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TheStreet.com's DAILY BULLETIN

February 23, 2000

http://www.thestreet.com

Market Data as of Close, 2/22/00:

o Dow Jones Industrial Average: 10,304.84 up 85.32, 0.83%

o Nasdaq Composite Index: 4,382.12 down 29.62, -0.67%

o S&P 500: 1,352.17 up 6.08, 0.45%

o TSC Internet: 1,084.90 down 11.72, -1.07%

o Russell 2000: 540.95 down 4.73, -0.87%

o 30-Year Treasury: 102 08/32 up 1 , yield 6.068%

In Today's Bulletin:

o Internet: Small Business Getting Big Attention as Dow Jones, Excite Join B2B Race
o Silicon Babylon: Cruttenden Roth Conference: The Rest of Odetics
o Evening Update: Still No Confirmation of Alcatel-Newbridge Deal
o Bond Focus: Despite Recovery in Stocks, Bonds Hang Onto Gains

How's your online broker doing? Let us know in our Online Broker Survey 2000. Fill it out now and get a chance to win a TSC T-shirt. Fill out the survey here:

http://survey.informative.com/sb/survey?s=57680&hdr=1

Also on TheStreet.com:

Brokerages/Wall Street: SEC Charges Fund Manager With Fraud

The SEC says David Mobley Sr. defrauded investors of at least $59 million since 1993.

http://www.thestreet.com/brknews/brokerages/888176.html

The Night Watch: The Night Watch: Visx Sees Trouble After Hours

The company, which makes systems for laser vision correction, announced price cuts and fell 3 15/32 to 18 11/32 on 430,000 shares on Island ECN.

http://www.thestreet.com/markets/nightwatch/888145.html

Mutual Funds: Jacob's Internet Strategy Hits Bump in Road

The smaller-cap Net stocks he favors are being outrun by large-cap tech blue-chips.

http://www.thestreet.com/funds/funds/888099.html

Brokerages/Wall Street: Bear Stearns Exec Rolls Out Big Guns for SEC Battle

Richard Harriton may go down to SEC fraud charges, but it won't be cheap -- or easy.

http://www.thestreet.com/stocks/brokerages/887846.html

Software: Closing Arguments Reveal Continuing Microsoft-Justice Rift

The government said it was 'simply impossible' that the company wouldn't be found to have violated antitrust laws.

http://www.thestreet.com/brknews/software/888133.html

Telecom: Oracle Is Ready to Go Wireless, but Skeptics Remain

Still, the stock has made a believer of Internet investors in recent months.

http://www.thestreet.com/tech/telecom/887930.html

Internet: Small Business Getting Big Attention as Dow Jones, Excite Join B2B Race

By

George Mannes

Staff Reporter

2/22/00 7:54 PM ET

On the Internet, there's no business like small business. That's the song that several online players have been singing, and now

Dow Jones

(DJ)

and

Excite@Home

(ATHM) - Get Report

are the latest to take up the tune.

The companies said Tuesday that they were launching a new, jointly owned company called

Work.com

that aims to be a portal for small and midsize businesses on the Internet. The partners, which are forming the venture from existing operations at each company, hope to sell a minority stake to the public later this year.

The move spotlights the belief held by numerous Internet companies that for all the money that might be made by leading consumer portals such as

Yahoo!

(YHOO)

, there's as much -- if not more -- opportunity in creating an all-in-one site for business users that encompasses news, commerce, community tools and other resources.

Other ventures that appear to be going after the same market include

NBC Internet

(NBCI)

, which is at work on a

B2B strategy;

Office.com

, owned by

Winstar Communications

(WCII)

and

CBS

(CBS) - Get Report

; and

America Online

(AOL)

, which is assembling services for small businesses through deals such as a recent alliance with

Onvia.com

, a company slated to go public soon that is developing a B2B marketplace for small business buyers and sellers.

Big Opportunity

Dow Jones and Excite@Home are targeting a market they define as the 30 million U.S. companies with anywhere from one to 500 employees, which they say account for half the gross domestic product. "We think the opportunity here is certainly at least the size of

Excite

all over again," said Excite@Home CEO George Bell in a call with reporters. The shares of both companies rose fractionally on the news, with Excite@Home closing at 34 3/16 and Dow Jones settling at 62 9/16.

The bite that the two companies will be taking out of the B2B market is starting as a very small nibble indeed. Work.com launches with a total of 15 or 16 employees contributed from sites that the firms launched last year -- the

dowjones.com

vertical portal for small business users, and Excite@Home's Work.com, an online service targeted at small and midsize businesses. The dowjones.com portal had $2.5 million in revenue in the fourth quarter of 1999, according to Dow Jones. Add Work.com, and the new venture has annualized revenue starting at $20 million to $25 million per year, says Bell. By comparison, in the fourth quarter alone, Dow Jones' news wires had $54.9 million in revenue and

The Wall Street Journal

site had $10.8 million in revenue.

The companies are hoping they'll be able to step away from the pack by combining Dow Jones' journalism and brand with Excite@Home's experience in building the Excite portal and ability to drive visitors to the new site. Along with news from Dow Jones wires and selected stories from

WSJ.com

, they hope to offer online services such as Web-site hosting, customer-relationship management payroll and accounting services.

Competition Is 'Staggering'

The number of companies getting into the B2B portal business is "staggering," says Mark Walsh, CEO of B2B portal

VerticalNet

(VERT)

. The Dow Jones/Excite@Home venture is "a great combination of content and a broadband platform," says Walsh. "Dow Jones is a great brand name that everyone trusts."

Walsh, though, says VerticalNet will continue to focus on midsize firms, which he defines as having anywhere from 50 to 1,500 employees and from $25 million to $1 billion in annual revenue. Companies focusing on smaller businesses don't appear to be as focused as is VerticalNet on transactions within specific industries, he says. "We still believe it's the industry focus that matters," he says.

But don't try picking winners and losers yet in the small business portal market. The industry is at a very early stage, points out Dan Meyer, senior vice president of business development for Office.com. "The user is just starting to understand that these sites exist," he says.

It's also likely that what these sites look like today will bear little resemblance to what they will become. That's clear lesson from the development of consumer online portals over the past few years, says Meyer. "They constantly evolved. They added new features. And they added these features on a daily or at least weekly basis," says Meyer. "So for their users, there was constant new value created on those sites. ... That's a lesson we hope to apply here at Office.com."

Silicon Babylon: Cruttenden Roth Conference: The Rest of Odetics

By

Cory Johnson

Editor-at-Large

2/22/00 7:12 PM ET

Editor's note: For the first part of this column, read "The Internet Incubator You Haven't Heard of."

LAGUNA NIGUEL, Calif. -- As investors at the

Cruttenden Roth Growth Stock Conference

look for new deals, the presentation by nearby Anaheim, Calif.-based

Odetics

(ODETA)

may provide them with a whole slew of deals. The company, which some call undervalued with a market cap of $172 million, is about to spin off one division,

Iteris

, in a $200 million initial public offering.

But the most exciting Odetics news may be in spinoffs yet to come. That's because the likely next candidate,

Mariner Networks

, is focused squarely on the Internet. And, um, that's good.

Mariner makes components for small and branch office network-access applications. They include ATM subsystems, ATM WAN-access concentrators -- stuff that helps midsize companies handle their data, voice and video traffic on the Internet. Its products pull together disparate systems at a lower price than competitors' offerings.

"Everyone in this business is focused on the convergence of traffic," says Laurie Gooding, a senior analyst with the research firm

Cahners In-Stat

. "ATM alone is going to be a huge business. In 1998, it was $2.8 billion, but by 2003 we're looking for $8.7 billion in ATM equipment sales. So this is the best time for Mariner to enter the market. If there was a window of opportunity from 1997 to 2003, it's now," she says. "I haven't looked at them closely yet, but Mariner is the kind of company that gets acquired in 18 months." Gooding compares it with

Mitel

(MLT)

, which sells components to a similar market.

While Mariner hit a bump last year when

IBM

(IBM) - Get Report

, its biggest customer, sold its networking business to

Cisco

(CSCO) - Get Report

, the company has solidified relationships with

Hughes Electronics

(GMH)

, Cisco,

TimePlex

and some U.S. government defense contractors. Jeffrey Van Sinderen, an analyst with

B. Riley & Co.

, expects Mariner to have $15 million in revenue in 2001. His firm does not do any underwriting, and he has a buy rating on the stock.

So what is the value of a networking company with $15 million in revenue? Mitel is trading for twice its revenue this year.

Copper Mountain

(CMTN)

is going for 35 times revenue. Cisco is trading for 30 times revenue.

Juniper Networks

(JNPR) - Get Report

,

209

times revenue. But for the sake of argument, assume that Mariner is valued at just 1.5 times 2001 revenue. That would give it a $22.5 million valuation.

Stacking It Up
Odetics shareholders get two hot tech companies, a pile of cash and a free IPO.

Source: SEC filings, B. Riley & Co. research

Odetics is a quiet company (with all due respect to

Northwestern Mutual Life

). It doesn't curry the fickle affection of Wall Street analysts and as a result gets little coverage. While company officials are friendly, they doesn't curry to the press. "We've just adopted a policy of not talking about the company," says CEO and founder Joel Slutzky.

But Slutzky has plenty of Odetics news to talk about at this conference besides Iteris and Mariner. Odetics boasts plenty of old-fashioned, tangible assets as well -- the kind that are hard to come by in Internet land. Like real estate. Odetics sprawling corporate headquarters sits on 14 acres one block from

Disneyland

. Comparable real estate in Orange County goes for about $3 million an acre, a scale that puts the value of Odetics' little plot at $42 million.

The company also has sizable broadcast division, with two components. One component,

Gyyr

, has a burgeoning digital video security-system business. It promises to grow as fast as crime, perhaps even faster.

Roswell

, the second component of the broadcast division, makes software that is being used by 12 television stations to automate operations. Odetics also says it is working with two unnamed Internet streaming video players that may decide to use Roswell. Or not. Either way, Roswell and Gyyr are expected to take in $55 million in 2001.

Add to that a settlement that Odetics is still collecting from a patent-infringement lawsuit against

Storage Technology

(STK) - Get Report

-- $10 million a year for the next two years. And Van Sinderen says the company should also end up with about $4 million in cash after the Iteris IPO.

"Odetics is a good solid company," says Howard Love Jr., hedge fund manager of Calif.-based

Love Capital Management

, a longtime Odetics shareholder. Odetics now accounts for 3% of his fund. "Is Iteris a moonshot? Probably not. But if Odetics can bulk up the Mariner stuff, well, that's a networking IPO and those things are huge.

That

could be a moonshot."

Cory Johnson files weekly from TheStreet.com's San Francisco Bureau. In keeping with TSC's editorial policy, he neither owns nor shorts individual stocks, although he owns shares of TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Johnson welcomes your feedback at

cjohnson@thestreet.com.

Evening Update: Still No Confirmation of Alcatel-Newbridge Deal

By

John J. Edwards III

Assistant Managing Editor

2/22/00 10:36 PM ET

There was still no confirmation of the intense speculation that

Alcatel

(ALA)

would announce an acquisition of

Newbridge Networks

(NN)

. As

reported earlier, Canadian networker Newbridge this evening postponed its planned third-quarter earnings release, heightening speculation that a deal announcement was imminent and that French telecom-equipment giant Alcatel would be the buyer. Analysts say they expect an announcement early Wednesday.

Arizona Sen.

John McCain

defeated Texas Gov.

George Bush

in the Michigan and Arizona Republican primaries, according to TV network exit-poll projections.

In other postclose news (earnings estimates from

First Call/Thomson Financial

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

Earnings/revenue reports and previews

Astec Industries

(ASTE) - Get Report

reported fourth-quarter earnings of 21 cents a share, a penny better than the nine-analyst expectation but down from the year-ago 29 cents. The company said it expects 20% earnings and revenue growth in 2000.

Clear Channel Communications

(CCU) - Get Report

reported a fourth-quarter loss of 3 cents a share, falling short of the three-analyst expectation of a 1-cent profit. The company earned 4 cents a year earlier.

Crown Castle

(TWRS)

reported a fourth-quarter loss of 24 cents a share, 4 cents narrower than the five-analyst view but wider than the year-ago 9-cent loss.

R.H. Donnelley

(RHD)

reported fourth-quarter earnings of 22 cents a share, in line with the two-analyst prediction and up from the year-ago 14 cents.

Fluor

(FLR) - Get Report

reported first-quarter earnings of 69 cents a share, in line with the five-analyst estimate and up from the year-ago 68 cents. The company said it expects weaker second-quarter earnings but a strong second half.

Longs Drug Stores

(LDG)

reported fourth-quarter earnings of 61 cents a share, 7 cents short of the six-analyst outlook but up from the year-ago 60 cents. The company blamed the shortfall on labor and other costs connected with the opening of new stores.

MRV Communications

(MRVC)

reported fourth-quarter earnings of 2 cents a share, in line with the two-analyst estimate and up from the year-ago 1 cent. MRV also agreed to acquire fiber-optic equipment maker

Fiber Optic Communications

for $263 million, and said it is exiting its enterprise LAN switching business.

Neiman Marcus

(NMG.A)

reported second-quarter earnings of 84 cents a share, 3 cents ahead of the four-analyst expectation and up from the year-ago 64 cents.

Papa John's

(PZZA) - Get Report

reported fourth-quarter earnings of 46 cents a share, in line with the 12-analyst view and up from the year-ago 33 cents.

Pride International

(PDE)

reported a fourth-quarter loss of 5 cents a share, narrower than the 17-analyst estimate of a 14-cent loss but down from the year-ago profit of 21 cents.

Offerings and stock actions

C&D Technologies

(CHP)

set a buyback of up to $25 million of its common shares.

Kimberly-Clark

(KMB) - Get Report

set a buyback of an additional 25 million shares. The buyback is in addition to about 7 million shares remaining under a previous authorization. Separately, the company said it will invest $300 million in new tissue machines in Jenks, Okla., and Loudon, Tenn., with production phased in over a two-year period starting in mid-2001.

The 23.5 million-share IPO of

Nextel Partners

(NXTP)

was priced at $20 a share, the top of the $18-to-$20 range.

Goldman Sachs

and

Donaldson Lufkin & Jenrette

are the lead underwriters. Nextel Partners is an affiliate of

Nextel Communications

(NXTL)

, offering digital wireless communications services in small and midsize markets.

Wells Fargo

(WFC) - Get Report

set a buyback of up to 81 million shares, or about 5% of its 1.6 billion outstanding shares. The company said about 35 million shares remain on a separate 82 million-share authorization, set Sept. 28.

Miscellany

Praxair

(PX)

named Dennis Reilley president and CEO. Reilley had been COO of

DuPont

(DD) - Get Report

.

Visx

(VISX)

said it would slash the licensing fee for its laser vision correction technology to $100 from $250. The go-for-growth strategy has gone over poorly with traders so far, with Visx down 3 1/4 to 18 5/8 in after-hours trading on

Island

. (See

The Night Watch for more on the action in Visx.) Separately, Visx set a buyback of up to 10 million shares.

Bond Focus: Despite Recovery in Stocks, Bonds Hang Onto Gains

By

David A. Gaffen

Staff Reporter

2/22/00 3:54 PM ET

Treasuries fed on the blood of the struggling stock market today, continuing a trend that's been in place since

Fed

chairman

Alan Greenspan

dug his fangs into the market's neck with his

Humphrey-Hawkins

testimony Thursday. Stocks managed a recovery in the last hour, but bonds held onto most of their gains nonetheless.

Stocks were routed Friday on interest-rate fears, as Greenspan said Thursday that stock gains are fueling excessive consumer demand that could potentially lead to dangerous inflation. The

Dow Jones Industrial Average

lost 295 points and the Nasdaq shed 137 Friday, and were both mired underwater for most of today until the Dow came back.

The benchmark 10-year Treasury note was lately up 25/32 to 100 27/32, dropping the yield 10.7 basis points to 6.384%. The 30-year Treasury bond was up 25/32 to 102 4/32, lowering the yield 6.6 basis points to 6.094%. The five-year note was up 14/32 to yield 6.574%, and the two-year note was up 4/32 to 6.564%.

The March bond futures contract, traded on the

Chicago Board of Trade

, closed up 31/32 to 95 27/32.

Without economic releases or important speeches, the bond market tracked the stock market's movements impeccably -- bonds peaked when stocks were at their lows.

Fed Chairman Greenspan has been careful to say that he's not targeting the stock market. However, because the advances in equities made in the last several years have far exceeded gains in income (see James Padinha's

column for more on this subject), he believes it's fueling an unsustainable level of demand that banks on substantial increases in corporate profits that haven't been earned yet.

The increased influence of stock market gains on consumer spending decisions has lessened the impact of rate hikes by the Federal Reserve. Combined with the gains made in home equity during the last few years, and the record number of mortgage refinancings that gave consumers more discretionary income, the pace of consumer demand hasn't slowed in response to higher interest rates.

Today, New York Fed President

William McDonough

reiterated, though more gently, Greenspan's remarks. McDonough, recognized as one of the most

dovish Fed officials (that is, he favors a less restrictive monetary policy), said this morning that he believes the inflation rate is going down, according to

Reuters

. Speaking in New York, McDonough also said the wealth effect shouldn't result in a "more Draconian monetary policy," but he echoed Greenspan's comments that interest rates will have to rise in order to slow demand.

Greenspan repeats his Humphrey-Hawkins testimony to the

Senate Banking Committee

tomorrow morning. Fed Governor

Laurence Meyer

, considered one of the most hawkish members of the Fed, speaks tomorrow to the

National Association of Business Economists

on how budget surpluses affect monetary policy, at 7:50 a.m. EST.

"Unless Greenspan decides to change his message a little bit, or we get something earth-shattering, I would expect things to track commodities and stocks," said Bill Hornbarger, fixed income strategist at

A.G. Edwards

.

The Treasury will sell $12 billion in two-year bonds tomorrow afternoon.

Economic Indicators

There were no releases today, and there are no monthly releases tomorrow. January's

durable goods

report is due out Thursday, and the Commerce Department revises its fourth-quarter

GDP

Friday.

Currencies and Commodities

The market improved overnight as the dollar continued to surge against the yen. The dollar reached a six-month high against the yen, because confidence that Japan's economy is on the rise has waned in recent weeks. Dollar/yen was lately off the recent highs, trading at 110.83, down from 111.30 yesterday.

While the yen was struggling, the euro closed above parity with the dollar for the first time since Jan. 26. It lately traded at $1.0029, from $0.9872 yesterday.

Crude oil for March delivery on the

New York Mercantile Exchange

recovered late in the day, and closed up 44 cents to $29.95, from $29.51 Friday.

The

Bridge Commodity Research Bureau Index

fell to 211.84 from 212.77 yesterday.

Gold for April delivery on the

COMEX

managed to finish higher, lately at $307.8 from $307.3 Friday.

Copyright 2000, TheStreet.com