Company Report: EBAY, VVDIY, VO, MSFT, FON, WCOM, More

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M&A Earnings/revenue Offerings/stock actions Miscellany

eBay(EBAY) got hit with two downgrades today, which took the stock down 5 1/4, or 7.7%, to 62 3/4. Deutsche Banc Alex. Brown lowered its 2000 EPS estimate for eBay to 15 cents a share from 18 cents today, while Goldman Sachs lowered its EPS expectations for the company to 17 cents from 21 cents.

French media group Vivendi(VVDIY) and its pay-television subsidiary Canal Plus are in talks with beverage and entertainment giant Seagram (VO) about a joint stock-swap bid that would value Seagram at more than $70 a share, or $30.6 billion in stock, according to a report in the The Wall Street Journal's online edition. Earlier today, the Financial Times reported that Vivendi had resumed talks with Seagram after they collapsed earlier this year over price and management issues. Seagram shares jumped 7 1/8, or 13.4%, to 60 1/8.

Mergers, acquisitions and joint ventures

Apache(APA) was 2 1/8 higher to 58 15/16 after it signed a definitive agreement with Collins & Ware to acquire long-lived producing properties in the Permian Basin and South Texas for more than $300 million, subject to adjustments.

Closing is expected by June 30, subject to satisfaction of certain approvals and conditions. CFO Roger Plank said, "With this transaction, year to date, Apache has purchased or has under contract total reserves of approximately 126 million barrels of oil equivalent (70% gas) which represent an estimated full-year 2000 reserve replacement of 136% at an average cost of less than $4 per barrel of oil equivalent."

Critical Path(CPTH) and Aether Systems(AETH) said they have entered a venture to make and sell wireless messaging devices. According to the terms, Aether, a wireless data systems provider, will enable users to access Critical Path's Web messaging services and will help Critical Path be a reseller of Research in Motion's(RIMM) Blackberry wireless email services. Critical Path shares were rose 1 5/16 to 46 3/4; Aether Systems were 13/16 higher to 181 13/16; and Research in Motion dropped 7/8 to 45 3/4.

NUI(NUI) will acquire Virginia Gas(VGCO) as a wholly-owned subsidiary. NUI shares shed 3/8 to 27 1/4 and Virginia Gas soared 19/32, or 20.4%, to 3 1/2.

Terms of the agreement call for NUI to acquire all of Virginia Gas' common stock for $4 a share in NUI common stock, with the exchange ratio to be established near the time of closing. Based on Virginia Gas' shares outstanding as of March 31, the transaction values Virginia Gas' equity at $22 million.

Office Depot(ODP) said it entered a pact with Microsoft(MSFT) that would focus on attracting small-business customers. Office Depot lost 1/16 to 6 13/16, while Microsoft bumped up 2 5/8 to 70 1/2.

The deal calls for Office Depot to be the exclusive product supplier on Microsoft's bCentral Web site, which is directed at small businesses. Microsoft also said that it would offer Office Depot's products on MSNBC.com, eShop and its WebTV service.

Executives at UAL(UAL) and US Airways(U) were questioned by lawmakers yesterday about their plans to merge, with concerns voiced about diminished competition and prospects of a rush of mergers by other large airlines. UAL edged 1 5/16 higher to 55 13/16 while US Airways slipped 3/8 to 42 1/2.

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Earnings/revenue reports and previews

Eastman Kodak(EK) shares gained 1 1/2 to 60 1/4 after it said that second-quarter revenue is in line with its fiscal 2000 6% to 7% growth forecast and said it would meet the second-quarter and 2000 earnings consensus estimates. For the second quarter, Eastman Kodak said it would post earnings between $1.60 and $1.70 a share, roughly in line with the 10-analyst estimate of a $1.65 profit. The company said fiscal 2000 would come in between $5.50 and $5.80 a share. The 10-analyst estimate calls for a $5.67 profit.

Home improvement and building products company Masco's(MAS) shares were unchanged after the company issued an earnings warning today. Masco said it sees second quarter earnings per share of between 41 and 42 cents, 10% below previous forecasts and year 2000 earnings per share of $1.70. The company cited a modest slowdown in sales growth as well as interest rates.

Midas(MDS) warned investors that its second-quarter and fiscal 2000 earnings would miss expectations. For the second quarter, the two-analyst estimate saw the company posting a profit of 81 cents a share, and the fiscal 2000 estimate expected Midas to report a $2.46 profit. Midas shares tumbled 4, or 16%, to 21.

Winnebago(WGO) posted third-quarter earnings of 74 cents a share, topping the four-analyst estimate and up from the year-ago 65 cent-profit. Winnebago shares gained 3/16 to 13 1/16.

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Offerings and stock actions

ADC Telecommunications(ADCT) was off 3/8 to 78 1/8 after it set a 2-for-1 stock split.

Certicom(CERT), which provides security products for wireless devices, rose 3/4 to 52 5/16 after it set a 2-for-1 stock split and posted fourth-quarter revenue of $4 million, a 156% increase from the year-ago $1.5 million.

Diodes(DIO) jumped 10 7/16, or 28%, to 47 7/16 after it set a 3-for-2 stock split.

Banc of America Securities priced a 1 million share offering for EntreMed(ENMD) at $22 a share. The company's shares lost 3, or 11.6%, to 22 7/8.

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Analyst actions

This morning, Bear Stearns' insurance analyst, Michael Smith, lowered his earnings estimate for Allstate(ALL) for the second quarter to 65 cents a share from 70 cents and his full-year estimate to $2.75 from $2.80 a share. Smith maintained his attractive rating on the stock.

After meeting with the company's management, Smith said Allstate's second-quarter will likely be affected by higher-than-expected payouts from storms. Allstate shares lost 1 3/16 to 25 1/2.

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Upgrades

Bausch & Lomb (BOL): price target UP to 85 from 75 at UBS Warburg. Bausch & Lomb gained 4 7/16, or 6.2%, to 76.

Boise Cascade (BCC) rose 2 1/8, or 8.3%, to 27 3/4: UP to buy from outperform at Salomon Smith Barney; price target: 54.

Canadian National (CNI) was off 5/8 to 28: UP to buy from hold at Credit Suisse First Boston.

R&B Falcon (FLC) lost 1/4 to 24 3/4: UP to buy from neutral at Lehman Brothers.

Schering-Plough (SGP) was 3 higher, or 6.6%, to 48 1/2: UP to strong buy from neutral at Morgan Stanley Dean Witter.

Downgrades

Alaska Air (ALK) inched up 3/8 to 29 3/4: DOWN to hold from buy at ING Barings.

Centex (CXP) fell 13/16 to 28: DOWN to neutral from accumulate at Merrill Lynch.

CSG Systems (CSGS) was off 5 3/16, or 10.0%, to 46 3/4: DOWN to hold from accumulate at Prudential Securities.

Fatbrain.com (FATB) shed 1 1/2, or 15.5%, to 8 3/16: DOWN to market performer from buy at Banc of America.

Kennametal (KMT) lost 2 1/8, or 8.3%, to 23 3/8: DOWN to hold from buy at ING Barings.

NBC Internet (NBCI) dropped 1/2 to 17 1/8: DOWN to market perform from buy at Banc of America.

Parker Hannifin (PH) slipped 2 9/16, or 6.3%, to 37 15/16: DOWN to attractive from buy at Bear Stearns.

Initiations

BioSource (BIOI) soared 3 5/8, or 42%, to 12 1/4: NEW strong buy at Thomas Weisel; price target: 19.25.

eSpeed (ESPD) dipped 3/8 to 35 1/8: NEW strong buy at Prudential; price target: 68.

Factory 2-U (FTUS) climbed 1 7/8, or 5.3%, to 37 1/4: NEW buy at Salomon Smith Barney; price target: 46.

Homestore.com (HOMS) jumped 2 9/16, or 9.4%, to 29 7/8: NEW buy at UBS Warburg; price target: 40.

Improvenet (IMPV) edged up 1/16 to 3 13/16: NEW hold at UBS Warburg; price target: 6.

International Flavors (IFF)edged up 1/2 to 34 1/4: NEW buy at J.P. Morgan.

Lilly Industries (LI) gained 5/16 to 13 15/16: NEW buy at J.P. Morgan.

Lubrizol (LZ) gained 3/8 to 22 3/4: NEW buy at J.P. Morgan.

Minerals Technologies (MTX) slipped 1/8 to 43 3/8: NEW buy at J.P. Morgan.

Paradigm Genetics (PDGM) gained 1/4 to 12 3/4: NEW buy at J.P. Morgan.

Pfizer (PFE) was up 25/32 to 46 5/8: RESTARTED as buy at Bear Stearns; price target: 52.

Sherwin-Williams (SHW) gained 1/4 to 23 3/4: NEW buy at J.P. Morgan.

Symyx (SMMX) was up 1 1/2 to 33 3/8: NEW buy at J.P. Morgan.

Williams Comm Group(WCG) rolled up 1 11/16 to 39 5/8: NEW buy at Wasserstein Perella; price target: $60.

WindRiver Systems (WIND) fell 15/16 to 37 1/2: NEW buy at WR Hambrecht; price target: 45.

Group Moves

PaineWebber initiated coverage of the following oil and gas exploration and production companies:

• Triton Energy(OIL) as a buy; price target: 47. Triton Energy gained 1 1/4 to 37 1/4;

• Barrett Resources(BRR) as attractive; price target: 45. Barrett Resources slipped 9/16 to 37 11/16.

• Houston Exploration(THX) as attractive; price target: 22. Houston Exploration climbed 9/16 to 24 11/16.

• Patina Oil & Gas(POG) as attractive; price target: 22. Patina Oil & Gas jumped 1/8 to 19 13/16.

• Louis Dreyfus(LD) as neutral; price target: 34. Louis Dreyfus fell 1/8 to 32 15/16.Nuevo Energy(NEV) as neutral; price target: 34. Nuevo Energy was off 1/8 to 20 5/16.

• Evergreen Resources(EVER) as a buy. Evergreen Resources rose 1/4 to 27 3/8.

Miscellany

America Online(AOL) is the latest company to be put under the antitrust microscope by the Federal Trade Commission, according to the The Wall Street Journal. America Online shares closed up 1 to 52 5/8.

As part of the FTC's review of AOL's $113 billion buyout of Time Warner(TWX), federal investigators are examining AOL's dominance in instant messaging, the Journal cites lawyers and industry executives as saying.

In an effort to boost confidence in its Delta III rocket, Boeing(BA) will launch one outfitted with a mock payload in August, according to The Wall Street Journal. The last two launches of the vehicle failed, which increased apprehension in potential customers who would use the rocket to carry their satellites. The newspaper said the launch of a Delta III costs about $85 million. Boeing shares were unchanged at 38 13/16.

Microsoft (MSFT) moved up 2 5/8 to 70 1/2 after a U.S. Court of Appeals agreed to hear its appeal of a federal judge's breakup order and prepared to speed its review of the case of the case while government lawyers formally requested that the matter be sent directly to the Supreme Court.

Sprint(FON) Chairman and CEO William Esrey told shareholders "it remains unclear" if the company will receive the necessary regulatory approval it needs for its $115 billion merger with WorldCom(WCOM), the Journal reported. Sprint fell 1 15/16 to 61 11/16, while Worldcom lost 2 7/8, or 6.6%, to 40 13/16.

A Sprint spokesman said Esrey was trying to give shareholders a realistic assessment of the negotiations with the Justice Department.

Standard & Poor's said it plans to make changes to its S&P 500 index by dropping soon-to-merge paper company Champion International (CHA) and computer firm SGI (SGI) from roster. Semiconductor equipment maker Novellus Systems (NVLS) will replace Champion, which is set to merge with International Paper (IP), after the market closes Friday. Luxury retailer Tiffany (TIF) will replace SGI after the close of trading June 20. SGI is being removed for lack of representation. Champion International climbed 1 to 73 7/16, SGI slipped 3/4, or 8.8%, to 7 3/4, Novellus rose 3 7/8, or 7.5%, to 55 7/16 and Tiffany tacked on 1 to 61 5/8.

Raytheon Systems, a unit of Raytheon(RTN.A), is selling its own version of computer-security software called SilentRunner, the Journal reported today. Raytheon was unchanged at 23 1/2.

The newspaper said Raytheon has sold licenses for the software to six unnamed federal government agencies involved in defense, intelligence or law enforcement, with one agency buying 12 licenses. The $65,000 program uses complex algorithms to find potentially improper uses of internal computer networks, and Raytheon claims the product can identify hard-to-discern patterns of data traffic that signal fraud, insider trading or espionage by a company's employees, the article said.

The world's largest package delivery company, United Parcel Service(UPS), announced acquisition of two privately held service parts support companies in Australia and Latin America. The two companies are Computer Logistics Solutions, an Australian firm with business in more than 13 Asian countries, and Comlasa, which serves Latin America and the Caribbean. The value of the deal was not revealed. UPS lost 1/16 to 61 1/4.

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