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daily06-07-99's DAILY BULLETIN

June 8, 1999


Market Data as of Close, 6/7/99:

o Dow Jones Industrial Average: 10,909.38 up 109.54, 1.01%

o Nasdaq Composite Index: 2,524.21 up 45.87, 1.85%

o S&P 500: 1,334.52 up 6.77, 0.51%

o TSC Internet: 585.87 up 32.41, 5.86%

o Russell 2000: 446.65 up 4.32, 0.98%

o 30-Year Treasury: 90 01/32, down 1/32, yield 5.965%

Companies in Today's Bulletin:

Microsoft (MSFT:Nasdaq)

Matsushita (MC:NYSE ADR)

Disney (DIS:NYSE)

Infoseek (SEEK:Nasdaq)

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TheStreet Recommends

In Today's Bulletin:

o Europe: The Anglo File: Microsoft Hopes for Slip-Up at Psion
o Wrong! Rear Echelon Revelations: Contemplating the Close
o Evening Update: Disney May Buy Rest of Infoseek; WellPoint to Replace Harnishchfeger in S&P 500
o Bond Focus: Treasuries Shed Early Strength in Molasses-Bound Trading

Also on

The Invisible Mouth: More Bad News for the Bondholders

A look at three things to watch this week.

Mutual Funds: Funds Notebook: Two Views on Foreign Investing From Vanguard

Also, Ron Baron puts his investors' money where his friendship is.

401(k)s: New Kind of Pension Divides Benefits Along Generational Lines

Many big corporations are adopting cash-balance plans, and workers in their 40s could be the losers.

Silicon Babylon: Merrill Lynch's Online Trading Effort Loses in the Name Game

With the long history of this code name, the company might as well have named it Waterloo.

Europe: The Anglo File: Microsoft Hopes for Slip-Up at Psion


Nick Watson

U.K. Correspondent

With Japanese electronics giant


(MC) - Get Moelis & Company Class A Report

joining the next-generation mobile joint venture called


, it would appear


(MSFT) - Get Microsoft Corporation Report

chances of convincing the world's four largest mobile phone makers to drop


EPOC operating system in favor of Windows CE are slim. Yet in public at least, Microsoft is still talking tough.

On May 25, Matsushita, the fourth-largest global player in mobile handsets, said it would join





(NOK) - Get Nokia Corporation Sponsored American Depositary Shares Report




and Psion in the Symbian venture. This means that Symbian is now owned by companies estimated to have more than a 75% market share of the mobile handset market.

Matsushita's 9% stake in Symbian adds grist to the mill that Psion's EPOC operating system is much better suited than Windows CE to run small handheld devices. EPOC was originally designed to run small handheld computers made by Psion. Windows CE, it is widely held, is less efficient in terms of memory and requires more battery power to run the software.

Certainly the market seems convinced that Psion now has the market sewn up. "An estimated 75% of market share

is enough, in our opinion, to dominate the market and make alternative platforms, such as Windows CE, unlikely winners within this particular segment," according to

Goldman Sachs

, which has a market perform rating on Psion and no investment banking relationship with the firm.

As such, Psion's shares have risen to a high of 965 pence this year from a low of 205 pence in June 1998, just before the Symbian venture was announced. The shares closed Monday down 0.9% at 790 pence.

Is Talking Tough Enough?

However, despite the tide of popular opinion, Microsoft still insists it can woo mobile phone manufacturers to adopt Windows CE. Greg Levin, group product manager for Windows CE at Microsoft, could hardly keep the irritation out of his voice at the perception that Windows CE is technically inferior to the Symbian operating system and is basically a stripped-down version of Windows technology.

"That's absolutely untrue garbage. There's not one single technical reason, business reason or marketing reason that the Symbian operating system should beat Windows CE," Levin said.

He confirmed a story in last week's London-based


newspaper that Microsoft is still talking to all the Symbian partners about various ventures and would continue to do so, arguing that only Microsoft is focused on all aspects of the market: PC, cable and wireless devices.

"There has not been one single device released from Symbian using Psion's system," Levin said, adding that Microsoft will announce at the end of this week it has figures to show Windows CE is outselling all other operating systems in the European handheld device market.

Indeed, as the PC encounters fierce competition from cable and wireless to become the leading gateway to the Internet, Microsoft has been liberally throwing its financial clout around to push its Windows CE onto other platforms. Deals with


(T) - Get AT&T Inc. Report


British Telecom





and cable companies






are all designed to push Windows CE as an operating system for either cable set-top boxes or the mobile phone.

Yet all these deals are nonexclusive -- the companies are still allowed to buy operating systems other than Windows CE -- and Microsoft is really only trying to buy influence.

Pride Comes Before a Fall

So is it wishful thinking when Microsoft talks of cooperation with the Symbian mobile phone manufacturers? The partners of Symbian are certainly wary of jumping into bed with Microsoft, aware of the company's habit of trying to dominate any partnership, but the money they have invested in Symbian is negligible -- the venture is valued at about $250 million -- and could easily pull out if circumstances demanded.

And it is Psion's reputation for snatching defeat from the jaws of victory that is no doubt keeping Microsoft's hopes alive of luring one or more of the partners away.

It always seems one step back, two steps forward with Psion. The announcement that Matsushita would join Symbian came just a month after the managing director of Psion's computer division left the firm by "mutual consent" after problems at the division.

Psion is suffering badly in the handheld computer market, with sales falling 14% last year. The market leader is now


(COMS) - Get ComSovereign Holding Corp. Report


Psion's earnings are expected to fall 43.1% this year, and its stock is trading at a forward price-to-earnings ratio of 169 times, according to a poll of five brokers by U.K. financial information provider

Hemmington Scott

. These facts show just how much of the firm's value is attributed to the Symbian venture.

Ultimately, though, Nainish Bapna, an analyst with

Nomura International

, which has a hold rating on Psion and no investment banking relationship with the firm, firmly believes Psion won't fall at the finishing line. "This time Psion's got four partners kicking its butt all the way," says Bapna.

Wrong! Rear Echelon Revelations: Contemplating the Close


James J. Cramer

We want so much for the last trades of the day to reflect the true action. We want the close to be at the high point. We want to feel like we bought something that went up after we bought it.

Unfortunately, there are sellers who want just the opposite. You have to understand the way institutional money works to be less embittered by a close that seems less-than-spectacular, or at least unrepresentative.

When my wife worked as a block trader for a couple of multibillion-dollar funds, she would always be working buy and sell orders. Let's say she was working a sell order of

Georgia Pacific

(GP) - Get GreenPower Motor Company Inc. Report

. Her sole goal in her work life was to have that closing price be lower than where she sold the bulk of her stock. Her trader, at the sell-side (brokerage firm) that was handling her order was similarly inclined. These are highly motivated people with firepower who are gauged strictly by how a stock goes out vs. the price they received.

You better believe that at day's end the sell-side broker is anxious to make him or herself look good. You better believe that they want the stock to be lower than where they sold it. That's how they get paid. My wife, if she felt the broker was doing an excellent job, as gauged by "where the stock went out," would often give the sell-side an extra penny or two per share.

So, keep that lesson in mind when you think "who sold off the close like that?" Remember that institutional sellers like to think they did a good job, and the only way to be sure that a good job was done was how the average of the sale compared to the close.

It starts to make all the sense in the world, doesn't it?

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any of the stocks mentioned. 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: Disney May Buy Rest of Infoseek; WellPoint to Replace Harnishchfeger in S&P 500


Heather Moore

Staff Reporter


(DIS) - Get The Walt Disney Company Report

said it's in talks to buy the rest of



, possibly in exchange for Internet tracking stock. Disney has a 43% stake in Infoseek, whose shares climbed to 51 in after-hours trading from a regular close of 43.

WellPoint Health Networks


will replace

Harnishchfeger Industries


in the

S&P 500

after the close tomorrow. Earlier today, Harnischfeger filed a voluntary petition for reorganization under Chapter 11 bankruptcy. Separately, WellPoint filed with regulators to resell 9 million shares.

Among other changes to S&P indices:

Nabisco Group Holdings

(NGH:NYSE), which will become a new food group following the restructuring of

RJR Nabisco Holdings


, will replace RJR Nabisco in the S&P 500 June 14.

RJR Reynolds Tobacco

(RJR:NYSE) will replace



in the

S&P MidCap 400 Index


E.W. Blanch Holdings


will replace

Daniel Industries

(DAN) - Get Dana Incorporated Report

in the

S&P SmallCap 600 Index

June 15. Daniel is being bought by

Emerson Electric

(EMR) - Get Emerson Electric Company Report


Labor Ready


will replace



in the smallcap index after Friday's close. Resound is being acquired by

GN Acquisition


Westamerica Bancorp

(WABC) - Get Westamerica Bancorporation Report

will replace

Nine West


in the midcap index June 14. Nine West is being acquired by

Jones Apparel



In other postclose news (earnings estimates from

First Call

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

Earnings/revenue reports and previews


(HOV) - Get Hovnanian Enterprises Inc. Class A Report

reported second-quarter earnings of 35 cents a share, topping the four-analyst prediction for 26 cents and moving ahead of the year-ago 23 cents. The company also said it sees its full-year 1999 earnings growing around 20% to $1.35 to $1.40. Analysts are calling for $1.35.



reported a first-quarter loss of 60 cents a share vs. the year-ago loss of 53 cents. First Call didn't have estimates for the company.

Tech Data

(TECD) - Get Tech Data Corporation Report

posted first-quarter earnings of 53 cents a share, a penny ahead of the 14-analyst estimate and above the year-ago 46 cents.



said it sees second-quarter earnings of 6 cents a share due to a continuation of problems identified in the first quarter, including the transition to a new enterprise resource planning system at its Intermec Technologies subsidiary, right-sizing activities at the Cincinnati Machine division, and new product introduction issues at the German Honsberg Lamb division. The five-analyst outlook called for earnings of 14 cents vs. the year-ago 17 cents.

Mergers, acquisitions and joint ventures

Advantica Restaurant Group


said it hired

Donaldson Lufkin & Jenrette

to explore the sale of its

El Pollo Loco

quick-serve restaurants.


(ORCL) - Get Oracle Corporation Report

said it will buy

Thinking Machines'

data mining unit.

Amsted Industries

reiterated its $35-a-share cash offer for



despite the company's earlier refusal.

Offerings and stock actions

Advent Software


filed for a 1.3-million-share offering.

Goldman Sachs


BackWeb Technologies'

(BWEB:Nasdaq) 5.5-million-share IPO top-range at $12 a share. The Israeli company makes Internet software.

Johns Manville


said it will buy back $166.8 million in stock from and repay $33.2 million in debt to its majority shareholder. The company said the transaction will add 31 cents to its 1999 net earnings but that it also will result in a 4-cent charge.



filed for a 8.3-million-share offering.



Deutsche Bank

, which just completed its acquisition of

Bankers Trust

, said it might seek a U.S. stock listing this year.

A federal court ruled that


(INTC) - Get Intel Corporation Report

has no license to use


(INGR) - Get Ingredion Incorporated Report

Clipper patents.


(MSFT) - Get Microsoft Corporation Report

launched its

Office 2000

upgraded suite of desktop PC software -- designed to link traditional spreadsheet programs and word processing to the Internet -- and said it has sold 15 million licenses so far. Meanwhile, Mister Softee President Steve Ballmer said Y2K concerns would slow initial sales of Office 2000.

An advisory panel to the

Food and Drug Administration


Pharmacia & Upjohn's


chemotherapy drug


for treating patients with early-stage breast cancer. But the panel said it wasn't convinced the drug was effective enough for advanced cases of the disease.

Bond Focus: Treasuries Shed Early Strength in Molasses-Bound Trading


Justin Lahart

Senior Writer

The problem when things go up on little news is that they can go down on little news, too.

And so it went with Treasuries today. After drifting higher through the morning, with the 30-year gaining as much as half a point at midday, bonds drifted right back to where they started the day. If pressed, you could ascribe reasons for the late-day selling -- asset-allocation trades as investors rode the stock market higher, nervousness about a burgeoning corporate supply later in the week -- but in a market listless even for a Monday in June, it's hard to come up with a solid catalyst. The 30-year Treasury lately was unchanged at 90 2/32, keeping the yield at 5.97%. Tracker


set volume at less than 60% of the average second-quarter Monday's.

"It doesn't have anything to trade off of until Friday, and until then, it's going to be listless, uninspired trading," said Dana Johnson, head of capital markets research at

Banc One Capital Markets

. "I don't see any source of energy for the market until we get the new data."

Friday, May's

retail sales

figures and

Producer Price Index

come out. Though the market is generally looking to take its cues from the

Consumer Price Index

June 16, Johnson is among those who think retail sales will be a bit more important than many investors are giving it credit for.

He pointed out that the

Federal Open Market Committee

, when it moved to a tightening bias last month, emphasized inflationary pressures on the economy. The FOMC wrote that it was "concerned about the potential for a buildup of inflationary imbalances that could undermine the favorable performance of the economy," citing "already-tight domestic labor markets and ongoing strength in demand in excess of productivity gains."

"If we get confirmation," said Johnson, "as I think we will, that consumer spending is continuing at a strong pace, I think that clinches the Fed tightening."

Technically speaking, even though the Treasuries seem to have found their footing, "there's still a lot of work to do," said Greg Nie, chief technical analyst at

Everen Securities

in Chicago. "It's still a shaky, vulnerable-looking chart."



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