Company Report: T, MSFT, TWX, DIS, MAR; Goldman Cuts Retail Sector

Author:: Kristen French
Publish date:: May 2, 2000 6:31 PM EDT

Updated from 6:06 p.m. EDT.

Telecommunications giant

AT&T

phoned in sick today, and its bad vibes helped tug down at the rest of the market. AT&T's shares were off 7 1/16, or 14.4%, to 41 15/16 at the close after it reported slim revenue growth and cut its profit and sales forecasts for the rest of the year. The company did report earnings in-line with a 15-analyst estimate of 53 cents a share. But they were down from the year-ago 61 cents.

AT&T, which plans to acquire cable television company

MediaOne Group

(UMG)

, said its first-quarter operating profits fell 13.1%, as merger costs and declining consumer sales offset strong sales of wireless and business services.

See separate coverage from

TheStreet.com/NYTimes.com's

joint newsroom for more details on this

story.

Goldman Sachs

analysts downgraded the retail sector late Tuesday, according to one investor. Among the stocks downgraded to either market outperformer or market performer from buy were

Costco

(COST) - Get Report

Kohls

(KSS) - Get Report

Target

(TGT) - Get Report

Tiffany

(TIF) - Get Report

Federated

(FD)

and

Abercrombie & Fitch

(ANF) - Get Report

A Goldman analyst confirmed that Abercrombie had been moved from the recommended list to market performer, but no one was available to confirm the other downgrades.

The sector has been under pressure all year due to fears of higher interest rates and increasingly difficult same-store sales comparisons.

Katherine Hobson

Mergers, acquisitions and joint ventures

Clarent

(CLRN)

, an Internet telecommunications provider, saw its shares drop 5 to 69 1/2 after it announced it will acquire

Act Networks

(ANET) - Get Report

, a data networking products maker, in a stock deal valued at approximately $189 million. Act gained 3/8 to 14 1/4.

Marriott International

(MAR) - Get Report

rose 1/8 to 33 1/8 after it announced a deal with privately held hotel operator

Hyatt

. The two companies have agreed to establish a Web company that would sell supplies to hotels. The hotel giants said their own hotels would purchase about $5 billion in supplies from the site and expect other companies to sign on to the venture, which will be launched later this year. The companies said they have selected Dennis Baker, executive vice president of Marriott, as the venture's COO.

See separate coverage from

TheStreet.com/NYTimes.com's

joint newsroom for more details on this

new venture.

Real estate firm

Security Capital Group

(SCZ) - Get Report

shares inched up 3/16 to 15 1/8 after it announced it had agreed to pay $4.10 a share, or about $64 million, for a stake in lodging operator and owner

Homestead Village

(HSD)

. This stake gives Security Capital group 100% control of Homestead.

Texaco

(TX) - Get Report

was up 15/16 to 50 13/16 and

Energy Conversion Devices

(ENER)

climbed 1 1/4 to 23 1/4 after the two companies announced a joint venture agreement. Under the agreement, Texaco would purchase a 20% stake in Energy Conversion for $67.3 million. The companies said that they would set up partnerships involving the development of advanced energy technologies. Texaco's stake will be run by its

Texaco Energy Systems

division.

Time Warner

(TWX)

was still down 2 3/4 to 86 1/8 after it said today it would put

ABC

back on the air. The ABC network's parent,

Disney

(DIS) - Get Report

, was back up 1/2 to 42 1/2.

Time Warner pulled the network from its cable systems early yesterday morning. Disney and Time Warner disagreed about the fee Disney wanted to charge the cable operator to carry the

Disney Channel

. Disney said it will allow Time Warner to carry ABC programming for free until July 15.

Earnings/revenue reports and previews

(

Earnings estimates from First Call/Thomson Financial. Earnings reported on a diluted basis unless otherwise specified.

)

Beverly Enterprises

(BEV)

fell 1/8 to 3 3/8 after it posted first-quarter earnings of 6 cents a share, in line with both the 11-analyst estimate and the year-ago report.

Dell

(DELL) - Get Report

dipped 1 1/4 to 49 13/16 after director Mort Topfer told investors at a

Merrill Lynch

technology conference that the computer maker would probably not experience a recovery in Europe until the second half of 2000. During the fourth quarter of fiscal 1999, the company reported 8% revenue growth in Europe as compared with its total revenue growth of more than 30%.

Emerson Electric

(EMR) - Get Report

reported second-quarter earnings of 82 cents a share, a penny better than the 11-analyst estimate and up from the year-ago 74 cents. The company said it is confident that its fiscal 2000 earnings will fall in line with earlier expectations but said that its positive outlook is moderated by slowness in the automation market recovery and ongoing devaluation of the euro. The 11-analyst estimate expects the company to post a fiscal 2000 profit of $3.31.

Enron

(ENE)

said its EnronOnline Internet trading operation notched up $2.5 billion in sales during the last week of April. The online operation was launched in late November to enable businesses to buy and sell electricity, natural gas and other commodities with Enron acting as the principal in all deals. Separately, Enron told

Reuters

the company expects to start wholesale electricity trading in Japan within three months.

Expedia

(EXPE) - Get Report

dipped 5/16 to 55 7/16 after posting a third-quarter loss of 40 cents a share, narrower than the four-analyst estimate of a 57-cent loss. The company does not have a year-ago per share comparison because its IPO was held in November 1999.

The Web travel service, which is 85% owned by

Microsoft

(MSFT) - Get Report

, posted revenue of $31.9 million, greatly surpassing the year-ago report of $11.2 million. Expedia attributed the strong results to the success of its hotel room and tour package sales.

Forest Labs

(FRX)

fell 1 to 84 1/4 after reporting fourth-quarter earnings of 31 cents a share, beating the 16-analyst estimate of 27 cents but down from the year-ago 45 cents.

Performance Food

(PFGC) - Get Report

was down 3/16 to 26 7/16 after it reported first-quarter earnings of 27 cents a share, a penny better than the eight-analyst estimate and up from the year-ago 22-cent profit.

StorageTek

(STK) - Get Report

was unchanged at 25 1/2 after it reported a first-quarter loss of 22 cents a share, narrower than the six-analyst estimate of a 24-cent loss but down from the year-ago 6-cent profit.

Offerings and stock actions

Underwriter

St. Paul

(SPC)

rose 3/16 to 35 7/16 after it announced plans to buy back up to $300 million in shares.

Sonic Innovations

(SNCI)

climbed 7 1/8, or 50.9%, to 21 1/8 after Goldman Sachs priced 3.6 million shares at $14 each. The Salt Lake City-based company designs and manufactures hearing aids.

Analyst actions

Microsoft shares slid 3 9/16 to 69 7/8 after influential Morgan Stanley Dean Witter tech analyst Mary Meeker reiterated her market outperform but said that she likes the stock "in the 60s."

Upgrades

BroadVision

(BVSN) - Get Report

: UP to strong buy at

Credit Suisse First Boston

; price target: 70. BroadVision popped 3 7/8, or 9%, to 46 15/16.

Credence Systems

(CMOS)

: fiscal 2000 earnings estimate UP to $4.25 a share from $3.60 and fiscal 2001 estimate UP to $6.10 from $4.75 at Credit Suisse First Boston; price target UP to 180 from 170. Credence Systems tacked on 1/16 to 141 13/16.

Ericsson

(ERICY)

earnings-per-share estimate UP at Deutsche Banc Alex. Brown. Ericsson slipped 1 11/16 to 89 7/16.

Globix

(GBIX)

: revenue estimates UP to $47.8 million from $45.5 million for 2000 at Lehman Brothers. Globix lost 3 1/2, or 13.9%, to 21 9/16.

Teekay Shipping's

(TK) - Get Report

price target UP to 36 from 32 at Morgan Stanley Dean Witter; outperform recommendation maintained. Analysts said the recovery in the Far East economy and

OPEC

production increases was causing the tanker market to tighten.

Morgan Stanley said an imminent new building boom would drive new building prices and secondhand values higher, although ultimately this poses a threat to the industry. The new price target was a result of an increased year-end Net Asset Value estimate of $30, raised from $26, which was then boosted by the standard 20% share price premium for the stock. Teekay slid 5/8 to 32 7/16.

Downgrades

Compuware

(CPWR)

: first-quarter earnings estimate DOWN to 16 cents a share to 26 cents at Credit Suisse First Boston; hold rating REITERATED. Compuware skidded 1/2 to 11 7/8.

Pacific Sunwear

(PSUN)

: CUT to buy from strong buy at

US Bancorp Piper Jaffray

. Pacific Sunwear fell 9 5/16, or 26%, to 26 1/2.

Shared Medical Systems

(SMS)

DOWN to hold from buy at UBS Warburg following the company's announcement of a proposed merger with Germany's

Siemens AG

(SMAWY)

. Shared Medical tacked on 13/16 to 71 5/16.

Stone & Webster

(SW)

: DOWN to sell from hold at Credit Suisse First Boston. Stone & Webster declined 2 1/4, or 36%, to 4.

Initiations

Kana

(KANA)

: ADDED to recommended list at

Goldman Sachs

. Kana leaped 3, or 6.4%, to 49 5/16.

Maxygen

(MAXY)

: NEW buy at Credit Suisse First Boston. Maxygen stumbled 9 7/8, or 16.2%, to 51.

Modem Media

(MMPT)

: NEW strong buy at CSFB, price target: 35. Modem Media gained 3 1/16, or 22%, to 16 13/16.

Saba Software

(SABA)

: NEW intermediate, long-term buy at

Merrill Lynch

. Saba Software lost 4 5/8, or 14.5%, to 27 1/8.

Ulticom

(ULCM)

: NEW buy at

Lehman Brothers

. Ulticom declined 7/8 to 29 1/4.

Group Moves

A number of brokerages started coverage of

AT&T Wireless

(AWE)

this morning:

ABN Amro

Merrill Lynch

Goldman Sachs

UBS Warburg

Palm

(PALM)

Lehman Brothers initiated coverage of four brokerages this morning:

Charles Schwab

(SCH)

Goldman Sachs

(GS) - Get Report

Merrill Lynch

(MER)

Morgan Stanley Dean Witter

(MWD)

Miscellany

Amazon.com

(AMZN) - Get Report

lost 3 13/16, or 6.3%, to 56 1/8 after it said is making a foray into the culinary market with a new online kitchen store. Amazon said the store will offer recipes, cooking tips, product reviews and culinary products and accessories.

USA Today publisher

Gannett

(GCI) - Get Report

slid 1 3/16 to 62 9/16 after it said Douglas McCorkindale, 60, who joined the company in 1971, will succeed John J. Curley as CEO on June 1. Curley, 61, will continue as chairman until he retires early next year.

Standard & Poor's

said software maker

Siebel Systems

(SEBL)

will replace

CBS

(CBS) - Get Report

in the

S&P 500

. CBS is set to be bought by

Viacom

(VIA) - Get Report

for about $47 billion in stock. Siebel Systems tacked on 3/16 to 123 1/2.

Dallas Fed

President Robert McTeer late yesterday told the

Washington Association of Money Managers

that "U.S. inflation is showing signs of resisting arrest," which could ignite investors' fears of a 50-basis-point rate hike at the May 16

Federal Open Market Committee meeting.

McTeer, who has held the principle that higher productivity growth enabled the economy to flourish with lower inflation, also called the stronger-than-expected March

Consumer Price Index figure a "terrible number," according to

Reuters

. However, McTeer went on to say he thinks the overall U.S. inflation rate is likely to decline in coming months as energy prices ease.

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

Corrections and Clarifications.