timing and financial proceeds or outlays from dispositions and three new acquisitions aren't definite at this point.

Additionally, the company said that President and COO C. Steve McMillan will add the title of CEO July 1.

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