Skip to main content

daily02-16-00's DAILY BULLETIN

February 17, 2000

Market Data as of Close, 2/16/00:

o Dow Jones Industrial Average: 10,561.41 down 156.68, -1.46%

o Nasdaq Composite Index: 4,427.65 up 6.88, 0.16%

o S&P 500: 1,387.67 down 14.38, -1.03%

o TSC Internet: 1,126.51 down 8.77, -0.77%

o Russell 2000: 547.76 up 7.52, 1.39%

o 30-Year Treasury: 99 26/32 down 8/32, yield 6.265%

Companies in Today's Bulletin:

DoubleClick (DCLK:Nasdaq)

Hewlett-Packard (HWP:NYSE)

In Today's Bulletin:

o Internet: Probes Knock Online Ad Firms' Shares, but DoubleClick Boosters Aren't Swayed
o Wrong! Rear Echelon Revelations: Only One Drug Away From Stardom
o Evening Update: Hewlett-Packard Beats Analysts Estimates
o Bond Focus: Treasuries Weaken in Anticipation of Tomorrow's Greenspeak

Also on

Semiconductors: New Management Model Speeds Intel's Chip Development

Chipmaker calling on the talents of new acquisitions. Also, its Internet push, and AMD's rival bash.

Software: Windows 2000 Launch Has Some Looking at Linux Stocks

The recent pullback could well make for a buying opportunity.

Wing Tips: AirAOL? JetIBM? Or Maybe AT&T Air?

At their current market caps, the major airlines look mighty salable.

Latin America: Latin American Telecom Sector Es Muy Positivo

As the Internet grows, so does demand for broadband in Latin America.

Internet: Probes Knock Online Ad Firms' Shares, but DoubleClick Boosters Aren't Swayed


George Mannes

Staff Reporter

2/16/00 9:04 PM ET



suffered a black eye Wednesday in the continuing

brouhaha over personal privacy on the Web.

But despite the stock market's sharp reaction, which knocked down shares of several companies in the Net ad sector, the company's boosters say the damage to the online advertising giant is purely cosmetic.

As if to show that delayed reactions can be just as strong as instant ones, DoubleClick's stock fell from 113 3/4 to below 107 in a matter of minutes on the news that the

Federal Trade Commission

was conducting an informal inquiry into the company's collection of Internet user information. Trading in the stock was subsequently halted, and it closed the day at 106 1/2, down 4 15/16.

In fact, DoubleClick had disclosed that information Monday in a filing for an impending secondary stock offering in which it hopes to raise more than $600 million. In that

Securities and Exchange Commission

filing, the company says it received a Feb. 8 letter from the FTC saying it was investigating whether DoubleClick had engaged in unfair or deceptive practices as it collected and maintained information concerning Internet users.

New Twist

But in a new twist to the continuing saga about privacy on the Internet, DoubleClick disclosed after the trading halted Wednesday that it was cooperating with the New York attorney general, Eliot Spitzer, in another informal inquiry, this one related to understanding "online advertising and the implications for consumers," as DoubleClick put it.

The revelation about the FTC inquiry is good news for privacy activists such as the

Electronic Privacy Information Center

, which filed a complaint with the FTC on Feb. 10 accusing DoubleClick of engaging in unfair and deceptive trade practices by tracking the online activities of Internet users, then combining that information with separately acquired personally identifiable information about those people. Because EPIC's complaint came two days after the FTC's letter to DoubleClick, it appears that the trade commission was already on the case.

What type of effect the moves will have on DoubleClick's and other Internet companies' efforts to gather information about consumers is unclear. Certainly, state attorneys general have effectively thrown their weight around the online world in the past, forcing

America Online


to provide credits to subscribers in 1997 after the service's phone lines jammed up.

Big Splash

The controversy surrounding DoubleClick "affects everyone on the Internet," says Dean Daniels, chief operating officer of


. The benefits of targeted advertising to consumers and marketers is endangered, he says, if people start believing that "unscrupulous people are grabbing their information and selling it." Daniels adds that it doesn't matter whether a site is collecting personal information or not. "The entire industry is getting painted by the same brush."

Well, the advertising industry is, for sure. Shares of DoubleClick rivals

Engage Technologies



24/7 Media


also plummeted on Wednesday, with 24/7 down 15% and Engage down more than 11%.

But one sell-side analyst, speaking anonymously, calls the privacy issue "an awesome buying opportunity" for DoubleClick. And Perry Boyle, analyst at

Thomas Weisel Partners

, agrees. "Let's be rational here and think about what the absolute worst case is for this company," he says -- that DoubleClick won't easily be able to attach real-world identities to the information it collects about online surfers. That means, he says, "no change to our forecast. No change to the fact that the company is a platform technology in Internet advertising." Boyle has a strong buy on DoubleClick, for which his firm hasn't done underwriting.

Wrong! Rear Echelon Revelations: Only One Drug Away From Stardom


James J. Cramer

2/16/00 7:42 PM ET

Before you say we should forget about the

biotech rotisserie league because the stocks are up so much, I have something to say: That's exactly what people told us 40% ago regarding the

B2B rotisserie league.

I know these moves have been outsized, to say the least, but when I look at the gulf in market caps between the new biotechs and the mature ones, what strikes me is that some of the former may be only one drug away from major stardom.

Don't get me wrong: I am investing paper money in the rotisserie league. The real thing will come during the price breaks. I'm just trying to get up to speed in an area where I know






, but



is foreign to me, even though I was an original investor in


, the company Millennium recently purchased.

I'm approaching it this way, in cautious paper-trading style, because two years ago I went hog wild on the Competitive Local Exchange stocks right at the top, and if I'd waited I could have made some money buying some down but would have lost a fortune on others. I intend to leg in, similarly, to the biotechs that we draft, once I feel confident of the prospects. I am grateful -- we all should be grateful -- for the work of

Melissa "Genome" Kasper

, who put up some great squibs about each stock on our message boards.


James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Imclone Systems and Human Genome Sciences. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

Evening Update: Hewlett-Packard Beats Analysts Estimates


Tara Murphy

Staff Reporter

2/16/00 8:38 PM ET



posted first-quarter earnings of 80 cents a share, beating the 23-analyst estimate of 78 cents but down from the year-ago 85 cents. The report did not include costs associated with its



spinoff. CEO Carly Fiorina said the company, which posted revenue of $11.7 billion, experienced growth in products and noted a turnaround in its


business, according to Reuters.

Tomorrow, three IPOs are scheduled to make their trading debuts. For more on their pricing and underwriting information, check out's

Offerings and stock action coverage.

In other postclose news (earnings estimates from

First Call/Thomson Financial

; earnings reported on a diluted basis unless otherwise specified):

Mergers, acquisitions and joint ventures

Star Cruises




said they have acquired a 95.4% stake in

NCL Holdings


and would look to obtain the remaining shares not tendered. Together, Star and Carnival earlier this month launched a $1.1 billion takeover offer for NCL, after solo attempts from both companies had been rejected.

Earnings/revenue reports

Applied Graphics


said it expected to post a fourth-quarter loss between 22 cents and 27 cents a share, greatly below the two-analyst estimate of a 9 cent profit.

Bell & Howell


posted fourth-quarter earnings of 73 cents a share, a penny below the four-analyst estimate of 74 cents, but up from the year-ago 66 cents a share.



said an accounting revision would trim its fiscal 1999 earnings by roughly 4 cents a share. The company said the revision, which would affect the reporting of income from gift certificates, store credit and lay-away sales, would also slice 3 cents a share off of its fiscal 1998 earnings and reduce its fiscal 1997 earnings by 3 cents.

Pegasus Communications


posted a fourth-quarter loss, which includes results from cable operations that will be sold, of $2.56 a share, narrower than the year-ago loss of $2.79, which included a loss from debt. The seven-analyst estimate expected the company to report a loss of $2.85.

Offerings and stock actions

Chase H&Q

priced a 3.7 million-share IPO for

Apropos Tech


above its expected $17 to $19 range at $22.

Dun & Bradstreet


said it has set spinoffs for

Moody's Investor Service

and the

Dun & Bradstreet Operating Co.

. Dun & Bradstreet posted fourth-quarter earnings of 52 cents a share, in line with both the year-ago report and the six-analyst estimate.

Morgan Stanley Dean Witter

priced a 7.145 million-share IPO for

Choice One


at $20 a share.

DTE Energy


said it set a 10 million-share repurchasing plan and trim its 2000 capital commitment by $100 million.

U.S. Bancorp Piper Jaffray

priced a 4.5 million-share IPO for



at $16 a share.

NextLink Communications


said it set a 2-for-1 stock split of its Class A and Class B common shares.

U.S. Bancorp


said it set a $2.5 billion, or 17%, share repurchasing plan.

For a look into this evening's after-hours trading action, please check out's

The Night Watch.

Bond Focus: Treasuries Weaken in Anticipation of Tomorrow's Greenspeak


Elizabeth Roy

Senior Writer

2/16/00 3:42 PM ET

The Treasury market rested up on the day before all the fun starts.

Very little happened today. The January

housing starts

report had bearish implications while the January

Import and Export Price indices

were marginally positive. There was little market reaction to either.

But tomorrow! Tomorrow brings the

Producer Price Index

and, even more importantly,



Alan Greenspan's



Congressional testimony on the economy and monetary policy.

In recent years, Humphrey-Hawkins has often triggered weeklong bond-market moves in excess of 2 points on the long Treasury bond in one direction or the other.

"In advance of that, people just sit back and wait," said Kevin Logan, senior economist at

Dresdner Kleinwort Benson


The benchmark 10-year Treasury note ended down 1/32 at 99 20/32, lifting its yield a fraction of a basis points to 6.556%. The 30-year Treasury bond, which has been displaced as the market benchmark in recent weeks by supply and demand dynamics, fell 10/32 to 99 23/32, lifting its yield 2.3 basis points to 6.270%.

The two-year note got a boost from the Treasury's announcement that next week's monthly two-year note auction will be $2 billion smaller than the last one, at $12 billion,

Merrill Lynch

government bond strategist John Spinello said. It ended up 1/32 at 99 18/32, trimming its yield 1.7 basis points to 6.615%.

At the

Chicago Board of Trade

, the March

Treasury futures contract ended down 2/32 at 93 22/32.

Logan thinks Greenspan is unlikely to spark a rally tomorrow, since the economy is still growing at a faster pace than the Fed thinks is sustainable. The best one can hope for, he thinks, is an unchanged market.

If, on the other hand, Greenspan suggests that the Fed will raise interest rates more aggressively than people currently expect, and the market goes down, Treasury yields should rise more or less proportionately, Logan says.

If that seems obvious, it's not. Over the last month, the Treasury yield curve has inverted, meaning that long-term yields have dropped below short-term yields. Long-term notes and bonds have outperformed short-term notes because the government plans to reduce the long-term supply.

Logan thinks that long-end yields will rise about as much as short-end yields if Greenspan is hawkish because by a key measure, the long end is as expensive relative to the intermediate part of the Treasury yield curve as it ever gets.

At 6.550%, the 30-year Treasury bond's yield is about 5% lower than the 10-year note's yield, he pointed out. Historically, investors in Treasuries have rarely been willing to accept a 30-year yield more than 5% lower than a 10-year yield. It's true that investors in English government bonds have settled for long-end yields 20% lower than intermediate-term yields, but only because they've had to, Logan said. "Certain institutional investors can only invest in gilts," he said. "We don't have that situation. Nobody has to buy Treasury bonds."

Economic Indicators

Housing starts defied expectations by rising in January. The pace quickened 1.5% to 1.775 million from 1.748 million in December. Economists polled by


had predicted a fall to 1.65 million, on average. Building permit issuance, a leading indicator of housing starts, rose 8.7%, to 1.763 million in January from 1.622 million in December.

Still, starts are down from a revised peak of 1.804 million in January 1999. And the January increase was entirely due to a rise in multifamily housing starts, which are more volatile than single-family starts. Single-family starts fell.

Meanwhile, import prices experienced their gentlest rise in seven months in January, gaining just 0.1%. Less-important export prices were unchanged. The annual pace of import price growth declined for the first time in over a year, from 7.1% to 6.7%. The pace of export price growth held steady at 0.5%.

The weekly

Mortgage Applications Survey

detected declines in both refinancing and new mortgage activity. The Refinancing Index fell to 373.1 from 436.7, while the Purchase Index fell to 270.8 from 307.1.

Currency and Commodities

The dollar rose against the yen and fell against the euro. It was lately worth 109.42 yen, up from 109.18 yesterday. The euro was lately worth $0.9850, up from $0.9873 yesterday.

Crude oil for March delivery at the

New York Mercantile Exchange

, which rose initially, fell after following comments by Energy Secretary

Bill Richardson

and the Saudi Arabian oil minister. Richardson said the White House will unveil plans to ease the heating oil shortage, while the Saudi Arabian oil minister said oil has been appropriately valued over the last six months. Oil dropped to $30.05 a barrel from $30.06 yesterday.


Bridge Commodity Research Bureau Index

rose to 212.67 from 212.61 yesterday

Gold for April delivery at the


rose to $305 an ounce from $304.10 yesterday.


Street Sightings:

Gary B. Smith will be chatting on Yahoo! Thursday, Feb. 17 at 5 p.m. ET. Register for Yahoo! Chat at: It's free!

Jim Cramer will be appearing on New York's WNYW-TV Channel 5 newscast Friday, Feb. 18 at 10 p.m.

Copyright 2000,