daily09-01-99

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TheStreet.com's DAILY BULLETIN

September 2, 1999

http://www.thestreet.com

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Market Data as of Close, 9/1/99:

o Dow Jones Industrial Average: 10,937.88 up 108.60, 1.00%

o Nasdaq Composite Index: 2,750.80 up 11.45, 0.42%

o S&P 500: 1,331.07 up 10.66, 0.81%

o TSC Internet: 563.14 down 2.68, -0.47%

o Russell 2000: 430.99 up 3.16, 0.74%

o 30-Year Treasury: 100 18/32 down 8/32, yield 6.082%

Companies in Today's Bulletin:

Intel (INTC:Nasdaq)

Rambus (RMBS:Nasdaq)

In Today's Bulletin:

o Semiconductors: Intel Notebook: Former Level One Chief Gets Carte Blanche to Go Shopping
o Wrong! Tactics and Strategies: Red Hot Index Poll: You Speak, We Listen
o Evening Update: Intel to Back Alternative to Rambus Chips
o Bond Focus: Bonds Slump Anew as Fundamentals Trump Technicals

"TheStreet.com" on the Fox News Channel

This week's "Stock Drill" guest is Richard Babson, president of Babson-United Investment Advisors. Babson is the third generation of management in a firm founded originally by Roger Babson, who is renowned for predicting the 1929 stock market crash and founding Babson College. Join Herb Greenberg and Jim Cramer as they see what Richard predicts for his favorite stock picks in today's market.

Plus, we'll tell you what sectors you don't want to be in come this fall and how to recognize danger zones on "Word on TheStreet."

The show airs Saturday at 10 a.m. ET and again Sunday at 1 p.m. ET. For more info and how to find Fox News in your area, please see our TSC on Fox page at http://www.thestreet.com/tv.

Also on TheStreet.com:

Truth Serum: Cabletron Rumors Aren't Adding Up

Despite a recent 35% share-price rise, one money manager warns a real deal could burst the bubble.

http://www.thestreet.com/stocks/truthserum/779503.html

Asia/Pacific: Japan Looks to 30-Year Bonds to Increase Interest in Its Debt

The move comes as 10-year bond yields have approached 2% and traders wonder if the Bank of Japan will lift short-term rates.

http://www.thestreet.com/int/asia/779398.html

The Invisible Mouth: Why the Market's Worried About the NAPM Price Data

The price index serves as a good guide to when the Fed might tighten.

http://www.thestreet.com/comment/economics/779367.html

Brokerages/Wall Street: Investing With the Man Who Saved the World's Markets

Though you don't know him, L.E. Cooper has spared every one of us financial Armageddon. Soon you'll have a chance to take stock in his company -- for free.

http://www.thestreet.com/stocks/brokerages/779458.html

Semiconductors: Intel Notebook: Former Level One Chief Gets Carte Blanche to Go Shopping

By

Marcy Burstiner

Staff Reporter

9/1/99 8:20 PM ET

PALM SPRINGS -- Ex-

Level One

CEO Robert Pepper, now a vice president of

Intel's

(INTC) - Get Report

networking communications group, has a boss for the first time in 15 years. But as part of a semiconductor company sitting on $2 billion in cash, Pepper has a credit card with a very high limit for new acquisitions.

At this week's

Intel Developers Forum

, Intel is giving clearer signs of its intentions to become a powerhouse in the networking chips arena -- a drive that its $2.7 billion purchase of Level One in March helped to galvanize. A new chip for Internet switches and routers and a $200 million venture fund for companies using the chip are Intel's latest strides onto the Net.

The initiative is bringing Pepper a rich bounty. Pre-Intel, Level One's acquisitions were on the $150 million level. Now Pepper's free to shop for companies in the billion-dollar range. The only problem now is that

Cisco

(CSCO) - Get Report

has been eating up small communications companies as if they were

M&Ms

, leaving Pepper hard-pressed to name independent companies with attractive products.

Those that Pepper could name come with huge price tags: communications chipmakers

Transwitch

(TXCC)

, with a market cap of $1.3 billion,

Applied Micro Circuits

(AMCC)

at $2.5 billion and

Vitesse

(VTSS)

at $3.9 billion.

How Easy is Easy?

Intel CEO Craig Barrett may be

frustrated that personal computers are still not user-friendly, but the headache-free PC is still a ways away.

Heading the effort to produce the perfect PC is Steve Whalley of Intel's desktop products group. Whalley's team has figured out how to get all the plugs for things like hard drives, mice and printers to be interchangeable so that plugging them in is easier.

The team's biggest headache, one that Intel doesn't control, rests in all that preinstalled software that gets loaded on packaged PCs. Boxmakers try to differentiate their products partly by offering customers nifty software. "We did a lot of studies and found that people were confused when they had a choice of six Internet service providers," Whalley says.

Whalley is trying to pressure boxmakers to make superfluous software available for users who want them, but in a way that doesn't confuse the people who don't. Not all consumers need a computer that does everything. "We learned that in the VCR industry," he says. "So much was programmed into them that four-year-olds were the only ones that could get them to work."

Wrong! Tactics and Strategies: Red Hot Index Poll: You Speak, We Listen

By

James J. Cramer

9/1/99 5:22 PM ET

What a miserable day for the

Red Hots! Ouch. We are right on the griddle with this one, aren't we? Our proprietary list of 18 incredibly hot companies is down 4.3% today.

No matter, you have spoken. Hundreds of you have asked that we add some names to the index. I have taken all of your choices and distilled them into two groups of four stocks each -- one group of prospective Red Hot members with market caps over $2 billion, the other with market caps under $2 billion. Scan the groups and vote for your favorite in each.

Thanks to

Matt Jacobs

for putting together these little bios. I think they are quite fair.

Cramer Berkowitz

owns

none

of these potential Red Hots. To which I say, what were we thinking? These stocks are in orbit!

Quantifying the Qualifiers

Below are brief descriptions of the eight companies vying for the two spots available in the Red Hot index.

Applied Micro Circuits (AMCC)

Applied Micro Circuits is a play on the explosive semiconductor communications area. It focuses on SONET/SDH, ATM, gigabit Ethernet, fibre channel and automated test equipment markets. The company has begun to deploy Silicon Germanium with

IBM

(IBM) - Get Report

and is actively sampling products in OC-48 and OC-192.

Nortel

(NT)

contributes 25% of its sales, while many OEMs are considering Applied Micro for future optical products.

BroadVision (BVSN) - Get Report

BroadVision is a play on the Internet applications software platform market. Its products deploy commerce-oriented Web applications to better customer relationships. Recent partnerships, customer wins and market share gains have helped the stock surge. BroadVision competes with

Vignette

(VIGN)

in this space, but a longer-term threat remains with

Microsoft

(MSFT) - Get Report

, IBM and

Netscape

getting more involved in this space.

Ditech Communications (DITC)

Ditech is the smallest of all the potential companies. It's a leading vendor for echo cancellation technology, which eliminates the voice echo that occurs frequently in the newer packet networks. Ditech also plays in the optical equipment space with a group of products that enhances the installed base of DWDM equipment. The company competes with

Lucent

(LU)

and

Tellabs

(TLAB)

in the echo business and a host of optical companies (Lucent,

Ciena

(CIEN) - Get Report

, Nortel, etc.) in the DWDM business.

Emulex (EMLX)

Emulex is another play on the growing opportunity in fibre channel, offering a mix of high- to low-end host bus adapters, which are board level products embedded into computers connecting to a fibre-channel network.

QLogic

(QLGC)

and

Hewlett-Packard

(HP) - Get Report

are the company's main competitors in this segment.

E-Tek Dynamics (ETEK)

E-Tek competes with

JDS Uniphase

(JDSU)

on the passive side (like the old JDS). E-Tek is experiencing explosive demand in isolators and integrated modules. It also got an extra pop in the stock after the

Cisco

(CSCO) - Get Report

-

Cerent

deal stressed the importance of the optical world.

F5 Networks (FFIV) - Get Report

F5 is a leader in traffic management, monitoring and managing servers to direct Internet traffic to the most ideal server. F5 is a play on the growing e-commerce market and is focused entirely on businesses leveraging the Internet. F5's solution leads to higher system availability and increases performance.

Harmonic (HLIT) - Get Report

Harmonic is a leading supplier of fiber-optic systems that increase bandwidth while enhancing quality. The company sells to leading cable companies, and

AT&T

(T) - Get Report

is expected to contribute 40% of the company's total revenues. As cable companies build out more complex networks, including telephony and high-speed access, the demand for Harmonic's infrastructure should increase.

Internet Capital Group (ICGE)

Internet Capital Group has surged since its IPO less than a month ago, with a market cap now larger than

CMGI's

(CMGI)

. ICG is a holding company with 36 positions, most of which are focused in the business-to-business e-commerce space. Business-to-business companies are not widespread yet, and many believe this is the next big wave, as the market potential for business-to-business commerce is seen as being much larger than the business-to-consumer segment.

--

List compiled by Matt Jacobs

TAKE THE POLL HERE:

http://www.thestreet.com/comment/wrongtactics/779396.html

******

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Intel, Nortel 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

jjcletters@thestreet.com.

Evening Update: Intel to Back Alternative to Rambus Chips

By

Eileen Kinsella

Staff Reporter

9/1/99 9:08 PM ET

Ending months of speculation,

Intel

(INTC) - Get Report

embraced a low-cost alternative to

Rambus

-based

(RMBS) - Get Report

memory chips.

Intel said at the

Intel Developers Forum

in Palm Springs, Calif., late Wednesday that it will support PC133 SDRAMs in the first half of next year. The PC133 is a memory chip seen as a stopgap measure to chips using Rambus designs. Some companies have been critical of delays and high costs of Rambus chips. Intel's announcement will make it easy for Rambus critics to embrace an alternative while still working with chipsets made by Intel.

Intel is facing growing competition in memory chipsets, or devices that connect a computer's memory to its processor. By the time Intel's chipsets come out, they will be six months behind competitor

Via Technology

, a Taiwan-based company that has PC133 chipsets on the market now.

Rambus isn't likely to penetrate the low-priced PC market until 2002, according to data from Intel. Many in the semiconductor industry have said Rambus can't dominate the industry without penetrating the budget PC sector.

Intel emphasized it isn't abandoning Rambus. It is still planning on producing parts for low-budget PCs next year, and is hoping that market will develop.

"Rambus DRAM still provides a much more capable platform," Intel spokesman Pete MacWilliams said. Until now, Intel has been adamant that it would support only Rambus in its attempt to move the memory industry to the costly but fast design. But only recently has it realized that the industry is moving regardless toward PC133 SDRAM, which is made by

Micron Technology

(MU) - Get Report

and Korea's

Samsung

.

"A key part of the decision," said MacWilliams, "is that we're finding that PC133 just happens. It is not a lot of work or cost for DRAM vendors."

That wasn't the case when Intel last evaluated the technology in the first half of 1998. MacWilliams told

TheStreet.com

that Intel has since been evaluating another Rambus alternative, double data rate DRAM, but doesn't plan to support it. But in a press conference later, MacWilliams said he would not rule it out.

The launch of Intel's Rambus-based chipsets is scheduled for Sept. 27. Rambus closed down 1 3/4 at 95 3/4 and Intel closed up 1 1/4 at 83 7/16.

--

Marcy Burstiner

Specialty materials maker

Dexter

(DEX) - Get Report

has a lot of stuff going on. The company said industry consolidation and rising offshore production prompted its decision to sell its printed wiring board materials segment. The unit generated $43 million in sales last year. Dexter also said it will restructure its specialty polymers and nonwoven materials units and close its magnetic technologies facility in Richardson, Texas, a move that will eliminate 60 jobs. Severance costs as well as the cost of moving production from Texas to another facility will result in a third-quarter charge of $2.6 million, or seven cents a share. The costs would be more than offset on a year-to-date basis by a first-quarter gain, said Dexter.

In other postclose news (earnings estimates from

First Call

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

Earnings/revenue reports and previews

AEP Industries

(AEPI)

reported third-quarter earnings of 40 cents a share from continuing operations, in line with the single analyst estimate and up from 21 cents a year ago.

Tech Data

(TECD) - Get Report

reported second-quarter earnings of 54 cents a share, in line with the 16-analyst estimate and lower than 55 cents a year ago, excluding a gain.

Mergers, acquisitions and joint ventures

MLC Holdings

(MLCH)

inked an agreement to acquire

Centura Bank's

(CBC)

technology leasing unit

CLG

for about $37.5 million in cash and stock.

Warner-Lambert

(WLA)

bought $2.5 million of

Ligand Pharmaceuticals'

(LGND) - Get Report

common stock and set a research and development deal for estrogen reception. The agreement with Warner's

Parke-Davis

division will focus on developing small molecule compounds with the potential to combat diseases affected by the estrogen receptor, including osteoporosis, cardiovascular disease, breast cancer, and mood and cognitive disorders. Ligand may receive up to $13 million in research funding through September 2002 in addition to product milestone payments and royalties.

Bond Focus: Bonds Slump Anew as Fundamentals Trump Technicals

By

Elizabeth Roy

Senior Writer

9/1/99 5:02 PM ET

The Treasury market lost ground again today, giving back an early bounce off yesterday's technically oversold levels as the dollar continued to erode against the yen, commodity prices continued their recent upward burst and carmakers reported strong August sales.

The benchmark 30-year bond ended the day down 8/32 at 100 18/32, lifting its yield a basis point to 6.08%. Shorter-maturity notes were unchanged to a basis point higher in yield.

Today was supposed to have centered on the August

Purchasing Managers' Index

, the

National Association of Purchasing Management's

monthly manufacturing-sector indicator. But it was accidentally released

yesterday.

So while traders kept an eye on the day's developments, those developments were a lot less engaging than they were supposed to have been. And with the August edition of the

employment report

, baddest of the economic indicators, due out Friday morning, traders seem destined to continue to hang back lest the report radically rewrite the odds of another

Fed

rate hike next month.

"We're just waiting around for the employment number," said Michael Andreas, senior vice president at

Advest

in New York. "It's going to determine where we go for the foreseeable future."

Treasuries were able to rally early in the session, with the long bond rising as much as 13/32, mostly because they fared so poorly recently,

Prudential Securities'

co-head of government bond trading Bill Kirby said. "We had sold off a fair amount the last few days," he noted. "Trading has been extremely technical in nature of late. We were a bit oversold this morning and so we were due for a pop."

But as the day wore on, those pesky fundamentals returned to the fore. The dollar experienced another sharp drop against the yen to end the day around 109.07, down from 109.72 yesterday and its lowest close since Jan. 11. A weakening dollar can stoke inflation by making imports more expensive.

Oil prices were reasonably behaved, ending the day down slightly. But commodity prices more broadly continued to romp. The

Bridge/Commodity Research Bureau Index

rose from 199.35 to 200.15, its first close over 200 and its highest close since Nov. 19, 1998. Bob Hafer, managing director at Bridge/CRB, said the latest rise has been "very, very broad based," with all of the index's groups participating in varying degrees. The groups are precious metals, grains, livestock, industrial products and energy.

Pile on today's robust August reports by carmakers --

General Motors

(GM) - Get Report

through August has sold 12% more cars than during the same period in 1998, while

DaimlerChrysler

(DCX)

has sold 7.5% more -- and any remaining impetus for a rally was crushed.

"It's a clear indication of strength in the economy, and that doesn't help," Advest's Andreas said.

SEE TSC'S ECONOMIC DATABASE:

http://www.thestreet.com/markets/databank/777189.html

Do you Dare?

Investment Challenge Round 3 registration begins August 30th. Trading begins September 6th. Invest $500,000 without the risk and you could be on the trading floor with James Cramer at opening bell! Go to http://www.activefactory.com/thestreet and take the challenge!

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