Publish date:

daily07-12-99's DAILY BULLETIN

July 13, 1999


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Market Data as of Close, 7/12/99:

o Dow Jones Industrial Average: 11,200.98 up 7.28, 0.07%

o Nasdaq Composite Index: 2,790.44 down 2.63, -0.09%

o S&P 500: 1,399.10 down 4.18, -0.30%

o TSC Internet: 658.79 down 6.05, -0.91%

o Russell 2000: 459.30 up 1.32, 0.29%

o 30-Year Treasury: 90 26/32 up 1 06/32, yield 5.906%

Companies in Today's Bulletin:

Disney (DIS:NYSE)

Infoseek (SEEK:Nasdaq)

Amgen (AMGN:Nasdaq)

Immunex (IMNX:Nasdaq)

In Today's Bulletin:

o Internet: Infoseek to Into Disney's Gullet
o Wrong! Rear Echelon Revelations: Don't Be Greedy
o Evening Update: Amgen Jumps on Strong Earnings, Faster Schedule for Arthritis Drug
o Bond Focus: For Bonds, Today Was a Good Day

Also on

Brokerages/Wall Street: Goldman Suddenly Has a Hulluva Presence Online

Goldman will spend $531 million to buy Hull, a market maker in derivatives. The deal is the latest in a string of e-ventures for the investment bank.

Wrong! Rear Echelon Revelations: No Breaks for eBay

A few years ago, the market cut AOL some slack because the medium was immature. eBay, with its recent outages, has had no such luck.

Software: SAP Stumbling in North America

Analysts worry the top enterprise software company is losing its edge in the U.S. after missing key deals.

Energy: Schlumberger-Transocean Deal Could Spur Related Mergers

The spinoff and subsequent merger, announced today, will create the world's largest offshore contract driller.

Internet: Infoseek to Into Disney's Gullet


George Mannes

Staff Reporter


(DIS) - Get Walt Disney Company Report

deal to take control of



may not have thrilled Infoseek shareholders. But it may improve prospects for the Internet operations of both companies, which will be folded together into a unit called


Among other benefits, the proposed deal will streamline operations, improve Disney's and Infoseek's ability to recruit executives and give current Infoseek shareholders the full value of Disney's brand name, according to executives at a New York press conference conducted by the two companies on Monday.

Eventually, as Disney chairman Michael Eisner explained, Disney's online investments will pay off in a world of high-speed, high-bandwidth Internet connections. That is, if the company can overcome initial shareholder skepticism and get a majority of Infoseek's non-Disney owners, who hold 58% of Infoseek stock, to approve the deal.

Theoretically, Infoseek and Disney have been working closely since last year, when Disney took a 43% stake in Infoseek. The two companies, which operate sites like



through a joint venture, together launched the

GO Network

portal site in January. Disney properties that will be lumped together with Infoseek ones in the transaction include

, Disney's

Club Blast

children's site,

The Disney Store Online

and the offline

Disney Catalog


But as closely as the two companies may have been working, it hasn't been close enough, executives say. Until now, the logistics of arranging deals with two sets of legal, business development and production staffs made such arrangements difficult. Charles Davis, president of e-commerce at Disney's

Buena Vista Internet Group

, says that a deal with the


health site is the only advertising deal he can think of that covers all of the GO Network and online Disney properties.

"drkoop is probably our test case," says Beth Haggerty, GO Network's senior vice president of sales and business development.

Another advantage of the deal is the creation of a proposed tracking stock that Disney hopes to use to reward and retain Internet talent. With Disney's stock trading near 28, down from its April 1998 high of 42 and about where it was in October 1997, it's been easy for Internet-related companies to tempt online employees with Internet-related stock options perceived to have much greater upside.

Eisner acknowledged as much on Monday. "We want our executives to be encouraged to stay with us and grow with us and grow in this new field," he said. A tracking stock balances the need for options-based compensation with Disney's absolute refusal to allow the Disney online brand to fall under the control of another company. "It is our lifeblood," Eisner said.

A fund manager and former Infoseek shareholder, who spoke on condition of anonymity, agrees that the tracking stock is a step in the right direction for employee retention.

It's unclear whether the proposed transaction, in which current non-Disney Infoseek shareholders would end up with 28% of Disney's tracking stock, is a good deal for Infoseek shareholders. Shareholders themselves seem to think not. Infoseek shares fell 5 9/16 today, or nearly 11%, to close at 45 15/16, on triple the stock's average volume. Disney, however, was up 3/16 to 27 13/16.

Early Monday, PaineWebber Internet analyst James Preissler estimated that Infoseek shares were being valued at $52 per share -- only 50 cents above the closing price for Infoseek Friday night.

Asked about the premium for Infoseek investors at the press conference, Eisner noted that when the companies disclosed June 7 that they were discussing the deal, Infoseek was trading at about 38. (After

The New York Times

reported a possible deal that day, the stock rose 6 5/16 to close at 43). Infoseek CEO Harry Motro said information about valuation would be disclosed in subsequent filings.

"There is a premium in the deal," said Motro, who plans to step down after a transition period following the deal's completion. For Infoseek shareholders, one of the big advantages is getting a stake in the name and a presence they don't have in the GO Network alliance. "That is of huge value," Motro said.

But the real value, according to Eisner, will come during the next decade. Within 10 years, people will be getting full-screen, full-motion video through the Internet, he said Monday. The Internet will mean getting full-fledged movies and music in a customized form -- or, as he put it, "My ABC, my movie library, my Thursday night." At that stage, it'll be entertainment and information which drives the Internet economy, not services such as email.

And it will be profitable, Eisner said. "It is not a badge of honor never to make a dollar," Eisner said. "However, we understand you have to invest to get to that point."

Of course, Disney will continue to encounter skepticism. "I'm not that much of a believer in Disney's ability to play the game," says another money manager who asked not to be identified and who does not own Infoseek.

Wrong! Rear Echelon Revelations: Don't Be Greedy


James J. Cramer

I'm going into


(INTC) - Get Intel Corporation (INTC) Report

lean. Have to. Too many great analysts hedging their bets lately about the chip giant. We all know the consensus. But that won't mean jack. We all know that the company has no competition again, because of the ineptitude of "competitor"


(AMD) - Get Advanced Micro Devices, Inc. Report


So why not load the boat up? I like to buy Intel big ahead of a quarter when it hasn't run up. (I have along position in Intel, just not a big one relative to quarters past.) But Intel just has a nice gallop here and that worries me. I like it when it is sold out and plenty of people are betting against it. Suddenly, though, it seems like everyone expects nothing but good news, so I have scaled back.

Similarly, I love

International Paper

(IP) - Get International Paper Company (IP) Report

and think they have a chance to report any quarter they want. But I was looking to catch a three- or four-point move off of a $50 base. Voila, it was there today. That doesn't leave much room unless the quarter is a blowout and I can't imagine that happening in an environment where some paper grades are very weak. So I scaled back from that one, too, as it flirted with $54.

The stock market game is one of psychology, and it is at its most psychological at the intersection between earnings and pre-and post-reporting stock market action. If a stock has run up ahead, it lessens the odds that we will see a ramp post earnings. If the stock and the whole market have run up in advance, it lessens the odds even more.

While I expect good numbers from almost all of the companies I am long -- wouldn't be long them otherwise -- I have taken some off the table ahead of the news. That way I am in shape to buy them on any knee-jerk selling created by a miss of some stupid whisper number that I could care less about.

Arrogant? Mature? Oblivious? No, just unwilling to be greedy in the face of a great run. No more than that.


James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Intel and International Paper. 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: Amgen Jumps on Strong Earnings, Faster Schedule for Arthritis Drug


Heather Moore

Staff Reporter


(AMGN) - Get Amgen Inc. Report

shares flew to 73 in after-hours trading from a close of 66 5/16 following the company's strong second-quarter earnings report. The company earned 50 cents a share, topping the 23-analyst

First Call

estimate of 46 cents and moving ahead of the year-earlier 41 cents.

But the bigger news for Amgen was that the company is pushing up its rheumatoid arthritis drug,


. The

Food and Drug Administration

said it was OK to file based on the two Phase II trials the company did on the drug. Amgen won't have to conduct Phase III trials. It will file for approval of the drug by the end of the year, way ahead of schedule.

The news is bad -- at least initially -- for



, which markets RA hit


, and



, which hopes for approval of its RA candidate


later this year. The sudden crowdedness of the market will spook IMNX and CNTO investors, analysts said. But it remains to be seen how strong Amgen's data are.


Jesse Eisinger



will replace

Battle Mountain Gold


in the

S&P 500

TheStreet Recommends

after the closing bell Aug. 6.


(DD) - Get DuPont de Nemours, Inc. Report

is spinning off the remaining 70% of Conoco it owns.

Merrill Lynch


said Herbert Allison, its president and COO -- and the anticipated successor to Chairman and CEO David Komansky -- is retiring from the company after 28 years. Vice Chairmen Stephen Hammerman and John "Launny" Steffens will assume Allison's duties while a replacement is found.

In other postclose news (earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified):

Earnings/revenue reports and previews



said it expects to break even in its second quarter. The six-analyst view called for earnings of 12 cents vs. the year-earlier 6 cents. The company blamed severance costs for a former CFO for the expected shortfall.

Coca-Cola Enterprises


said it expects to record a second-quarter charge of $103 million due to


(KO) - Get Coca-Cola Company Report

European product recall. On June 24, CCE said it expected the recall to cost $60 million.

Flowers Industries

(FLO) - Get Flowers Foods, Inc. Report

said it sees second-quarter earnings coming in around 10 cents a share due to production realignment costs and promotional expenses at its

Mrs. Smith's Bakeries

business. The 10-analyst estimate called for a repeat of the year-ago 19 cents.


(INGR) - Get Ingredion Incorporated Report

said its second-quarter revenue will fall about $25 million below expectations because of weak orders and revenue from worldwide computer hardware businesses. The three-analyst estimate called for a loss of 15 cents a share during the quarter vs. the year-ago loss of 43 cents.



reported fourth-quarter earnings of 17 cents a share, 3 cents ahead of the five-analyst estimate and above the year-ago penny. The company also set a 2-for-1 stock split.

Tropical Sportswear


sees third-quarter earnings of 40 cents to 42 cents a share due to the cancellation of about $6.5 million in orders and the deferral of about $4.5 million in other orders. The single-analyst forecast called for earnings of 67 cents vs. the 40 cents made a year earlier.

Vitesse Semiconductor


shares slipped 2 3/4 to 69 in after-hours trading despite a positive third-quarter earnings report. The company made 24 cents a share, 1 cent ahead of the 13-analyst estimate and above the year-ago 18 cents.

In other earnings news:

Mergers, acquisitions and joint ventures



agreed to acquire

Global Industrial Technologies

(GIX) - Get GigCapital2 Inc. Report

for $300 million.





(COT) - Get Cott Corporation Report

completed their $2 billion merger after battling lawsuits brought by rivals alleging the companies were violating antitrust laws.



agreed to acquire a unit of Germany's


for $218 million in cash and the assumption of debt.


Le Groupe Forex

said it received a new offer from an undisclosed U.S. firm that's better than the C$26-a-share bid made last month from


(LPX) - Get Louisiana-Pacific Corporation Report


Liberty Media


said it agreed to swap some assets for 109.6 million shares of

TCI Music


stock. Liberty will exchange its Internet content and interactive television assets, rights to provide interactive video services to


(T) - Get AT&T Inc. Report

cable television systems and $150 million in cash and notes.

Offerings and stock actions

Central Garden & Pet

(CENT) - Get Central Garden & Pet Company Report

increased its stock buyback plan by $25 million, bringing the total amount authorized to $130 million.



filed for a 3.3 million-share offering.



Justice Department




U.S. unit, claiming the pollution-detection systems on 2.2 million of its vehicles violated clean air laws.

Bond Focus: For Bonds, Today Was a Good Day


David A. Gaffen

Staff Reporter

Treasuries rallied sharply on flight-to-quality buying today, sparked by massive selloffs in Latin American equity markets. The 30-year bond yield closed at its lowest level since May 28, but participants described the action as extremely thin.

Pin the rally on the power of positive thinking -- and patience. The bond market tried to move higher last week, only to have rallies smacked down by fear of hefty corporate supply or weakness in European bond markets. So today felt like the first real breath of fresh air since the

Federal Reserve

raised the fed funds target almost two weeks ago.

"The market has been feeling better about itself, but we haven't seen it in higher prices," said George Simon, Treasury market strategist at

A.G. Edwards

. "I think the market would have traded higher

last week if it weren't for all the corporate issuance."

Lately the 30-year Treasury bond was up 1 7/32 to trade at 90 27/32. The yield fell 10 basis points to 5.91%.

Thomson Global Markets

managing analyst Ken Logan was pessimistic, terming today's rally "just an exaggerated trade in an illiquid market," and ultimately an opportunity to sell.



index fell 8.7% today on continued concerns about the country's deepening recession and rumors that it would default on its foreign debt, which President

Carlos Menem

refuted earlier today. Argentine Brady bonds lost ground also, as portfolio managers sold external debt in expectation of more domestic government bond issuance.

"It's been flaring up modest, albeit global, fears," said Simon. "There's been some flight-to-quality, not broad-based, buying, so we shouldn't read too much into it."

Other Latin American markets were tagged in tandem -- Brazil's


index fell 2.3% and Mexico's


was down 2%.

Simon said the safety buying was the impetus the bond market was waiting for. Sources interviewed during the last week have been more confident in the Treasury market, believing a trio of important upcoming economic releases will bring friendly tidings. But rallies were constrained by plunging European bond markets, which had the effect of marking down Treasuries in sympathy, and by corporate supply, most specifically


(F) - Get Ford Motor Company Report

$8.6 billion mammoth bond offering, the largest corporate bond deal in history. The corporate calendar is still huge, but for now it's taking a breather.


retail sales

will be released Wednesday, along with the June

Producer Price Index

. With Thursday comes the June

Consumer Price Index

. "There's the anticipation of friendly data later in the week," said Logan. "Retail sales rose 1% last month, and that didn't shake the market up too much. The PPI and CPI data are only supposed to be up a tenth or two."

According to


, the expectation is for a 0.4% increase in retail sales, and 0.1% for the overall PPI, PPI minus food and energy, and overall CPI. The core CPI is expected to rise 0.2%.

Benign readings on all three still might not dissuade the Fed from hiking interest rates in August. John Blough, senior investment strategist at

Fahnestock & Co.

, figures the market will look past these reports to Fed Chairman

Alan Greenspan's



testimony next week.

"Our economy is quite strong, and oil is above $20 a barrel, and Greenspan is going to err on the side of restraint," said Blough. Oil is currently at its highest level since November 1997.

The price of September light sweet crude oil futures traded on the

New York Mercantile Exchange rose to $20.10 a barrel today. On the other hand, the

Bridge/Commodity Research Bureau Index

continues to sputter, as other commodities have not recovered the way oil has. It fell to $183.75 today, meanwhile, not far off the 18-year low of $182.76.


Street Sightings

James Cramer will be a guest on San Diego's KSDO's Wall Street Review Radio Show hosted by Mike Green and Jim Benham. You can hear the show at The show begins at 6:10 EDT, Tuesday, July 13.

James J. Cramer will be appearing on CNBC's "Squawk Box" at 7 a.m. EDT, Wednesday, July 14.

Catch the premiere of on the FOX News Channel July 17! Join host Brenda Buttner and TSC regulars like Jim Cramer, Herb Greenberg and Dave Kansas. Saturdays at 10 a.m. ET and again on Sundays at 1 p.m. ET.

Copyright 1999,