Midday Stocks to Watch: LU, MOT, IBI, T, WAC, MSFT, PFE, TAN

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

Mergers, acquisitions and joint ventures

Dean Foods(DF Quote) announced it will buy Land O'Lakes' Upper Midwest fluid milk operations. The companies also agreed to form a joint venture to market and license certain value-added fluid and cultured dairy products to further expand and leverage the Land O'Lakes brand name nationwide. Dean Foods slipped 7/16 to 30 5/16.

Both agreements include long-term licensing arrangements for use of the Land O'Lakes brand name. The transaction, which is subject to regulatory review, is expected to close on or about July 1. Terms of the deal were not disclosed.

Lucent(LU Quote) said it agreed to acquire privately held fiber optical networking equipment maker Chromatis Networks in a stock deal valued at $4.5 billion. According to the deal's terms, Lucent, which already holds about a 7% interest in Chromatis, would pay 78 million of its shares for the company, based on Lucent's closing price yesterday of $58.19. Lucent staggered 5/8 to 57 1/8.

Motorola(MOT Quote) said that it has entered a $30 billion outsourcing deal with Flextronics(FLEX Quote). The terms call for Flextronics to make parts for Motorola's wireless phone, two-way pager and wireless infrastructure. Motorola has also agreed to pay $100 million for an equity instrument which is eventually convertible into 11 million shares of Flextronics. Motorola added 1 3/4 to 98 1/4 Flextronics was up 6 1/2, or 13.1%, to 56 9/16.

Royal Dutch Shell will sell its Australian-based coal business to Anglo American(AAUK Quote) for about $850 million in a deal that puts Anglo back into the Asian coal market.

Shell said the final price for the business could reach $900 million, depending on final adjustments on completion of the deal, but Anglo said these would be minor. The agreement is expected to be completed by the end of June. Shell did not say how it would use the proceeds. Anglo American gained 17/64 to 43 25/64.

Schlumberger(SLB Quote) signed a Memorandum of Understanding with Baker Hughes under which Schlumberger's surface seismic business Geco-Prakla would join with Baker Hughes'(BHI Quote) Western Geophysical seismic unit to form a new venture called Western GECO.

In connection with the formation of the venture, Schlumberger will pay Baker Hughes $500 million in cash. Schlumberger will own 70% of the joint venture, and Baker Hughes, 30%. The deal, which is expected to close before the end of the year, is subject to completion of a definitive agreement, and to regulatory and board approvals. Schlumberger advanced 2 11/16 to 73 11/16, while Baker Hughes lifted 2, or 5.9%, to 36 1/16.

Sonera(SNRA Quote), a telecom operator, agreed to make a $200 million investment in Powertel(PTEL Quote) and Eliska Wireless Ventures I. Its $125 million investment in Powertel boosts its interest in the company to 11.8% from 9.1%, while a $75 million investment gives it a 30.1% stake in Eliska. Sonera gained 3/4 to 50 3/8, while Powertel moved up 2 1/16 to 81 1/16.

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Earnings/revenue reports and previews

Intimate Brands(IBI Quote) said May same-store sales increased 11%.

Litton Industries(LIT Quote) reported third-quarter earnings of $1.33 a share, beating the nine-analyst estimate by a penny and up from the year-ago earnings of $1.10 a share. The earnings were excluding a one-time gain on the sale of businesses. Intimate Brands climbed 9/16 to 23 11/16.

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Analyst actions

This morning, Pepsico (PEP Quote) was upgraded to strong buy from buy at UBS Warburg and its price target was boosted to 51 from 46. Analyst Caroline Levy said that the company was her top pick in the soft drink space and raved about two recent management changes. Pepsico slipped 1/8 to 40 7/8.

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Upgrades

Amerada Hess (AHC Quote): UP to strong buy from buy at Deutsche Banc Alex. Brown. Amerada Hess rose 2 to 66 3/4.

HotJobs (HOTJ Quote): UP to buy from neutral at PaineWebber. HotJobs increased 1 43/64, or 16.6%, to 11 3/4.

National Computer Systems(NLCS Quote): UP to intermediate-term buy from accumulate at Merrill Lynch. National Computer Systems slipped 1/8 to 46 3/8.

Seagram (VO Quote): UP to strong buy at SG Cowen; price target: 70. Seagram improved 15/16 to 48 5/16.

Spectrasite (SITE Quote): UP to buy from hold at Warburg. Spectrasite fell 5/8 to 16 1/8.

Smithfield Foods (SFD Quote): UP to strong buy from buy at Credit Suisse First Boston. Smithfield Foods boosted 1 11/16, or 7.5%, to 24 3/16.

Wireless Facilities (WFII Quote): UP to strong buy from buy at Chase Hambrecht & Quist. Wireless Facilities hopped 7 13/16, or 20.3%, to 46 5/16.

Downgrades

Airgas (ARG Quote) lost 3/16 to 5 7/16: DOWN to market performer from outperform at Goldman Sachs.

Answerthink Consulting (ANSR Quote) slipped 1/4 to 17 1/2: price target DOWN to 35 from 55 at CSFB.

Cintas(CTAS Quote) stumbled 1/8 to 45 1/16: DOWN to intermediate-term accumulate from buy at Merrill Lynch.

Ethyl (EY Quote) jumped 3/16, or 7.3%, to 2 3/4: DOWN to market performer from outperformer at Goldman Sachs.

MGM Grand (MGG Quote) was off 1/2 to 28 3/16: DOWN to neutral from outperform at Lehman Brothers.

Oxford Health Plans(OXHP Quote) shot down 3 3/16, or 13.6%, to 20 1/4: DOWN to neutral from buy at Salomon Smith Barney.

Initiations

Avigen (AVGN Quote) rose 1 5/16 to 29 7/8: NEW strong buy at ING Barings; price target: 56.

Clear Channel Communications (CCU Quote) edged up 7/16 to 75: NEW buy at SG Cowen; price target: 90.

Gap (GPS Quote) grew 1 3/8 to 35 13/16: NEW buy at Thomas Weisel; price target: 45.

MGI Pharma (MOGN Quote) bumped up 1 3/4, or 8.8%, to 21 5/8: NEW strong buy at US Bancorp; price target: 50.

Paradigm Genetics (PDGM Quote) shares jumped 1/4 to 9 7/8: NEW strong buy at Chase H&Q.

Sierra Wireless(SWIR Quote) shed 1 9/16, or 5.6%, to 29 3/8: NEW intermediate, long-term buy at Merrill Lynch.

SPX (SPW Quote) climbed 3 5/16 to 105 5/16: NEW strong buy at Warburg; price target: 190.

StarMedia Network (STRM Quote) soared 1 11/16, or 10.4%, to 17 15/16: NEW buy at CS First Boston; price target: 29.

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Offerings and stock actions

Barr Laboratories(BRL Quote) set a 3-for-2 stock split. Barr Laboratories lifted 1 1/4 to 53 1/4.

Salomon Smith Barney priced 28.17 million shares of NRG Energy (NRG Quote) at $15 a share, below the estimated $16-$18 range. The company is a wholly owned unit of Northern States Power (NSP Quote), one of the largest independent power generators in the U.S. NRG Energy moved up 1, or 6.7%, to 16.

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Miscellany

AT&T's(T Quote) cable unit's programming will include a hard-core adult-movie channel as part of a agreement that could leave the telecom company with a hefty portion of the movies' profits, reported in The Wall Street Journal. According to the Journal, AT&T's cable division is facing pressure to produce results after using billions to upgrade its networks for new digital fare. The company's shares were off 5/16 to 35 1/16.

Warnaco(WAC Quote) shares tumbled 1, or 12%, to 7 5/16, after Calvin Klein said it would bring a lawsuit against the company for alleged trademark infringement. Calvin Klein also plans to terminate its jeans and underwear agreement with the clothing maker.

ECI Telecom's(ECIL Quote) shares hopped up 1 5/8, or 6.4%, to 26 15/16, after its fully owned subsidiary, InnoWave ECI Wireless Systems, was chosen by Global Village Telecom in Brazil to supply fixed wireless access systems. Under the deal, GVT will deliver advanced Internet, data and telephony services to residences and businesses in south and central Brazil. Reuters said the deal is valued at up to $165 million.

ECI Telecom is offering GVT long-term financing. In conjunction, ECI Telecom has decided to invest up to $35 million in GVT's parent company, GVT Holding NV, in convertible subordinated notes.

Kmart(KM Quote) signed Charles Conaway, former president of CVS (CVS Quote) to a five-year contract as its chairman and CEO.

Conaway succeeds the retiring Floyd Hall. CVS' current chairman and chief executive, Thomas Ryan, will take on the additional duties of president. Kmart's shares were up 1 1/16, or 13.9%, to 8 11/16. CVS shares were just 5/16 higher to 42.

LifePoint Hospitals(LPNT Quote) was 1 5/8 lower, or 7.1%, to 21 1/8 after it announced that its chairman and CEO, Scott Mercy, died in an airplane accident yesterday. The company named DeWitt Ezell its interim chairman. Day-to-day operations of the company will continue to be led by Jim Fleetwood, the company's president and COO.

Microsoft(MSFT Quote) shares lost 11/16 to 62 11/16. The company is set to respond today to a plan modified by the government to divide the software giant into two companies. The response could be the last before a federal judge makes a final decision on the matter. The Justice Department and 17 states on Friday brought the revised plan, which included comments from District Court Judge Thomas Penfield Jackson, who has been presiding over the antitrust case. The proposed split would create two companies: One company would offer the Microsoft Windows applications and another would focus on Microsoft Internet Explorer and Office products. A decision could come later this week.

Pfizer(PFE Quote) was 5/16 higher to 44 1/2. The company was sued by a Florida man who was prescribed a Pfizer drug called Cardura for hypertension. The man claimed the pharmaceutical company failed to warn users about serious risks related to the drug.

The purported class-action suit seeks emergency notification to all Cardura users about scientific research in March that found the drug was less effective than a standard diuretic pill in preventing certain consequences of heart disease. Pfizer currently markets Cardura as an alpha blocker. The study found that while Cardura was as effective as a diuretic in preventing heart attacks and mortality, patients who took Cardura during a trial had a greater chance of suffering congestive heart failure or stroke than those who took a diuretic.

Tandy's(TAN Quote) shareholders gave their stamp of approval to change the company's 40-year-old family name to RadioShack Corp.. The name change is part of Tandy's plan to gain investor recognition by focusing on the RadioShack brand name. Shares of RadioShack will begin trading on the New York Stock Exchange under the ticker symbol "RSH" today. RadioShack shares were 7/8 higher to 43 11/16.

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