Publish date:

TheStreet.com's DAILY BULLETIN

December 29, 1999


Market Data as of Close, 12/28/99:

o Dow Jones Industrial Average: 11,476.71 up 85.63, 0.75%

o Nasdaq Composite Index: 3,972.11 down 3.27, -0.08%

o S&P 500: 1,457.66 up 0.57, 0.04%

o TSC Internet: 1,121.97 down 7.03, -0.62%

o Russell 2000: 488.48 up 4.02, 0.83%

o 30-Year Treasury: 95 14/32 unchanged , yield 6.475%

Companies in Today's Bulletin:

PurchasePro.com (PPRO:Nasdaq)

State Street (STT:NYSE)

Commerce One (CMRC:Nasdaq)

In Today's Bulletin:

o Internet: On the Cusp of an IPO, FreeAgent.com Faces Being Stripped of Its Name
o Wrong! Rear Echelon Revelations: Commerce One Proves Again That It's All in the Timing
o Evening Update: State Street Sells $5.2 Billion in Debt Securities, Takes Charge
o Bond Focus: Consumer Confidence Rises, and Bonds' Confidence Falls

"TheStreet.com" on

Fox News Channel


Special Times!

Jan. 1 at 6 p.m. ET and Jan. 2 at 11 a.m. ET

A special edition of "TheStreet.com" looks at investing in the new millennium. Special guests include

Ryan Jacob

, CIO of the

Jacob Internet Fund


Gene Walden

, author of

The 100 Best Stocks to Own in America

, and

Ken Schapiro


Condor Capital Management


Also on TheStreet.com:

Mutual Funds: On the Verge of a Record, S&P 500 Index Can't Get No Respect

Exploding tech stocks and triple-digit fund returns are overshadowing a strong performance by the benchmark.


Online Investing: Daytrading Software Goes Mainstream

Mainstream brokers Schwab and E*Trade are starting to offer some tools that professional daytraders use.


Wrong! Dispatches from the Front: Not Just Another Big Hat

Cramer didn't create this speculative environment, but he does have to work in it.


The TaskMaster: For PurchasePro, a Time for Amends

The company yesterday amended its S-1 filing with the SEC, a move that suggests the old rules still apply.


Internet: On the Cusp of an IPO, FreeAgent.com Faces Being Stripped of Its Name


Spencer E. Ante

Staff Reporter

12/28/99 4:55 PM ET

SAN FRANCISCO -- The good news for


, the company that runs the


Web site, is that it's the first company linking independent workers and companies online to file to go public. The bad news is that the company has become entangled in a trademark dispute with the

San Jose Mercury News

over the term "Free Agent."

According to its S-1 filed with the

Securities and Exchange Commission

on Dec. 20, FreeAgent.com in July received a letter from the

Mercury News

alleging that its use of "Free Agent" and the domain name www.freeagent.com infringed on the newspaper's trademark of the Free Agent name of its online classifieds service. The letter requested that FreeAgent.com cease all use of the trademark for online classifieds and relinquish its domain name to the

Mercury News


The paper's counsel Ed Davis declined to comment. FreeAgent.com also declined to comment, citing an SEC-mandated quiet period. But in its filings, the company says it has "valid defenses to the claims."

The controversy underscores the growing importance -- and uncertainty -- of intellectual property rights on the Internet. If left unresolved, the dispute may hang over the company like a black cloud, scaring away investors and making it harder for Opus360 to go public. Or, in the worst case scenario, if the company loses the dispute, it could suffer considerable legal expenses and damages and be stripped of its ability to use its brand name.

Chasing Free Agents

FreeAgent.com is one of a number of companies chasing after the growing pool of indie professionals and long-term temp workers that comprises a large segment of the Internet economy's labor force. White collar freelancers are also working more in other industries such as marketing, computer software, financial services and publishing. Freeagent.com already faces competition from start-ups like




(which filed to go public on Dec. 22) and


as well as traditional recruiting, search and placement firms such as headhunters.

Firms underwriting the IPO include

Robertson Stephens


Bear Stearns


J.P. Morgan

. For the nine months ended September 30, 1999, FreeAgent.com lost $12.5 million on $241,000 in revenue. Niku, by contrast, lost $13.5 million on $3 million in revenue during the same period.

According to the

Gartner Group

, by 2004 60% of enterprises will use freelance workers to fulfill more than 50% of their information technology needs. A recent study by the

Economic Policy Institute

determined that self-employed and temporary workers now make up 30% of the American workforce. And FreeAgent.com estimates that there are more than 24 million free agents in the U.S.

Branding Time Bomb?

All of these companies face great challenges in building their business, but FreeAgent.com is the only player that faces the possibility of losing its brand. If the Mercury News brings an infringement claim against FreeAgent.com and it loses, the company "could be liable for substantial damages." In October, a federal district-court jury in Los Angeles ordered


(PFE) - Get Report

to pay $143 million -- the largest judgement in the history of U.S. trademark law -- for infringing on the trademark of


, a British maker of electronic-identification devices. Worse, FreeAgent.com could be forced to cease use of the Free Agent trademark and transfer its domain name to the Mercury News, throwing away all the money spent on building its identity, and spending more money building a new brand.

Sally Abel, a partner with San Francisco law firm

Fenwick & West

, who also heads up its trademark group, says if the dispute goes to court, the key question is whether FreeAgent.com's use of the trademark is likely to cause consumer confusion. "If courts find they have created confusion then there is cause for infringement," says Abel.

Either way, until the situation is resolved, it's like a time bomb ticking away. For investors, the question is whether it's going to explode or be defused.

Wrong! Rear Echelon Revelations: Commerce One Proves Again That It's All in the Timing


James J. Cramer

12/28/99 5:59 PM ET



David Faber

pop the

Commerce One


bubble? If he did, that would be more than any bear has been able to do. Let me explain what I think happened here. By way of comparison, I am going to use the analogy of






. I am neither long nor short these stocks. This may shock you, but I don't care where they go. If you own them, great. If you are short them, great. Don't bother me none. (Take that, those who think to write is to endorse!)

priceline had been super hot. But it ran into a mammoth amount of insider selling when various lockups ended. eToys, too, was very hot, but it too had a gigunda lockup expiration. In both cases, it seems that the insiders took advantage of the free-to-trade situation. That made these "tight" situations loose.

Let's walk through that tight-loose transference for a second. Many people had thought that both of these stocks were too high. They were priced for perfection. If there were any execution glitches, short-sellers believed that both stocks would get hammered and they could profit from the expected decline. As these stocks rallied higher and higher, the bears shorted these stocks aggressively, betting that they would drop and big money would be made.

Remember, when you short a stock, you have to be able to borrow it to sell it. That means you have to be able to locate stock. Both of these companies did not have enough stock registered for sale to meet those short-sellers' demands. So, frequently they had to cover their shorts during the dramatic run-ups as they could not provide the stock they shorted to the buyers. But the bears just kept returning and returning, betting on a big payday someday. (You can keep shorting and covering all of you want.)

eToys then hit some bumps. So did priceline, which is dependent upon airline traffic for some of its revenue, and airline traffic is down vs. last year at this time (Y2K). As the fundamentals became less rosy, the insiders simultaneously registered stock and sold it. That action "cured" the tightness and removed these short-selling buyers from the equation.

All of a sudden, you had no more short squeeze; you had analysts becoming critical, and you had insiders who wanted out. The short-sellers, smelling blood, put added pressure on the stocks by offering more short. Why not? The best gains are often right after the tightness has been cured.

And the declines were steep, fast and profitable for the shorts.

In fact, the gains became so outsized that bears started figuring they could make big money if they timed their shorts perfectly. One of these gambits involved Commerce One, which, like eToys and priceline, had a huge expiration of a lockup, some 20 million shares.

Of course the shorts didn't know whether all 20 million shares would be registered to be sold or not. But given the run-up, it sure seemed likely that a lot of it will get registered to be sold.

There was only one problem. Nobody, long or short, figured that B2B would takeover the market's imagination in a way that made tulips seem like gold bullion.

So, all at once, you had real buyers and individuals walking the stock up, with short-sellers providing a lot of the supply. As the stock continued to confound, the shorts joined in the buyers' stampede by trying to cover some of the stock before the losses became ruinous. This run was as close to the dreaded infinity that a short-seller has nightmares about.

Finally, with the shorts one day away from the promised lock-up, the stock went bonkers-up still again. The peak came an hour before Faber "broke" the news that every short-seller knew anyway, but maybe some of the long buyers didn't.

And the stock reversed.

As I had no idea what would make this stock reverse or continue to charge up, I avoided both sides, but admired the battlefield in the way that the Virginians brought lawn chairs to the Battle of Bull Run (an apt comparison).

But now the short promised land has been reached. The cuffs are off. There is only one problem: Unless you shorted this stock at 2:00 p.m. today, you are probably already history.

Will this stock be eToys? Will it be priceline? Here's an honest statement: Beats the heck out of me.


James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any 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: State Street Sells $5.2 Billion in Debt Securities, Takes Charge


Tara Murphy

Staff Reporter

12/28/99 7:44 PM ET

State Street

(STT) - Get Report

said it would assume a pretax fourth-quarter charge of roughly $57 million, or 21 cents a share after taxes, as a result of selling $5.2 billion in investment securities. State Street said that the sale, which mostly included Treasury and federal agency securities that had an average maturity of less than two years, was part of repositioning its investment portfolio assets. State Street CFO Ronald O'Kelley said roughly 75% of the sale's funds were used to buy Treasury and federal government securities with higher yields, while the remaining proceeds went toward short-term securities. The 12-analyst

First Call/Thomson Financial

estimate sees the company posting fourth-quarter operating earnings of 73 cents a share.

State Street said it the portfolio repositioning would tack on 3 cents to its EPS each quarter in fiscal 2000.

After-Hours Trading

American Champion Entertainment


was easily the most active issue on

Island ECN

. The company is best known for

Adventures with Kanga Roddy

, a children's television show. It also operates a chain of karate schools. With no news on the stock, tonight's sudden interest in the company is, well, more inexplicable than usual.

At the No. 2 spot,

Elcom International


received a huge pop on news that it was a coveted business-to-business play. Technically, that not news. It's just news to investors. The company, which produces electronic commerce systems, has always been a B2B'er, but some people are just finding that out. According to a


story, Elcom has languished in the shadow of bigger B2Bs like

Internet Capital Group



Commerce One


. After-hours investors have sent Elcom to new heights, where it can fly with its brethren.

Speaking of Commerce One, it seems to have recovered nicely from today's late-afternoon stumble.

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

Century Business


said it plans to assume a $25 million to $30 million pretax charge in the fourth quarter due to an office consolidation. Century Business said the consolidation, which is expected to produce pretax yearly savings of more than $15 million, would also reduce its workforce by roughly 200 jobs. The company also said the office consolidation would result in an additional pretax charge in 2000 of between $5 million to $10 million. Century said it would combine 10 of its biggest markets, where the company has bought several businesses in the last three years, including Washington, D.C.; Philadelphia; Atlanta; Kansas City, Mo.; Colorado; Northern and Southern California; Cleveland; Chicago; and Texas.

Finish Line


reported a third-quarter loss of 9 cents a share, in line with the eight-analyst estimate but down from the year-ago 2-cent profit.

Sodexho Marriott


warned investors that first-quarter earnings would be roughly 5% below the two-analyst consensus estimate of 47 cents a share. The company blamed softer-than-expected operating margins in the its corporate services business, start-up costs for new contracts and Y2K expenses for the disappointing results. The company said its disappointing first quarter could cause fiscal 2000 earnings to fall roughly 5% below the three-analyst consensus estimate of $1.05 a share.

Bond Focus: Consumer Confidence Rises, and Bonds' Confidence Falls


David A. Gaffen

Staff Reporter

12/28/99 4:27 PM ET

Where there's a will, there's a selloff.

Volume barely exceeded 60% of an average Tuesday for this past month, but the skeleton crews employed by dealers still took Treasury prices down a bit due to several strong economic reports. Ten-year notes reached high yields for the year, but the 30-year bond finished a basis point off its 1999 closing high.


Conference Board's

Consumer Confidence Index

and weekly retail sales reports typically rank low on the totem pole in terms of importance to the market, but strength in those releases was enough to knock a few more ticks off bond prices.

Lately the 30-year Treasury bond was down 6/32 to 95 13/32, leaving the yield virtually unchanged at 6.476%, still below the year's highest closing yield of 6.487%, reached

last Thursday.

The 10-year note closed at 6.421%, compared with Thursday's 6.417% close. Tracker


reported 10-year volume at 39.5% less than the usual for Tuesdays in the past month.

The Consumer Confidence index rose to 141.4 in December, second-highest reading for this release ever. The highest reading was in October 1968, when it hit 142.3. Economists as polled by


were expecting the index to fall to 135 from a revised 137 in November.

George Simon, market analyst at

A.G. Edwards

, said more attention would have been paid to this figure were market activity in full swing, rather than winding down. Analysts believe the market has squeezed out most of this year's negativity, but poor trading could resume next week when fully staffed dealers ponder the possibility of more


rate hikes.

"We would have been down further if it had been a different week," Simon said. "There was not too much attention paid. It was well above consensus, and that would normally have been a bigger negative."

Two weekly retail reports --


and the

Redbook Retail average

-- showed sales last week rising 1.2% and 1.7%, respectively.

After declining for four months in a row,

existing homes sales

increased to a seasonally adjusted annual rate of 5.09 million homes in November, a 6% increase from October's 4.8 million rate.

A weakening housing market is generally considered a leading indication of future spending and, after reaching a record 5.63 million rate in June, it appeared that the pace of housing sales was finally trailing off.

For what it's worth, economists were looking for this increase, predicting sales to rise at a 5.02 million clip, according to



Tomorrow's only monthly economic release is the Conference Board's index of

leading economic indicators

, forecast to rise 0.2%. A strong reaction out of the market is unlikely.

"Everything that comes out is going to be muted or overstated because of very little volume," Simon said.



Street Sightings

James J. Cramer will be appearing on "Fox and Friends" Wednesday, Dec. 29 at 7 a.m. EST.

Copyright 1999, TheStreet.com