April 26, 2000

Market Data as of Close, 4/25/00:

o Dow Jones Industrial Average: 11,124.82 up 218.72, 2.01%

o Nasdaq Composite Index: 3,711.23 up 228.75, 6.57%

o S&P 500: 1,477.14 up 47.28, 3.31%

o TSC Internet: 818.56 up 62.21, 8.23%

o Russell 2000: 489.03 up 20.49, 4.37%

o 30-Year Treasury: 104 09/32 down 27/32, yield 5.934%

Companies in Today's Bulletin: (KOOP:Nasdaq)

JDS Uniphase (JDSU:Nasdaq)

eBay (EBAY:Nasdaq)

Microsoft (MSFT:Nasdaq)

Compaq (CPQ:NYSE)

Bausch & Lomb (BOL:NYSE)

CDNow (CDNW:Nasdaq)

In Today's Bulletin:

o Internet: drkoop on Life Support as AOL Takes 10% Equity Stake
o Wrong! Dispatches from the Front: Hearing What They Want to Hear
o Evening Update: JDS Uniphase, eBay Beat Estimates
o Bond Focus: Consumer Resilience Hits Treasury Prices

Also on

Telecom: Avanex Shares Roar Higher as Gilder Rides Again

The newsletter's momentum-boosting effect has some investors shaking their heads.

Manufacturing: Pikachu and Squirtle Help Hasbro Beat Estimates

Pokemon spurs strong demand and helps the No.2 toy maker post strong earnings.

Market Roundup: Stocks Fulfill Fantasies in Broad, Tech-Led Rally

eBay, JDS Uniphase, Intel and Hewlett-Packard today's big winners.

The TaskMaster: Calling Agent Mulder: The Microsoft Files

Taking conspiracy theories too far? Some point to analyst Rick Sherlund as the mystery man in this equation.

Internet: drkoop on Life Support as AOL Takes 10% Equity Stake


Edith Yates

Editorial Assistant

4/25/00 10:01 PM ET

Within weeks of fellow e-death row inmates






having been saved from the gallows,


today slipped into the noose. postponed release of its first-quarter earnings, warned they would be ugly, said it had cash to stay alive through the summer, and retained

Bear Stearns

to explore strategic alternatives.

A victim of its own bad marketing deals and the recent market downturn, painted a grim picture after the market closed today.

In its annual report, released March 30, the company admitted it had received a "going concern" warning from its independent auditors. In other words, the company didn't have enough cash to cover its obligations and continue operating for the next 12 months.

The company said it would seek financing, possibly through a secondary offering. With its stock price below its IPO level and the entire stock market struggling, prospects for a secondary offering have been slim. went public June 8, 1999, and shares first fell below their IPO price of $9 on Feb 28. Shares of the company rose 1/16, or almost 3%, to 2 11/32 before trading was halted in midafternoon, pending what was supposed to be the company's earnings release.

To try to solve its crisis, the company may seek a sale, though it would not comment on that possibility. There are several factors, beyond its bleeding bank account, that make the company an unattractive purchase. A clause in the company's agreement with former Surgeon General Dr.

C. Everett Koop

allows him to terminate his agreement upon a change in control of the company.

If that happened, the new owners might have to change both the name of the company and the Web address. All money spent on brand recognition might go out the window. That's not the only cause for concern, according to

Pacific Growth Equities

analyst Mark Mulcahy. The company has restrictive agreements with





(GO) - Get Report

that call for drkoop to make huge payments to them in return for being the exclusive health content provider to the two companies' Web properties.

These expensive deals are part of the reason drkoop is where it is now. Last July, the company agreed to pay AOL $89 million over four years. As of Dec. 31, $65 million of that was still outstanding. Today, the company said it had renegotiated with AOL, converting all future cash commitments, estimated at $64 million, and warrants into a 10% equity stake.

The exclusive content agreement also was shortened by 26 months. "AOL taking equity, I'm sure some people will seize on that as a positive. To me, that's the equivalent of, 'You can't pay your bills.' Somebody hands it over to a debt collector who says, 'We'll give you 30 cents on the dollar,' " Mulcahy said.

Pacific Growth hasn't done any underwriting for drkoop, which also said it restructured its year-old agreement with, which had called for the company to pay Go $57.9 million over three years. will receive an undisclosed cash payment and warrants to buy additional drkoop shares at an undisclosed strike price. The company tried to boost analysts' spirits by saying that the restructured deal represents a cash savings of $38 million.

"There's a big lesson to be learned

from drkoop in the sales and marketing side," said

Wit Capital

analyst Richard Lee -- namely, that companies should avoid getting locked into expensive, long-term placement agreements. He said it may be difficult for anyone to step in to bail out drkoop because few would be prepared to assume the types of losses drkoop is suffering.

A buyer would need to do a wholesale restructuring of the company. Wit Capital was co-underwriter of drkoop's IPO and has a neutral rating on the stock. The Austin, Texas-based health care portal reported preliminary first-quarter revenue of roughly $4.6 million, a dismal number that misses even the company's own expectations.

Net loss is expected to be between 80 and 82 cents per share, the company said. Analysts polled by

First Call/Thomson

had anticipated a loss of 52 cents a share. The company attributed the wider loss to disappointing direct-to-consumer advertising revenue.

As of March 31, the company had $24 million in cash, enough to survive through August, according to the company's press release. drkoop said it would release final first-quarter results the second week in May.

drkoop's news comes after CDNow stepped back from the brink of death in March when a proposed merger with

Columbia House

failed, and

Time Warner





jumped in with $51 million to save CDNow. Two weeks ago, Peapod Inc. was rescued by Dutch food company

Royal Ahold


, which invested $73 million in convertible preferred stock of the troubled online grocer.

Wrong! Dispatches from the Front: Hearing What They Want to Hear


James J. Cramer

4/25/00 6:17 PM ET

Trying to reconcile


(MSFT) - Get Report




is proving to be difficult. Compaq is so bullish about

Windows 2000

and Microsoft, frankly, was pretty bearish. These differences contribute mightily to the up-and-down nature of this market. Bulls speak; stocks lift. Cautious people speak; stocks get hammered.

Why not just agree with Compaq? OK, who had a better record and handle on its business, Compaq or Microsoft? Who has been the horse to bet on this last decade?

I keep hearing that people think Microsoft was being its "usual cautious self." I can only tell you that these things are like theater. I have seen the production a gazillion times and this time it was very different. Very negative. Very "cut your numbers."

What I think is a more important takeaway is this market's


memory for the previous piece of news. Right now, Compaq is saying Windows 2000 is going to grow great guns. It would not shock me if

people simply forget what Microsoft said and now focus on what Compaq is saying


I say childlike because I find that my kids remember every good promise I make them but they very quickly forget anything cautionary or downbeat.

No wonder Buzz and Batch are

winning here.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Compaq. 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: JDS Uniphase, eBay Beat Estimates


Tara Murphy

Staff Reporter

4/25/00 10:03 PM ET


(EBAY) - Get Report

posted first quarter earnings of 6 cents a share, topping the 24-analyst estimate of a 3-cent profit and surpassing the year-ago report of 4 cents a share. The online auctioneer said its first-quarter sales tallied $85.8 million, doubling the year-ago result of $42.8 million. eBay also set a 2-for-1 stock split.

JDS Uniphase


reported pro forma earnings for its fiscal fourth quarter of $85.8 million, or 11 cents per share, a penny better than the 10 cents per share Wall Street had expected. The Canadian- and Silicon Valley-based maker of fiber-optics equipment for the telecommunications industry reported revenue of $394.6 million, 40% above sales in the quarter ended Dec. 31, and 2 1/2 times the pro forma sales in the year-earlier period. The company's results reflect the performance of three acquired companies but exclude the affects of accounting charges related to those and other acquisitions. Including merger-related and other costs, JDS Uniphase reported a net loss of $240.9 million, or 32 cents per share. The company's stock surged 13, or 16%, Tuesday to 93 5/16, on the strength of a strong earnings report earlier in the day from competitor


(GLW) - Get Report

. Shares of momentum-investor darling JDS Uniphase -- colorful traders believe its stock symbol stands for "Just Don't Sell Us" -- remain 39% below their March 7 high of a split-adjusted 153 3/8.

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 it was prepared to launch its best and final bid for

Wesley Jessen


, following a $600 million hostile offer which Bausch & Lomb made earlier this month. Bausch & Lomb said it also bumped ahead its April 28 deadline for its $34-a share tender offer for Wesley Jessen to May 12. In March, Wesley Jessen entered a merger with Ocular Sciences and rebuffed Bausch & Lomb's initial offer.

Earnings/revenue reports

AK Steel

(AKS) - Get Report

posted first-quarter earnings of 24 cents a share, ahead of the 10-analyst estimate of 19 cents, but below the year-ago 40 cents. Additionally, the company approved a buyback of up to $100 million of its outstanding shares.


(AMGN) - Get Report

reported a first-quarter profit of 25 cents a share, in line with the 18-analyst estimate and up from the year-ago report of a 23-cent profit.

Digital Impact


posted a fourth-quarter loss of 17 cents a share, excluding stock based compensation. The year-ago report was a 10-cent loss. The three-analyst estimate expected the company to report a 39-cent loss.

Edwards Lifesciences

(EW) - Get Report

reported first-quarter earnings of 14 cents a share, which include expenses from a spin-off. The year-ago report was a 21-cent profit. The two-analyst estimate expected the company to posted first-quarter earnings of 14 cents a share.



reported first-quarter loss of 54 cents a share, which includes costs. The year-ago report was a 29-cent loss, which included a gain. The four-analyst estimate expected the company to post a loss of 67 cents a share.

Offerings and stock actions



set a $500 million stock buyback.


Sotheby's Holding's

(BID) - Get Report

, which is accused of price fixing, said that it pushed back its annual shareholders meeting to finish selecting its board members. The auction house did not set a date for the meeting, which was initial scheduled for April 27. Sotheby's two main shareholder groups concluded that meeting should be delayed until the talks related to the board's makeup were "finalized" and are backing the company¿s current executives.

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

The Night Watch.

Bond Focus: Consumer Resilience Hits Treasury Prices


Elizabeth Roy

Senior Writer

4/25/00 3:55 PM ET

Treasury prices moved lower again today on very light volume, lifting short- and intermediate-term yields to their highest levels in nearly a month.

Two second-tier economic reports were stronger than expected, indicating that neither the recent series of interest-rate hikes by the

Fed nor the struggling stock market has put much of a damper on consumer spending, the economy's biggest driving force.

Consumer confidence fell only slightly in April despite carnage in the stock market, and

existing home sales continued to rebound.

"The unsightly combination of a weak equity market,

Federal Reserve

monetary tightening and higher energy prices" -- though down from their March peak -- "failed to put a dent in what remains a very high level of consumer confidence," said John Lonski, chief economist at

Moody's Investors Service


Meanwhile, Lonski said, today's positive action in stocks "tends to support the view that the brisk pace of U.S. domestic spending will persist."

The bond selloff occurred in spite of the

Treasury Department's

announcement that the fourth installment of its buyback program will take place on Thursday. In the operation, the department will take offers on 30-year Treasury bonds issued from 1985 to 1995, intending to buy $3 billion of them, it said.

The announcement failed to lift long-term Treasury prices because the market has already amply discounted the buybacks, market analysts said. "Buybacks are nice, but some of the potency of buybacks to support the intermediate and long end of the Treasury market may be been exaggerated over the course of the last two months," said Jack Malvey, chief global fixed-income strategist at

Lehman Brothers


As a result, Malvey said, the Treasury market is "returning to a more classic, fundamental focus" on the prospects for inflation. This week, that means dwelling on key economic data due out later this week -- chiefly

GDP and the

Employment Cost Index, both for the first quarter.

Either of which has the potential to change the likeliest outcome of the next Fed meeting on May 16 from a 25-basis-point hike in the

fed funds rate to a 50-basis-point move, said Ken Logan, managing analyst at



At the same time, Logan pointed out, the biweekly Commitments of Traders report by the

Commodity Futures Trading Commission

have been revealing that speculators -- any market's weak hands -- have been amassing record long positions in interest-rate futures.

This is a bearish indicator. "I think what we're seeing is a liquidation of sorts by the weaker hands," he said. "If the weak hands are sitting with record long positions, you can guess they're trying to get out. But volume is extremely light, so they're not finding many takers for their paper. So the price action is being exaggerated."

According to tracker


, just $31.5 billion of Treasuries changed hands by 3 p.m., 28% below the average for Tuesdays over the past months.

Finally, although the Treasury's buybacks are a positive force in the market, they are being counteracted these days by upcoming Treasury auctions of new short- and intermediate-term notes, Logan said. The Treasury will sell $12 billion of new two-year notes tomorrow, and yet-to-be-determined quantities of new five- and 10-year notes the second week of May. In advance of the auctions, traders have little incentive to accept higher prices.

The benchmark 10-year Treasury note ended down 27/32 at 102 20/32, lifting its yield 12.6 basis points to 6.136%, highest since March 29. The five-year note fell 12/32 to 98, lifting its yield 9.8 basis points to 6.375%, also highest since March 29. The two-year note dropped 5/32 to 100 1/32, lifting its yield 8.6 basis points to 6.479%, the highest since April 1. And the 30-year bond shed 1 point to 104 9/32, hiking its yield 9 basis points to 5.942%.

At the

Chicago Board of Trade

, the June

Treasury futures contract dropped TK to TK.

Economic Indicators

The Consumer Confidence Index fell to 136.9 in April from 137.1 in March. Economists polled by


had predicted it would fall to 135.8, on average. The index hit an all-time high of 144.7 in January, and remains in the top decile of all time, according to Lonski.

Meanwhile, existing home sales rose 1.5% to an annual pace of 4.83 million in March from 4.76 million in February. They had been expected to retreat to 4.74 million on average. The pace remains well below its June 1999 peak of 5.59 million, but is the fastest pace so far this year, in spite of the fact that mortgage rates are unchanged on the year.

Freddie Mac's

30-year mortgage rate stood at 8.16% on Friday, vs. 8.15% at the start of the year.

The two weekly retail sales reports showed a slight weakening of April sales. The

BTM/Schroder Weekly Chain Store Sales Index fell 0.2%, dropping its year-on-year pace from -1.0% to -1.2%. The

Redbook Retail Average found April sales running 1.4% ahead of March, the same reading as the previous week.

Currency and Commodities

The dollar fell against the yen and rose against the euro. It lately was worth 105.79 yen, up from 105.78. The euro was worth $0.9240, down from $0.9383. For more on currencies, please take a look at



Currencies column.

Crude oil for June delivery at the

New York Mercantile Exchange

fell to $25.36 a barrel from $26.04.


Bridge Commodity Research Bureau Index

rose to 212.10 from 211.81.

Gold for June delivery at the


fell to $279.8 an ounce from $281.20 yesterday.


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