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August 3, 1999


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Market Data as of Close, 8/2/99:

o Dow Jones Industrial Average: 10,645.96 down 9.19, -0.09%

o Nasdaq Composite Index: 2,623.63 down 14.86, -0.56%

o S&P 500: 1,328.05 down 0.67, -0.05%

o TSC Internet: 540.03 down 16.06, -2.89%

o Russell 2000: 442.63 down 2.14, -0.48%

o 30-Year Treasury: 88 04/32 down 6/32, yield 6.119%

Companies in Today's Bulletin:

RealNetworks (RNWK:Nasdaq)

Xing Technology (FLWS:Nasdaq) (EFTD:Nasdaq) (QUOT:Nasdaq)

In Today's Bulletin:

o Internet: RealNetworks Merger May Mean Dings at Xing
o Wrong! Rear Echelon Revelations: That Stinking Market
o Evening Update: IPO Prices Above-Range at $21 a Share
o Bond Focus: NAPM Lifts Bonds From Early Fall

Also on

Mutual Funds: Funds Notebook: Goldman Sachs Throws Its Weight Behind an Internet Fund

Also, Amerindo Technology will review its concentrated holdings and two new funds are launched from USAA and Aeltus.

Wrong! Dispatches from the Front: Out of the Net

When the long-awaited consolidation of the Net occurs, the trader will play again.

The TaskMaster: Would You Buy a Used Car From This Man?

That man being Wayne Huizenga -- not the TaskMaster, who of course has earned your implicit trust.

Europe: And on the Seventh Day, Berlin Shopped

Stores in Berlin and other German cities, disregarding politicians and unions, last Sunday defied the law and opened to the public.

Internet: RealNetworks Merger May Mean Dings at Xing


Spencer E. Ante

Staff Reporter



(RNWK) - Get Free Report

gobbled up

Xing Technology

back on April 13, the $75 million acquisition was cheered as a smart move that accelerated the streaming media leader's move into downloadable music.

So far, the acquisition has served its immediate purpose. Less than a month after it was announced, RealNetworks unveiled its


software, which included Xing's core MP3 encoding technology. With the acquisition set to close this quarter, RealNetworks is keen to ensure that Xing's engineering talent stay around. After all, that is the main reason why RealNetworks bought the San Luis Obispo, Calif.-based outfit.

Chris Eddy, Xing's former chief technology officer who is now general manager of RealNetworks' technology development center, says that after the merger closes he expects a staff of 12 people -- all engineers -- to work in technology development at RealNetworks. Several engineers say they hope to continue developing advanced versions of audio and video compression technologies. Some engineers are optimistic that the merger will work out. "I'm excited about it," says Xing engineer Tim Bohlmann. "Real is gonna be able to take it to the next level."

But not all of Xing's ancillary products, such as its DVD player and its streaming-media software, may be allowed to continue.

And there are rumblings of dissent. Current and former employees of Xing say they expect that many workers -- including top Xing executives such as CEO Hassan Miah, who replaced founder Howard Gordon in 1997, and CFO Dean Kaplan -- will not be invited to join RealNetworks. The cuts are most likely to come from the sales side. After all, Xing is better known more for its sharp technology than its marketing prowess.

"Do we need a marketing department and a support department for a development office?" asks one Xing engineer, who requested anonymity. "Probably not."

Despite Eddy's assurances, Xing insiders say confusion about the role of the company after the merger could lead to defections, especially among the highly coveted engineering staff. Already, one Xing engineer has turned down an offer from the Seattle-based company, according to two Xing employees. RealNetworks declined to comment, citing legal restrictions during the merger process.

"I'm not sure what I'm going to do," says one engineer, who requested anonymity. "The mission of the development office hasn't been clearly defined yet."

Gordon (Xing's founder who left in June 1998) predicts most of the company's engineers are likely to stay with RealNetworks. "I don't think it's been traumatic," says Gordon. "Most of the engineers are ending up at Real."

Cultural differences may present the most vexing obstacle. Even though RealNetworks has a reputation for being a progressive company, within the Internet community some see it as being more corporate-minded than your typical grungy Net start-up. "What's going on at Xing does not sound compatible with Real," says one former employee. "The Real culture is a whole lot more of a corporate culture. Xing is based on a much looser feel."

When Xing was bought, it was a shadow of its former self. Founded in 1990, Xing quickly established a reputation for technological innovation and excellence. In 1995 Xing released


, one of the first systems for delivering streaming media over the Internet. At the time, RealNetworks, then known as

Progressive Networks

, considered Xing its most lethal competitor.

Since then, Xing has had difficulty raising money and marketing its products just as RealNetworks began to make a name for itself through its competing streaming media player, the


. Xing cut product lines and the firm's head count shrank to 50 from a peak of 100 in 1997. Yet its MP3 compression software is being used as a key technology in the emerging market for digital music.

"Clearly we could have got more than 1% of RealNetworks if we had merged back then," says one Xing engineer. "Once you lose you're dead, but Xing kept going long enough. It caught another wave -- the MP3 wave -- and it saved the company."

Wrong! Rear Echelon Revelations: That Stinking Market


James J. Cramer

If markets could smell, this Monday's would nauseate the professionals from

Waste Management


, and I don't mean those who clean up after the accountants. Can there be anything worse than the stench a failed rally leaves? Not only do you have all of the disappointment from last week, now you have a whole new group of dispirited souls who took


(XLNX) - Get Free Report

at 64 and



at 108.

Not to mention anybody who bought the Net. (The odor from the Net would seep through a hardened missile silo buried under 50 feet of aggregate.)

The essence of days like Monday is discouragement. Just as the market allowed bulls to run through the streets of Broad and Wall unimpeded a few short weeks ago, now it is hard to imagine feeling more penned in and frustrated.

For us, we try to do little. We are in one of those periods where strength is a godsend, a gift that allows us to cut our losses and raise more cash for when things make more sense and are less debilitating. I know after days like Monday, it is hard to imagine that it could ever be easy again. That's why I wrote when things were great to remember what it felt like, to get you through discouraging sessions that fake you out and leave you with less money than when you started.

Right now you just want to lose less. You want to stay in the game, for when it gets better. There is nothing more to do.


James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Hewlett-Packard. 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: IPO Prices Above-Range at $21 a Share


Eileen Kinsella

Staff Reporter

Everything's looking really rosy for

(FLWS:Nasdaq) and

(EFTD:Nasdaq) as analysts predict investors will be drawn to the concept of dot-com flower power.

Goldman Sachs

tonight priced 6 million shares of at $21 each, above the expected range of $16 to $18.

The lead underwriter for's offering, expected later this week, is

Bear Stearns

, which has set a range of $13 to $15 a share for the 5.5 million-share deal. Observers are optimistic about a blooming public reception for both companies, according to


, though some are leaning towards 1-800-Flowers because of its high profile and hefty sales.

In other IPO news,

Hambrecht & Quist

priced 5 million shares of

(QUOT:Nasdaq), an Internet-based insurance service in Darien, Ill., top-range at $11 each.

In other postclose news (earnings estimates from

First Call

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

Earnings/revenue reports and previews



reported a second-quarter loss of 16 cents a share, narrower than the six-analyst estimate of a loss of 27 cents and lower than the year-ago profit of 1 cent.



reported fiscal fourth-quarter earnings of 66 cents a share, in line with the nine-analyst estimate and up from 55 cents a year ago.


(CI) - Get Free Report

said its second-quarter earnings were $1.22 a share, ahead of the 12-analyst estimate of $1.12 and up from $1.15 a year ago.

CNA Surety


reported second-quarter earnings of 29 cents, a penny better than the three-analyst view and up from 25 cents a year ago.

Delphi Information

(DLPH) - Get Free Report

reported a second-quarter loss of 55 cents a share, wider than the two-analyst estimate of a loss of 2 cents and lower than the year-ago profit of 7 cents.

Enhance Financial


reported second-quarter earnings of 60 cents a share, 1 cent better than the seven-analyst estimate and up from 52 cents a year ago.



, a discount store chain, said it will take a charge of 5 cents a share for the second quarter ended Saturday, for physical inventory adjustment.

Henry Schein

(HSIC) - Get Free Report

reported second quarter earnings of 40 cents a share, in line with the 12-analyst outlook and up from 33 cents a year ago.

Hines Horticulture


reported second-quarter earnings of 88 cents, a penny less than the four-analyst estimate and up from 77 cents a year ago.



reported second-quarter earnings of 23 cents a share, in line with the six-analyst expectation and up from 14 cents last year.



reported a second-quarter loss of 72 cents a share, a penny wider than the one-analyst estimate but narrower than the year-ago loss of $1.85.



reported second-quarter earnings of 50 cents a share, even with both the eight-analyst estimate and the year-ago figure.

Media Metrix


reported a second-quarter loss of 16 cents a share, a penny narrower than the three-analyst estimate but wider than last year's pro forma 14-cent loss. Figures were reported on a pro forma basis as the company went public in May. All figures were reported on a pretax basis, with no after-tax figures provided.

Placer Dome


reported break-even second-quarter results, worse than the 11-analyst forecast of a profit of 6 cents a share but up from a loss of 4 cents last year.

Post Properties


said its second quarter income was 92 cents a share, ahead of the 13-analyst expectation of 90 cents, and up from 83 cents a year ago.


(RCII) - Get Free Report

reported second-quarter earnings of 41 cents a share, beating the eight-analyst estimate of 39 cents and up from 34 cents a year ago.



reported second-quarter earnings of 1 cent a share, ahead of a five-analyst expectation of a break-even result and up from a year ago loss of 7 cents. The company said the year-ago EPS included a pretax restructuring charge of $6.6 million.



reported better-than-expected second-quarter earnings of 25 cents a share, ahead of the three-analyst estimate of 20 cents and up from 10 cents a year ago.


(UNIT) - Get Free Report

said it would take a third-quarter after-tax charge of $13.9 million, or 19 cents a share, to cover its portion of

Litton Industries'

(LIT) - Get Free Report

one time charges. Unitrin owns approximately a 27% stake in Litton.


(UNM) - Get Free Report

reported second-quarter earnings of 71 cents a share, worse than the 12-analyst estimate of 76 cents but up from 69 cents a year ago.

U.S. Liquid

(USL) - Get Free Report

reported second-quarter earnings of 29 cents a share, in line with a four-analyst estimate and up from 20 cents a year ago.

Vicorp Restaurants


reported third-quarter earnings of 35 cents a share, ahead of a lone analyst's prediction of 28 cents and up from 20 cents a year ago.


(WIN) - Get Free Report

reported fiscal fourth-quarter earnings of 38 cents a share, a penny ahead of the seven-analyst estimate and up from 22 cents last year. The company said the year-ago figure included a charge for closing a distribution facility. Separately, in an effort to dispel rumors, the company said it was not for sale.

World Airways


reported better-than-expected second-quarter earnings of 15 cents a share, ahead of an analyst's estimate of a 40-cent loss and up from a loss of 44 cents last year.

Mergers, acquisitions and joint ventures


(CNET) - Get Free Report

said it has acquired

Nordby International

, a provider of customized financial information, for $20 million in cash and stock.

Offerings and stock actions



approved a 2-for-1 stock split effective Aug. 30, for shareholders of record Aug. 16. After the split, the company will have about 17 million shares outstanding.


Cleveland Cliffs

(CLF) - Get Free Report

said a depressed market for iron ore pellets would force it to idle three of its mines for different lengths of time. The company warned that 1999 sales would fall.



, an Internet service provider, said it was suing


, a low-priced PC maker, for allegedly failing to pay money owed under a deal to give customers a free year of Web access.


, an online community catering to U.S. Hispanics, said it ousted Jeffrey Peterson, one of its co-founders and its chief technology officer, and filed a lawsuit against him and one other employee.



said it reopened its refinery in Avon, Calif., following a five month closure after a fire in February.

New York advertising agency

Young & Rubicam


said it would appoint Tom Bell, 49, to the position of president and chief operating officer, adding the title of chief executive Jan. 1. Bell succeeds Chairman and CEO Peter Georgescu.

Bond Focus: NAPM Lifts Bonds From Early Fall


David A. Gaffen

Staff Reporter

What could have been a massive braining today turned into just a minor downturn. Treasuries were hammered overnight in the European and Asian markets but recovered after the 10 a.m. EDT release of friendly economic data.


National Association of Purchasing Management's

index of manufacturing sentiment fell to 53.4 in July from 57 the previous month. That's still interpreted as growth in the sector (any reading above 50 shows growth), albeit at a slower pace than in June. Analysts said the moderation in this report gave the market a catalyst to regain some of last week's losses.

Lately the 30-year Treasury bond was down 4/32 to trade at 88 7/32. The yield rose 1 basis point to 6.12%.

"Evidently, the market was prepared for the worst, and we got a relief trade afterward," said Ken Logan, managing analyst at

Thomson Global Markets

. After last week's unfriendly

Employment Cost Index


Chicago Purchasing Managers' Index

, "the market was on the defensive."

That defensive posture turned into a full-fledged retreat overnight, when better-than-expected economic data out of the U.K. and a selloff in Japan's bond market resulted in a Treasury selloff. The yield on the 10-year Japanese government bond rose 4 basis points to 1.825%. The U.K.'s own purchasing managers' index rose to its highest level since 1997, evidence of a rebound in demand in Europe.

This rebound has contributed to the recent weakness in the dollar versus the euro and yen during the last few weeks. As investors perceive increased strength in other economies, they've shifted some assets away from the U.S. The dollar was lately trading at 114.28 against the yen, compared with 118.18 two weeks ago. The euro currently trades at $1.068, compared with $1.031 two weeks ago.

For today, at least, the market was able to turn on the 10 a.m. release of the NAPM report and the construction spending numbers. "When the NAPM came out at 10, it showed a bit of moderation. We got a bit of a relief trade out of it, but it was mainly short-covering and professional-led," said Logan. He called the afternoon's relative calm "a realization that we're going to mark time until Friday's payroll report."

Components of the NAPM release were mixed. Employment decreased in July, to 49.6 from 51.9, and new orders fell from 54.4 from 61.7. However, prices paid, a measure of what producers are paying for materials, rose to 54.7 from 53.5.

Construction spending rose 0.5% in June after a 1.4% revised decline in May. On a year-over-year basis, spending is rising at an 8% rate, compared with 12.7% in March, but higher than last June's 7% rate of increase.

"The construction data provide a sign that this sector is responding to a tighter interest-rate environment, but I don't think the market is going to get any mileage out of it until housing is slowing down," said Adam Blankman, Treasury market analyst at

Standard & Poor's MMS



Street Sightings

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