Company Report: Procter & Gamble Move Shakes Drug Sector

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Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

The earnings parade continued to transfix the market, but a

Monday Merger Mania

sideshow proved somewhat distracting, even if a lot of it was just talk. A veritable maze of merger talks between

Procter & Gamble

(PG) - Get Report

,

Warner-Lambert

(WLA)

and

American Home Products

(AHP)

made for a hectic trading day in some big drug and consumer products stocks (see below). The

American Stock Exchange Pharmaceutical Index

slid 4.6%.

EMI Group

and

Time Warner

(TWX)

agreed to merge in a deal forming the world's largest music group. Shares of Time Warner lost 3 1/2 to 87 5/8. The deal, which is valued at $20 billion according to industry sources, calls for a 50-50 joint venture that will focus on online music distribution. According to the terms, Time Warner would pay over $1 billion to EMI's shareholders to have control of the board, holding six seats to EMI's five, industry sources told

Reuters

.

EMI holders would receive $1.65 for each EMI share they own. Last week, Time Warner announced its plans for a $150 billion merger with

America Online

(AOL)

, which closed off 2 7/8 to 61 7/8.

Elsewhere,

neoforma.com

(NEOF)

kicked off an IPO new year with a bang despite a less-than-friendly day for most stocks. The 7-million share offering soared 39 1/4, or 301.9%, to 52 3/8, after trading as high as 57. Lead underwriter

Merrill Lynch

priced 7 million shares above-range at $13 each. The Santa Clara, Calif.-based company provides business-to-business e-commerce services to the medical product and supply industry.

Mergers, acquisitions and joint ventures

Alcan

(AL) - Get Report

lost 13/16 to 40 15/16 after it signed a multiyear deal with

Ford

(F) - Get Report

for aluminum for efficient vehicles. Shares of Ford climbed 11/16 to 51 1/8.

Amazon.com

(AMZN) - Get Report

jumped 8 1/4, or 13.3%, to 70 1/8 after it said it would raise its minority interest in

drugstore.com

(DSCM)

to 28%. Shares of drugstore.com hopped 5 1/2 or 19%, to 35. According to the terms, Amazon would invest another $30 million in the Internet pharmacy and receive $105 million from drugstore.com.

Goldman Sachs

upped its rating on Amazon.com to trading buy from market outperformer.

Ariba

(ARBA)

dropped 3 1/4 to 182 3/8 after it said it has agreed to a deal with

Ernst & Young

to offer B2B e-commerce software, network services and systems integration services.

Carnival

(CCL) - Get Report

lost 3 1/2, or 7.5%, to 43 1/8 after it said it has entered a $775 million deal to acquire

Fairfield Communities

(FFD)

. Shares of Fairfield lost 1 5/16, or 10.1%, to 11 11/16. Fairfield owns 28 resorts in North America, with six additional resorts under construction.

General Motors

(GM) - Get Report

lost 1 7/8 to 80 1/16 after it said it is intensifying talks with

Toyota

(TM) - Get Report

to involve the Japanese automaker in

TradeXchange

and is open to offering it a stake in the new business-to-business e-commerce site. Toyota rose 1 1/16 to 86 15/16.

Healtheon/WebMD

(HLTH)

hopped 5 7/16, or 9.1%, to 65 1/8 after it said it has entered into a $2.5 billion deal to acquire the electronic transaction division of

Quintiles

(QTRN)

. Shares of Quintiles rose 3 3/16, or 13.1%, to 27 1/2. The transaction calls for Healtheon/WebMD to give Quintiles up to 35 million shares of its stock, making Quintiles a 16% interest holder in Healtheon/WebMD.

In addition, Healtheon/WebMD would pay Quintiles $400 million in cash. Quintiles has agreed to issue Healtheon a warrant to buy up to 10 million shares of its stock at $40 per share, which can be exercised in four years.

Motorola

(MOT)

dropped 4 15/16 to 139 7/16 and

MCI WorldCom's

(WCOM)

slipped 3/4 to 40 13/16 after its

SkyTel

division said the two have entered a pact to provide two-way wireless communications services in Latin America.

STMicroelectronics

(STM) - Get Report

fell 1 3/4 to 165 3/4 and

8X8

(EGHT) - Get Report

jumped 1 9/16, or 16.6%, to 11 1/16 after the companies said they have made a pact to manufacture and sell semiconductor products for voice applications online. The agreement calls for STMicro to license 8X8's software and digital systems for voice-over-Internet protocol and in exchange STMicro will purchase 3.7 million shares of 8X8 common stock at $7.50 a share.

Procter & Gamble said talks for a potential three-way merger with Warner-Lambert and American Home Products had gone down the drain as a result of leaks and speculation, which had created an "environment in which we cannot continue meaningful discussions," according to Procter & Gamble CEO Durk Jager.

Earlier, a story in

The Wall Street Journal

reported that Jager spoke to

Gillette

(G) - Get Report

about a possible agreement, citing people close to the matter. Shares of Gillette gained 1 3/8 to 40 3/8. All the buzz led the Big Board to halt trading of Warner-Lambert, American Home Products and Procter & Gamble. And the hoopla was making investors plain dizzy. Warner dropped 4 to 88, American Home shed 5 3/8, or 11.2%, to 42 5/8, Procter & Gamble inched up 3/16. Warner-Lambert's occasionally hostile suitor

Pfizer

(PFE) - Get Report

, whose shares were also halted, slipped 11/16 to 34 3/8.

Earnings/revenue reports and previews

American Express

(AXP) - Get Report

added 5/16 to 152 after it posted fourth-quarter earnings of $1.33 a share, in line with the 15-analyst estimate and up from the year-ago $1.16. The company also said its board approved a 3-for-1 stock split.

Bank United

(BNKU) - Get Report

climbed 1 to 24 7/16 after it posted fourth-quarter earnings of 87 cents a share, beating the eight-analyst estimate of 86 cents and up from the year-ago 83 cents.

Bell Atlantic

(BEL)

inched up 1/16 to 60 1/8 after it reported fourth-quarter earnings of 77 cents a share, in line with the 21-analyst estimate and up from the year-ago 69 cents.

BellSouth

(BLS)

lost 1 1/8 to 45 15/16 after it posted fourth-quarter operating earnings of 53 cents a share, a penny ahead of the 17-analyst estimate and up from the year-ago 42 cents.

Eastman Kodak

(EK)

gained 1 5/16 to 62 1/16 after it posted fourth-quarter earnings of $1.27 a share, beating the 12-analyst estimate of $1.24 and up from the year-ago $1.05 profit. Eastman Kodak CEO Daniel Carp said he was comfortable with the 12-analyst estimate of $5.64 a share.

Eaton

(ETN) - Get Report

rose 5 11/16, or 8.5%, to 72 3/4 after it posted first-quarter earnings of $1.59 per share, beating the 10-analyst estimate of $1.53 and up from the year-ago report of $1.01.

El Paso Energy

(EPG)

fell 1/8 to 33 3/4 after it reported fourth-quarter earnings of 48 cents a share, beating the seven-analyst estimate of 46 cents and the year-ago 33 cents.

FMC

(FMC) - Get Report

slipped 7/16 to 54 3/4 after it reported fourth-quarter earnings of $1.69 a share, beating the seven-analyst estimate of $1.61 and up from the year-ago $1.06 profit.

Heartland Express

(HTLD) - Get Report

lost 5/8 to 13 9/16 after it reported fourth-quarter earnings of 31 cents a share, beating the five-analyst estimate of 27 cents and the year-ago 28 cents.

Kennametal

(KMT) - Get Report

fell 7/8 to 29 3/16 after it posted second-quarter earnings of 41 cents a share, edging out the eight-analyst estimate of 40 cents and the year-ago 47-cent profit.

Lexmark

(LXK)

jumped 12 1/32, or 14.9%, to 92 1/2 after it reported fourth-quarter earnings of 73 cents a share, edging out the 10-analyst estimate of 68 cents and the year-ago 58-cent profit.

OGE Energy

(OGE) - Get Report

lost 1/16 to 18 3/4 after it posted fourth-quarter earnings of 16 cents a share, beating both the eight-analyst estimate of 13 cents a share and the year-ago 13 cents.

Ryerson Tull

(RT)

gained 1 5/16, or 7.9%, to 18 after it reported fourth-quarter earnings of 34 cents a share, beating the six-analyst estimate of 29 cents and up from the year-ago 22-cent profit.

Steel Technologies

(STTX)

climbed 9/16 to 11 7/8 after it reported first-quarter earnings of 33 cents a share, missing the five-analyst estimate of 35 cents but up from the year-ago 26-cent profit.

Smurfit-Stone

(SSCC)

lost 11/16 to 19 3/4 after it reported fourth-quarter earnings of 20 cents a share, edging out the 11-analyst estimate of 18 cents and up from the year loss of $1.25.

South Jersey Industries

(SJI) - Get Report

was unchanged at 29 after it reported fourth-quarter earnings of 74 cents a share, beating the three-analyst estimate of 71 cents and the year-ago earnings of 59 cents.

Susquehanna Bancshares

(SUSQ)

lost 7/8 to 13 15/16 after it posted fourth-quarter operating earnings of 33 cents a share, a penny shy of the four-analyst estimate of 34 cents but up from the year-ago earnings of 29 cents.

United National Bancorp

(UNBJ)

added 1/16 to 17 1/2 after it reported fourth-quarter earnings of 41 cents a share, a penny shy of the one-analyst estimate of 42 cents but above the year-ago 38 cents.

Offerings and stock actions

Arthur Gallagher

(AJG) - Get Report

lost 9/16 to 56 9/16 after it set a 2-for-1 stock split.

Lam Research

(LRCX) - Get Report

fell 4 5/8 to 134 1/2 after it set a 3-for-1 stock spilt.

Xcelera.com

(XLA)

popped 9 7/8, or 9.1%, to 119 after it set a 2-for-1 stock split.

Analyst actions

Goldman Sachs

raised its fiscal 2000 EPS estimate on

Amerada Hess

(AHC) - Get Report

to $4.15 a share from $3.79. Shares of Amerada Hess shed 1 5/8 to 56 15/16.

Goldman Sachs upgraded the rating of

Amazon.com

(AMZN) - Get Report

to trading buy from market outperform. Shares of Amazon.com popped 8 1/4, or 13.3%, to 70 1/4.

Credit Suisse First Boston

launched coverage on

Art Technology

(ARTG)

with a buy rating and a 200 price target. Shares of Art Technology soared 15 5/8, or 12.4%, to 141 1/8.

Donaldson Lufkin & Jenrette

downgraded the rating of

BJ Services

(BJS)

and

Ensco

(ESV)

to market perform from buy. Shares of BJ Services skidded 1 7/8 to 44, while Ensco declined 2 1/16, or 7.5%, to 25 1/4.

DLJ upgraded

Compaq's

(CPQ)

rating to buy from market perform. Shares of Compaq gained 1 to 32 1/4.

Morgan Stanley Dean Witter

initiated coverage of

CDW Computer Centers

(CDWC)

and

Insight Enterprises

(NSIT) - Get Report

with outperform ratings. Shares of CDW Computer Centers tacked on 1/8 to 65 7/8, while Insight Enterprises slid 3/4 to 36 1/4.

Deutsche Banc Alex. Brown

upgraded

DQE

(DQE)

to buy from market perform.

PaineWebber

upgraded El Paso Energy to buy from attractive. Shares of DQE advanced 6 5/16, or 16.2%, to 45 1/16.

Lehman Brothers

upgraded

Ericsson

(ERICY)

to buy from outperform. Shares of Ericsson edged up 1 to 67 3/4.

Banc of America Securities

raised its price target on

International Rectifier

(IRF)

to 65 from 30. Shares of International Rectifier mounted 11/16 to 34 1/4.

LSI Industries

(LYTS) - Get Report

posted second-quarter earnings of 55 cents a share, in line with the two-analyst estimate and the year-ago 47-cent profit. Shares of LSI Industries fell 1 1/8, or 5.8%, to 18 3/8.

A.G. Edwards

upped

Phillips Petroleum

(P)

to buy and set a price target of 60. Shares fell 15/16 to 41 3/4.

PaineWebber

raised its second-quarter EPS estimate on

Salton

(SFP)

to $2.70 a share from $2.35. Shares of Salton lifted 2 5/16, or 6.6%, to 37.

CSFB upgraded

Sysco

(SYY) - Get Report

to buy from hold and upped its earnings estimates for fiscal 2000 to $1.45 from $1.40 and for fiscal 2001 to $1.27 from $1.26. Shares of Sysco slipped 1 1/2 to 34.

Williams Capital

started coverage of

United Parcel Service

(UPS) - Get Report

at accumulate and set a price target of 74. Shares of UPS declined 15/16 to 66 5/16.

Miscellany

AT&T

(T) - Get Report

said it would cut its executive staff by up to 25%, according to

The Wall Street Journal

. The reduction is part of the company's plan to cut $2 billion in costs by the end of 2000. According to the

Journal

, the layoffs are likely to effect hundreds or possibly thousands of employees. Shares of AT&T lost 1 1/2 to 50 9/16.

Bristol-Myers Squibb

(BMY) - Get Report

slipped 2 1/2 to 58 11/16 after it said it will sharply boost its research and development budget for pharmaceuticals in 2000 to over $2 billion in order to ensure strong growth of its core prescription drug business.

Interneuron

(IPIC)

advanced 5/8, or 26.3%, to 3 said it brought a lawsuit seeking unspecified damages against its former marketing partner, American Home Products, alleging that American Home didn't release all the potential heath risks associated with the

fen-phen

diet drug. Fen-phen was pulled off the market in 1997, after it was linked to potential heart valve damage.

According to the suit, American Home prevented Interneuron from initiating timely action with its

Redux

diet drug, because Interneuron was unaware of the health risks associated with fen-phen. Both companies have faced claims from former users of the diet drugs seeking damages. American Home's settlement is pending the authorization of a Philadelphia federal judge.

As originally published, this story contained an error. Please see

Corrections and Clarifications.