Publish date:

daily03-27-00's DAILY BULLETIN

March 28, 2000

Market Data as of Close, 3/27/00:

o Dow Jones Industrial Average: 11,025.85 down 86.87, -0.78%

o Nasdaq Composite Index: 4,958.56 down 4.47, -0.09%

o S&P 500: 1,523.86 down 3.60, -0.24%

o TSC Internet: 1,260.97 down 11.56, -0.91%

o Russell 2000: 573.65 down 0.36, -0.06%

o 30-Year Treasury: 103 25/32 up 6/32, yield 5.986%

Companies in Today's Bulletin:

Bank One (ONE:NYSE)

Citigroup (C:NYSE)


Bausch & Lomb (BOL:NYSE)

Wesley Jessen VisionCare (WJCO:Nasdaq)

In Today's Bulletin:

o Consumer Products: Dial 'T' for Takeover
o Wrong! Rear Echelon Revelations: The Trader Scratches His Head
o Evening Update: UAL Sees Brighter Earnings Skies
o Bond Focus: Consensus Builds Around a Half-Point Hike

Also on

Moscow Journal: Putin Has Reins in Moscow and Investors Are Hoping for Stability

The new president has promised reforms, but whether he will follow through remains to be seen.

Banking: Bank One Bounces on News of Dimon's Appointment

Investors seem confident in the former Citigroup exec, but Bank One still has tough row to hoe.

Options Buzz: Despite Uncertainty on Ruling, Microsoft Call Options Are in Demand

Also, the Clinton Administration's endorsement of ethanol buoys ADM calls.

Mutual Funds: Monument Internet Fund Loses Manager Cheung to Start-Up

The move is another indication that Net fund management is every bit as volatile as the sector itself.

Consumer Products: Dial 'T' for Takeover


Catherine Valenti

Staff Reporter

3/27/00 12:41 PM ET

With its market capitalization slipping away,


(DL) - Get Report

is looking more and more like a takeover target.

Trading at just under 13, many industry watchers say the maker of Dial soap and

Armour Star

canned meats might make an attractive purchase for global consumer products players like

Sara Lee


or Germany's



"Dial is significantly undervalued," says Kevin Grant, an analyst at money manager

Harris Associates

, which owns Dial, Sara Lee and


(UL) - Get Report

. "There are multinational companies that would be interested in having some of their brands."

Dial's stock has gained some ground since March 10, when shares plunged 23% after the company

announced its earnings for the year's first half would fall short of expectations. But analysts say it could be a while before the stock fully recovers.

It's off 46% this year, a drop almost as steep as

Procter & Gamble's

(PG) - Get Report

49% decline, and it's sharply underperforming competitors like


(CL) - Get Report

and Unilever, whose shares have fallen 16% and 18%, respectively.


Dial shares currently trading 20% below its $14.50-per-share spinoff valuation in 1996, it is high on the radar screen as a potential takeover candidate," Andrew Shore, an analyst for

Deutsche Bank Alex. Brown

, wrote in a recent note. (Deutsche Bank hasn't done recent underwriting for Dial.)

"Given its diverse brand portfolio, we believe a sale would occur in several pieces, which could take longer to execute and would result in a significant corporate capital gains tax," added Shore, who estimates a sum-of-the-parts valuation of 17 to 18 a share, after giving rise to the corporate tax hit.

A Dial spokeswoman declined to comment on the issue.

Making Dial more vulnerable to bids is the growth of large, global retailers that prefer the ease and efficiency of dealing with fewer suppliers that can provide a wide variety of consumer products. Though Dial's products are well known in the U.S., only 10% of the company's $1.7 billion in sales last year came from international markets.

"Longer term, the retail consolidation coupled with the need for faster-growing markets augurs that Dial needs to be a larger company," says Jim Dormer, an analyst at

Morgan Stanley Dean Witter

, which has done no recent underwriting for Dial.

Germany's Henkel seems to lead the list of potential suitors. Dial formed a joint venture with the company last year to develop and market laundry detergents in the U.S. The companies expanded that venture into Mexico last week, buying an 80% stake in Mexican soap and detergent maker

Fabrica de Jabon Mariano Salgado


With 71% of its sales within Europe, Henkel has been keen to enter other markets through joint ventures and equity stakes. The company also owns a 25% stake in


(CLX) - Get Report


And Henkel could be gearing up to get more aggressive. In its earnings announcement Wednesday, the company said it plans to repurchase up to 14.6 million of its shares for an employee stock incentive plan and possible acquisitions.

Henkel Chairman Hans-Dietrich Winkhaus has also said the company is prepared to make large acquisitions, should the opportunity arise. With sales of 11.4 billion euros ($10.9 billion) in 1999 and cash flow of 1.25 billion ($1.2 billion), Henkel has plenty of cash on hand for purchases.

A Henkel spokeswoman declined to comment about the company's acquisition strategy.

In the U.S., Chicago, Ill.-based Sara Lee, which makes everything from



Ball Park Franks

, has been on an acquisition spree. The company bought

Hills Bros.




Chase & Sanborn

coffee assets from

Nestle USA

in December and recently launched a hostile bid for U.K. apparel manufacturer

Courtaulds Textiles PLC


With only 8% of Sara Lee's body care and household sales in the U.S. last year, Dial's strong U.S. presence could be a nice fit for Sara Lee's portfolio, say some analysts. A Sara Lee spokeswoman declined to comment on the company's acquisition strategy.

Sara Lee also has a $5.2 billion food unit with $4.1 billion in sales of meat products. George Bryan, Sara Lee Foods' CEO, recently said the unit is looking to purchase meat and bakery companies with sales of $100 million to $500 million in the U.S. With sales of $246.5 million in fiscal 1999, Dial's Armour could fit the bill.

Jimmy Dean

sausage and Armour Star pork brains and gravy anyone?

Whatever Dial's fate, analysts say the challenge for the company will be getting its products to stand out amid the ever-growing sea of consumer products lining the supermarket aisles -- a challenge that might more easily be met as a bigger company.

Wrong! Rear Echelon Revelations: The Trader Scratches His Head


James J. Cramer

3/27/00 5:42 PM ET

We couldn't get our arms around the trading action today. We couldn't read it. We couldn't make sense of it. That disturbs us. Maybe it was the severe reaction to the lack of


(MSFT) - Get Report

news. Or perhaps it was that oil didn't come down enough. Or that all of that money that was supposed to come in didn't do anything.

Anyway, we left bewildered. I found myself thinking, "what would I possibly say if someone stuck a mike in my face and asked me what I thought?" If ever there were a day to pass on that, it would be today.

So many people told me in the last few days that the big institutions will come in and buy that I guess I felt like I should have seen more of it today. Why not come in and buy the


(VRSN) - Get Report

after it was upgraded? Why not make a bet that Microsoft won't go much lower even if it loses given how strong personal computers are?

If one stock could encapsulate our frustration it would have to be



. This morning when the stock didn't get hit on the news that



was allied with


(IBM) - Get Report

on a giant hosting agreement that could impact Exodus, we sold a little. We ended up buying it right back when it was clear that the market didn't mind.

Three hours later the stock was down six, off the Qwest news, no less, and we felt like real dolts.

It was just that kind of day. Everything felt like it was slow motion. Somehow we expected more.

Not every day can be gettable. This one sure wasn't.

Random musings:

At last some traction on the

taking it off the table pieces. Many of you wrote in to say that you felt great taking some off and stowing it away. Some of you said you even felt you could trade and invest better without that big margin debt or with some cash on the sidelines.

To which I say, Amen.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Exodus, Verisign and Microsoft. 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: UAL Sees Brighter Earnings Skies


Tara Murphy

Staff Reporter

3/27/00 8:00 PM ET

First-quarter earnings for

United Airlines



(UAL) - Get Report

TheStreet Recommends

look turbulence-free after the company said its report would surpass the top end of its earlier expectations of 80 cents to $1.20 a share. The company said it sees first-quarter earnings coming in between $1.25 to $1.40 a share. The 11-analyst estimate expects the company to report EPS of 98 cents a share. UAL reiterated its fiscal 2000 earnings forecast of between $7 to $9 a share and attributed its anticipated 6.25% to 7% total revenue growth to robust passenger demand and higher fares.

Bank One

(ONE) - Get Report

said that it has tapped former


(C) - Get Report

President Jamie Dimon as its new chairman and CEO. According to a press release, Dimon plans to buy a 2 million-share equity stake in Bank One, which has seen its stock price stumble due to its floundering credit card unit.

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

Bausch & Lomb


said that it plans to recommend three officials to sit on

Wesley Jessen VisionCare's


board. The nominations could ensure the acceptance of Bausch & Lomb's roughly $600 million offer for the company. Bausch & Lomb elected former

Chase Manhattan Bank


exec vice president William Balderston,

Global Crossing

North America CEO Joseph Clayton and

University of Rochester

economics professor Charles Plosser to Wesley Jessen's board. Wesley Jessen already has agreed to a $420 million deal with

Ocular Sciences

(OCLR) - Get Report


Liberate Technologies

(LBRT) - Get Report

entered into a $561 million stock agreement to buy closely held


. Liberate said it would issue shares to fund the deal, which is set to close in the second quarter of 2000.

North Fork Bancorp


said it would contemplate raising its $1.9 billion takeover for

Dime Bancorp


if Dime is willing to negotiate. North Fork said it would seek permission from

Hudson United Bancorp


to hold talks with Dime, which has already committed to a $1.3 billion deal with Hudson. North Fork said it would consider changing the stock and cash terms of its initial offer, which values Dime at $17.06 a share based on current stock prices.

Quest Diagnostic

(DGX) - Get Report

said it inked an agreement to offer lab services to



U.S Healthcare members. Although the terms are undisclosed, the contract, which starts April 1, makes Quest one of Aetna's preferred lab service national providers for its U.S. Healthcare members.

3dfx Interactive


said it agreed to buy closely held


in a stock deal valued at $186 million. According to the terms, 3dfx said it would pay 15.6 million shares and options for GigaPixel. The deal will be completed in the third quarter of 3dfx's fiscal year 2001.

Earnings/revenue reports



posted second-quarter earnings of 28 cents a share, a penny better than the 10-analyst estimate. The company reported second-quarter 1999 earnings of 22 cents a share.

Walter Industries


posted third-quarter earnings of 11 cents a share, which includes a 5-cent gain. The two-analyst estimate expected the company to post earnings of 5 cents a share. The results are up from the year-ago report of a 21-cent loss. Separately, the company said Chairman, President and CEO Kenneth Hyatt stepped down from his posts to pursue other interests. Former Chairman and CEO G. Robert Durham will temporarily replace Hyatt.

Offerings and stock actions

Deutsche Banc. Alex Brown

priced a 7.5 million share IPO for

IntraBiotics Pharmaceuticals


at the top of its $13 to $15 range at $15 a share.

Chase H & Q

said it priced a 4 million-share IPO for



above its expected $14 to $16 price range at $18 a share.


Mosel Vitelic


Micron Technology

(MU) - Get Report

resolved a $100 million patent dispute this morning before it entered a U.S. District Court in Delaware, according to court records,


reported. The terms of the resolution, which involved 10 patents that covered computer memory circuits and semiconductor manufacturing processes, were not disclosed. Mosel had initially brought a lawsuit claiming infringement against Micron, which countersued.

The judge presiding over the


(MSFT) - Get Report

antitrust case will render a decision on the matter sometime after Tuesday, according to sources quoted by


. According to one of the sources, District Judge Thomas Penfield Jackson had previously set a deadline of Tuesday to decide whether further talks were necessary between the parties involved in the case.

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

The Night Watch.

Bond Focus: Consensus Builds Around a Half-Point Hike


Elizabeth Roy

Senior Writer

3/27/00 5:06 PM ET

The bond market ended a lackluster session with most issues close to unchanged. It managed to shake off earlier weakness as stock prices eroded over the course of the day.

The day's only economic release --

existing home sales

for February -- was a nonstarter, as was a

speech by



Alan Greenspan

on Social Security and Medicare financing.

And the price of oil didn't provide much guidance, as


ministers, meeting in Vienna, failed to reach an agreement on increasing production and adjourned till tomorrow.

But considering the backdrop of rising fears that the

Federal Open Market Committee

will wheel out the big guns at its next meeting on May 16 and hike the

fed funds rate

by 50 basis points, the price action was good.

Ever since the FOMC released the minutes of its Feb. 1-2 meeting on Thursday, which revealed that at least some committee members were prepared to consider hiking the fed funds rate in increments larger than 25 basis points in response to signs of rising inflation, traders have been upgrading the risk that the May 16 meeting will produce the first 50-basis-point hike since February 1995. That continued today. The

fed funds futures

contracts listed on the

Chicago Board of Trade

discounted a 53% chance of a hike in the fed funds rate from 6% to 6.50% on May 16, up from 41% on Friday.

The implications for long-term Treasury yields aren't clear. Joe LaVorgna, senior U.S. economist at

Deutsche Bank Securities

, expects "more inflation, not less, and higher yields." On the other hand, Don Kowalchik, associate fixed-income analyst at

A.G. Edwards

, argues that a 50-basis-point hike might trigger a selloff in the stock market that could send money Treasuries' way.

A more unambiguously bearish sign for the Treasury market came in the form of the latest biweekly Commitments of Traders report from the

Commodity Futures Trading Commission

, released Friday after the close.

The report showed the biggest net long position among speculators in key interest-rate futures contracts (with the notable exception of the Treasury bond contract) since late summer 1998. Extreme net long positions among speculators often coincide with peaks in prices.

"This suggests that little buying away from the large speculators has taken place," explains

Jim Bianco

, president of

Bianco Research

, in an analysis of the numbers. "In other words, it suggests that the rally from the January 2000 low was largely a short-covering affair."

"For prices to continue to move higher," Bianco adds, "someone other than the large speculators must step up and start buying. We have seen little evidence of others interested in committing new money to the bond market. They are too busy buying technology stocks."

The benchmark 10-year Treasury note ended the day unchanged, its yield 6.191%. The 30-year bond gained 7/32 to 103 25/32, trimming its yield 1.6 basis points to 5.977%. The two-year note gained 1/32 to 99 25/32, dropping its yield 1.8 basis points to 6.619%.

At the

Chicago Board of Trade

, the June

Treasury futures contract gained 2/32 to 96 3/32.

Economic Indicators

Existing home sales surged 6.7% in February to a pace of 4.75 million from a revised 4.45 million in January. The pace peaked in June at 5.59 million. The January pace was the slowest since November 1997.

Currency and Commodities

The dollar fell against the yen and gained against the euro. It lately was worth 106.75 yen, down from 106.88 on Friday. The euro was worth $0.9667, down from $0.9769. For more on currencies, please take a look at



Currency Watch column.

Crude oil for May delivery at the

New York Mercantile Exchange

fell to $27.79 a barrel from $28.02.


Bridge Commodity Research Bureau Index

fell to 212.30 from 212.59.

Gold for April delivery at the


fell to $280.50 an ounce from $285.10.


Copyright 2000,