TheStreet.com's DAILY BULLETIN
September 30, 1999
Market Data as of Close, 9/29/99:
o Dow Jones Industrial Average: 10,213.48 down 62.05, -0.60%
o Nasdaq Composite Index: 2,730.27 down 25.98, -0.94%
o S&P 500: 1,268.37 down 13.83, -1.08%
o TSC Internet: 643.49 up 12.19, 1.93%
o Russell 2000: 421.52 up 3.03, 0.72%
o 30-Year Treasury: 99 31/32 down 17/32, yield 6.117%
Companies in Today's Bulletin:
America Online (AOL:NYSE)
In Today's Bulletin:
o Internet: Talk of Excite Leaving @Home Riles Wall Street
o Wrong! Rear Echelon Revelations: You Bet It's Betting
o Bond Focus: Bonds Are an Over-Oiled Machine
o Evening Update: eBay Soars on Addition to Nasdaq 100; After-Hours Trading Update
TheStreet.com on the Fox News Channel
Gruntal's Peter Green does the "Drill" with Herb Greenberg and Dan Colarusso. Find out which stocks the technical analyst likes and which ones he'd most like to short.
And Gary B. Smith goes head-to-head with Adam Lashinsky over two top market indexes in Chartman. Will it be buy, sell or hold for the Nasdaq and the S&P 500?
Also, Jim Cramer's calling for a rough road in the month ahead. He'll tell how he plans to dodge the missiles of October.
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Also on TheStreet.com:
Herb on TheStreet: *Extra* Why Amazon's New Plan May Be Further Evidence That Its Biz Ain't Booming
Checking back with Jeff Matthews on Amazon's new pitch. Plus, check out the discussion on our message boards.
Consumer Products: Frosty Fourth-Quarter Outlook Chills Avon Shares
The stock plunges 27% after the cosmetics concern predicts it won't hit fourth-quarter targets.
Tech Savvy: Amazon's zShops: Big Idea?
Seymour thinks Bezos is doing things the right way, and eBay will be facing some serious competition. Discuss today's developments on our message board.
Marc Chandler: Yanking the Yen
Rumors of an imminent liquidity boost by the Bank of Japan are running rampant in the forex markets today.
Internet: Talk of Excite Leaving @Home Riles Wall Street
Spencer E. Ante and
9/29/99 10:51 PM ET
SAN FRANCISCO --
is under increasing pressure to split itself into two companies, undoing a merger completed just four months ago, according to four investment bankers and money managers.
The pressure comes as speculation mounts that
is interested in buying the Excite portal business and striking a broadband distribution alliance with
, which owns a majority of Excite@Home's voting shares.
, among others, reported on the speculation that AOL would acquire Excite, which pushed up Excite@Home's stock 13%. Those reports followed one posted by
, a financial news site, on Sept. 25. And earlier this summer, reports said
was in talks to buy Excite.
Excite@Home declined to comment on the latest rumblings. AOL couldn't be reached for comment. AT&T spokesman Andrew Johnson denied rumors of a deal. "When I saw the news come over the wire I kind of scratched my head and said, 'What's going on?'" says Johnson. "I would normally get some inkling of it."
Many on Wall Street think this time the talk is more than your garden-variety bulletin board rumormongering.
CIBC World Markets
both published research bulletins Wednesday bolstering the speculation.
"We believe that such a transaction makes sense for both," wrote
analyst Henry Blodget. (Merrill helped underwrite @Home's 1997 IPO and acted as an adviser to @Home in its merger with Excite.)
Splitting the company into a content part (i.e. Excite) and a conduit part (i.e. @Home) would strengthen @Home's hand, wrote Blodget, because it would resolve the company's regulatory problems and put it in a better position to strike other deals with cable operators for set-top boxes. Blodget wrote that Merrill could neither deny nor confirm the speculation.
CIBC analyst John Michael Segrich wrote that a deal between AT&T and AOL is "highly likely (90% probability in our opinion)", and may occur in the "near term." (CIBC has no underwriting relationship with Excite@Home.)
Although AT&T controls 58% of Excite@Home's voting rights, it must garner the support of other board members such as
to take a big step like breaking up the company. Cox spokeswoman Amy Cohn declined to speculate on the rumors, but said that "we think content and distribution make sense and that's why we're supportive of their being one company."
AT&T broadband exec Leo Hindery has argued that the Excite acquisition runs counter to Ma Bell's stance of staying out of the content business. But Excite@Home CEO Tom Jermoluk has said he wants to keep the company together to compete against AOL.
A money manager who has no position in Excite@Home and who asked not to be named, says that, increasingly, AT&T and its cable partners are losing patience with the combined firm. "They're saying, 'We're spending all this money and we have to be hooked up to this one content partner,'" he comments.
In hindsight, a hint that Excite@Home might be split up came on Monday, when the company issued a release saying it was organizing its operations into two major divisions: Media & Marketing Services, focused on content and sales; and Subscriber Networks, which includes the @Home and @Work products.
Four people interviewed say they expect that AT&T and its cable partners would want to retain control of the network side of Excite@Home, that is, @Home's original business. The question, then, would be what company would want the former Excite.
One investment banker, whose firm has no underwriting relationship with Excite@Home, says he doubts Excite would go to AOL or Yahoo!. Rather, the most likely candidates are traditional media companies such as Barry Diller's
and the soon-to-be-combined
Viacom and CBS could use Excite to build a major portal, similar to what
has done with
has done with
. And for Diller, Excite might be a good substitute for
, a company it tried unsuccessfully to buy this year. It has the kind of extensive shopping area that Diller coveted in Lycos. "Why
Barry Diller make a run at Excite?" the banker asks.
Wrong! Rear Echelon Revelations: You Bet It's Betting
James J. Cramer
9/29/99 10:37 PM ET
Wow, will the old timers want to nail me to the wall after I wrote that I was
excited about the action. Talk about a total taboo violator. This isn't a game about rapid price movement, or opportunity or rapid cash deployment. In fact, it is not a game at all. It is an investment process and to call it anything else is to run the risk of creating a casino-like atmosphere.
To which I say, GIVE ME A BREAK. It wasn't me that turned it into a casino. It was just me willing to admit what market professionals won't do because it savages the veneer they have cultivated all of their lives.
Maybe it's because I used to play the horses. Maybe it is because I used to bet large on Sundays. Or that I played in a rotisserie league that had me in arrears for the first two years of law school. Don't worry, I made good. But I can smell betting when I see it, and when we are out there taking
up six points, we are gambling and we should just own up to that. We are assessing the odds and making a wager. I can't stand the sanctimonious people out there who would call this something else in a vain attempt to dignify what they do for a living. The worst ones are the ones who think there is a science behind it. A Nobel-awarding science. They are totally bogus.
It is about an edge. It is about being early, or ahead of the crowd. It is about perception and psychology and capitulation and hubris. It ain't about P/Es and price-to-book anymore.
Maybe it never really was.
: If you are like me and have been watching
develop these years, you had to have a tinge of pride today. A dozen great Amazon stories, some terrific repartee in the commentary section and, best of all, spirited, intelligent discussion in the boards, something that no other board has. And no attacks on the person. People keep telling me not to go to the
boards dealing with TSCM because they portray me as a cross between
. What a shame. I used to love to look at those boards. But their loss is our gain. And because we are a paid site, we can assure you that they will get better and better without interruption or
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Amazon and Yahoo! and Cramer was long TheStreet.com. 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
Bond Focus: Bonds Are an Over-Oiled Machine
David A. Gaffen
9/29/99 4:53 PM ET
Bonds slid on an oil slick today, but the footing under the Treasury market was fragile to begin with. The bond market fell for the third straight day today, leaving Treasury yields back near the top of their recent trading range.
The price of oil per barrel today hit $25 for the first time since January 1997, and that was enough to continue bonds' temper tantrum. When there's little news to move bonds one way or another, they tend to bounce methodically back and forth in a range. But these volatile five days are as violent as
actors flinging themselves against walls to simulate turbulence.
The 30-year Treasury bond fell 15/32 to 100 1/32, pushing the yield up 3 basis points to 6.12%. Tracker
reported volume up 17% when compared with the average Wednesday this past month.
"We're definitely sitting at the low end of the trading range now," said Maryann Hurley, vice president in taxable fixed-income trading at
in Seattle. "It's a combination of the huge run-up in gold prices in the last two days and oil continuing its upswing. Further than that, in the
released tomorrow, we're going to see prices paid coming in stronger."
The price of oil bounded over $25 this morning, hitting an intraday high of $25.08. It actually closed up 29 cents to $24.62, but the damage was done. By contrast, gold prices tapered off today, closing down $7.30 to $301.50 an ounce -- but that's still up $40 this week. Gold has lost some of its luster as an inflation hedge, but the price increases still underscore the fact that commodity prices overall continue to rise, and that's potentially inflationary because it increases the prices of goods used in production. The
Bridge/Commodity Research Bureau
index closed up 5 cents today at 208.02.
But the seeds of this selloff were sown on Friday, when the bond market forced out its second consecutive 1-point rally. The swiftness of that two-day rally had some traders thinking the market might push firmly below 6% this week. That optimistic projection was based on expectations for more flight to quality heading into Y2K, but it seems the market might have discounted Y2K fears a little early.
With this three-day selloff to provide hindsight, last week's rally now looks more like a couple days of technical buying, exaggerated by the flagging stock market, rather than a determined swing upward. The reports of selling by those covering shorts on losses in gold may have similarly distorted this week's activity. It's more energetic range trading, but it's a range nonetheless.
"A few days ago, it looked like we were breaking out to the upside," said Bill Kirby, co-head of government bond trading at
. "Now we're drifting back to the lower end. We'll probably hold there and then go on with business as usual. As we drift further into the fourth quarter, that may change."
Not if economic reports resemble what the market's been seeing month in and month out, said Hurley. Despite the liquidity jitters that may arise due to Y2K, the economy isn't showing any signs of slowing.
"We have to see a slowdown in commodity prices -- that's not happening," said Hurley. "Or, we'll have to see a definitive slowdown in the overall economy. We're seeing some slowing from really, really high levels. If we're going to break out, it's not going to be with higher prices and lower yields."
The Chicago Purchasing Managers' Index is tomorrow's most important release. Forecasts as estimated by
are for the index to rise to 56.6 in September from 56.1 in August. The report is a survey of Midwest manufacturing conditions and is reportedly watched closely by the
will release August's
new homes sales
data tomorrow at 10 a.m. EDT. The forecast is for sales to decline on a seasonally adjusted annual pace to 946,000 from 980,000 in July, but the housing market's been pretty stubborn to slow down, despite what economists think.
Lastly, the final revision to second-quarter
will be released tomorrow. The market is expecting no change to the previous estimate of 1.8%.
TO VIEW TSC'S ECONOMIC DATABANK, SEE:
Evening Update: eBay Soars on Addition to Nasdaq 100; After-Hours Trading Update
9/29/99 9:00 PM ET
roared up 7 15/16 to 147 in after-hours
trading on news that it will join the
on Monday. eBay, whose market capitalization is about $17.7 billion, will replace
Johnson & Johnson
is acquiring. The Nasdaq 100 is an index of the 100 largest nonfinancial stocks on the
Nasdaq Stock Market
will announce Thursday that
is investing $15 million in the company at a price of $12 a share. CAIS closed Wednesday at 11, down 1/4.
In addition, CAIS, which provides the hardware, software, and connectivity for hotels and apartment communities, will also announce that it will purchase 44 million IRUs, or bandwidth units, from Qwest, said Gary Rabin, company executive vice president of finance and strategic planning, at the
Volpe Brown Whelan Internet & Communications
conference Wednesday. That basically means that CAIS will have the right to that dedicated amount of bandwidth for 20 years, Rabin said.
CAIS announced earlier Wednesday that it signed an agreement with
Bass Hotels & Resorts
. The deal lets CAIS install its high-speed Internet access products in an initial 60
Staybridge Suites by Holiday Inn
properties. CAIS Internet will hook up an initial 6,700 units in 60 cities nationwide.
The company already has arrangements with
and others, and has its service available in 887 hotels and more than 200,000 rooms in the U.S.
in after-hours trading. How heavy was the volume in the online retailer? Yesterday's volume leader on Island was
with 97,830 shares. Tonight, Amazon is almost double that.
Island ECN, owned by Datek Online, offers trading, mainly in Nasdaq-listed stocks, from 8 a.m. to 8 p.m. EDT. Prior to Sept. 15 Island offered trading from 8 a.m. to 5:15 p.m. EDT
MarketXT, formerly Eclipse Trading, offers after-hours trading to retail clients of Morgan Stanley Dean Witter's (MWD) Discover Brokerage and Mellon Bank's (MEL) Dreyfus Brokerage Services. Clients can trade 200 of the most actively traded New York Stock Exchange and Nasdaq Stock Market issues, 6 p.m. to 8 p.m. EDT Monday through Thursday.
updates the most active issues on both MarketXT and Island ECN in Got a Minute? and in the Evening Update.
In other postclose news (earnings estimates from
First Call/Thomson Financial
; earnings reported on a diluted basis unless otherwise specified):
Earnings/revenue reports and previews
said the $25 million sale of its stake in
Sonat Power and Marketing
would result in a fourth-quarter pretax gain of roughly $20 million.
said it anticipates third-quarter revenue between $30 million to $31 million, greatly beating the year-ago revenue report of $2.8 million.
posted fourth-quarter earnings of 67 cents a share, in line with the 14-analyst estimate of 67 cents, and beating the year-ago 60 cents.
reported third-quarter earnings of 25 cents a share, missing the five-analyst estimate of 27 cents but up from the year-ago 14 cents.
said its first-quarter same-store sales declined 2% to $1.36 billion, down from the year-ago $1.39 billion. The computer retailer blamed the decline on slowness in its direct sales, related technical services and technology training sales. Compared with a year ago, direct sales slipped 14% to $410 million, while technical services and training sales fell 8% to $30 million and 14% to $23 million respectively. In addition, the company said that comparable same-store sales for 195 stores in business a year or more stumbled 0.3%.
warned investors that it would post third-quarter earnings below the 10-analyst estimate of 20 cents a share, citing its
Mrs. Smith's Bakeries
subsidiary's weak sales and ongoing costs as a cause for the disappointing results. The company holds a 55% interest in
said it expects to post fiscal 1999 earnings of $1.90 a share, missing both the six-analyst estimate of $2.03 and the year-ago $1.92. The company blamed softness in its retail loans and increasing costs for the disappointing earnings.
posted third-quarter earnings of 23 cents a share, in line with the five-analyst estimate and beating the year-ago 18 cents.
Personnel Group of America
said it is on track to post third-quarter earnings in line with the 11-analyst estimate of 25 cents a share. In addition, the company said it set a $30 million share-repurchasing plan.
posted fourth-quarter earnings of 21 cents a share, in line with the nine-analyst estimate of 21 cents and up from the year-ago 28 cents.
said September same-store sales were boosted 8.3% by pharmacy same-store sales growth of 16.7%.
RTI International Metals
warned investors that it expects to report a third-quarter loss of 7 cents to 12 cents a share, after it assumes a $1 million to $1.5 million charge for new product development and slow oil and gas exploration markets. The two-analyst consensus estimate expects the company to post earnings of 14 cents a share, lower than the year-ago 76 cents a share.
posted first-quarter earnings of 28 cents a share, beating both the 13-analyst estimate of 26 cents and the year-ago 25 cents.
posted fourth-quarter earnings of 44 cents a share, beating both the single-analyst estimate of 42 cents and the year-ago 40 cents a share.
Offerings and stock actions
said it has filed with the
Securities and Exchange Commission
for an offering of 6.5 million common shares.
Credit Suisse First Boston
priced a 5.5 million-share IPO for
(TIVO:Nasdaq) above-range at $16 per share.
said it would shut down three coal mines, which are used as a resource for the
power plant in western Pennsylvania, while continuing to operate a West Virginia mine for at least two months. The closings, which are set to occur in early December, will leave 560 employees out of work. Consol spokesman Thomas Hoffman said the company has forge an agreement with the power plants owners including
Public Service Enterprise Group
to supply the facility with coal from other mines that are cheaper to operate.
announced the departure of President and COO George Tronsrue. The company said Tronsrue resigned from the company to "pursue other career opportunities."
said workers have filed another petition with the
National Labor Relations Board
to ax the
as their current negotiating representative. The NLRB said that workers at 10 facilities have filed 13 decertification petitions in the last two years. Overnite said one of the key issues dividing the union and the company is the Teamsters insistence that the workers swap their wholly funded pension plan for the Teamsters Central States Pension Fund.
Copyright 1999, TheStreet.com