Midday Stocks to Watch: LU, MOT, IBI, T, WAC, MSFT, PFE, TAN

Microsoft responds today to the government plan to divide the software giant into two companies.
Author:
Publish date:

Mergers, acquisitions and joint ventures

Dean Foods

(DF) - Get Report

announced it will buy

Land O'Lakes'

Upper Midwest fluid milk operations. The companies also agreed to form a joint venture to market and license certain value-added fluid and cultured dairy products to further expand and leverage the Land O'Lakes brand name nationwide. Dean Foods slipped 7/16 to 30 5/16.

Both agreements include long-term licensing arrangements for use of the Land O'Lakes brand name. The transaction, which is subject to regulatory review, is expected to close on or about July 1. Terms of the deal were not disclosed.

Lucent

(LU)

said it agreed to acquire privately held fiber optical networking equipment maker

Chromatis Networks

in a stock deal valued at $4.5 billion. According to the deal's terms, Lucent, which already holds about a 7% interest in Chromatis, would pay 78 million of its shares for the company, based on Lucent's closing price yesterday of $58.19. Lucent staggered 5/8 to 57 1/8.

Motorola

(MOT)

said that it has entered a $30 billion outsourcing deal with

Flextronics

(FLEX) - Get Report

. The terms call for Flextronics to make parts for Motorola's wireless phone, two-way pager and wireless infrastructure. Motorola has also agreed to pay $100 million for an equity instrument which is eventually convertible into 11 million shares of Flextronics. Motorola added 1 3/4 to 98 1/4 Flextronics was up 6 1/2, or 13.1%, to 56 9/16.

Royal Dutch Shell

will sell its Australian-based coal business to

Anglo American

(AAUK)

for about $850 million in a deal that puts Anglo back into the Asian coal market.

Shell said the final price for the business could reach $900 million, depending on final adjustments on completion of the deal, but Anglo said these would be minor. The agreement is expected to be completed by the end of June. Shell did not say how it would use the proceeds. Anglo American gained 17/64 to 43 25/64.

Schlumberger

(SLB) - Get Report

signed a Memorandum of Understanding with Baker Hughes under which Schlumberger's surface seismic business Geco-Prakla would join with

Baker Hughes'

(BHI)

Western Geophysical seismic unit to form a new venture called Western GECO.

In connection with the formation of the venture, Schlumberger will pay Baker Hughes $500 million in cash. Schlumberger will own 70% of the joint venture, and Baker Hughes, 30%. The deal, which is expected to close before the end of the year, is subject to completion of a definitive agreement, and to regulatory and board approvals. Schlumberger advanced 2 11/16 to 73 11/16, while Baker Hughes lifted 2, or 5.9%, to 36 1/16.

Sonera

(SNRA)

, a telecom operator, agreed to make a $200 million investment in

Powertel

(PTEL)

and

Eliska Wireless Ventures I

. Its $125 million investment in Powertel boosts its interest in the company to 11.8% from 9.1%, while a $75 million investment gives it a 30.1% stake in Eliska. Sonera gained 3/4 to 50 3/8, while Powertel moved up 2 1/16 to 81 1/16.

Back to top

Earnings/revenue reports and previews

Intimate Brands

(IBI)

said May

same-store sales increased 11%.

Litton Industries

(LIT) - Get Report

reported third-quarter earnings of $1.33 a share, beating the nine-analyst estimate by a penny and up from the year-ago earnings of $1.10 a share. The earnings were excluding a one-time gain on the sale of businesses. Intimate Brands climbed 9/16 to 23 11/16.

Back to top

Analyst actions

This morning,

Pepsico

(PEP) - Get Report

was upgraded to strong buy from buy at

UBS Warburg

and its price target was boosted to 51 from 46. Analyst Caroline Levy said that the company was her top pick in the soft drink space and raved about two recent management changes. Pepsico slipped 1/8 to 40 7/8.

Upgrades

Amerada Hess

(AHC) - Get Report

: UP to strong buy from buy at

Deutsche Banc Alex. Brown

. Amerada Hess rose 2 to 66 3/4.

HotJobs

(HOTJ)

: UP to buy from neutral at

PaineWebber

. HotJobs increased 1 43/64, or 16.6%, to 11 3/4.

National Computer Systems

(NLCS)

: UP to intermediate-term buy from accumulate at

Merrill Lynch

. National Computer Systems slipped 1/8 to 46 3/8.

Seagram

(VO) - Get Report

: UP to strong buy at

SG Cowen

; price target: 70. Seagram improved 15/16 to 48 5/16.

Spectrasite

(SITE) - Get Report

: UP to buy from hold at Warburg. Spectrasite fell 5/8 to 16 1/8.

Smithfield Foods

(SFD)

: UP to strong buy from buy at

Credit Suisse First Boston

. Smithfield Foods boosted 1 11/16, or 7.5%, to 24 3/16.

Wireless Facilities

(WFII)

: UP to strong buy from buy at

Chase Hambrecht & Quist

. Wireless Facilities hopped 7 13/16, or 20.3%, to 46 5/16.

Downgrades

Airgas

(ARG)

lost 3/16 to 5 7/16: DOWN to market performer from outperform at

Goldman Sachs

.

Answerthink Consulting

(ANSR)

slipped 1/4 to 17 1/2: price target DOWN to 35 from 55 at CSFB.

Cintas

(CTAS) - Get Report

stumbled 1/8 to 45 1/16: DOWN to intermediate-term accumulate from buy at Merrill Lynch.

Ethyl

(EY)

jumped 3/16, or 7.3%, to 2 3/4: DOWN to market performer from outperformer at Goldman Sachs.

MGM Grand

(MGG)

was off 1/2 to 28 3/16: DOWN to neutral from outperform at

Lehman Brothers

.

Oxford Health Plans

(OXHP)

shot down 3 3/16, or 13.6%, to 20 1/4: DOWN to neutral from buy at

Salomon Smith Barney

.

Initiations

Avigen

(AVGN)

rose 1 5/16 to 29 7/8: NEW strong buy at

ING Barings

; price target: 56.

Clear Channel Communications

(CCU) - Get Report

edged up 7/16 to 75: NEW buy at

SG Cowen

; price target: 90.

Gap

(GPS) - Get Report

grew 1 3/8 to 35 13/16: NEW buy at

Thomas Weisel

; price target: 45.

MGI Pharma

(MOGN)

bumped up 1 3/4, or 8.8%, to 21 5/8: NEW strong buy at

US Bancorp

; price target: 50.

Paradigm Genetics

(PDGM)

shares jumped 1/4 to 9 7/8: NEW strong buy at

Chase H&Q

.

Sierra Wireless

(SWIR) - Get Report

shed 1 9/16, or 5.6%, to 29 3/8: NEW intermediate, long-term buy at

Merrill Lynch

.

SPX

(SPW)

climbed 3 5/16 to 105 5/16: NEW strong buy at

Warburg

; price target: 190.

StarMedia Network

(STRM) - Get Report

soared 1 11/16, or 10.4%, to 17 15/16: NEW buy at

CS First Boston

; price target: 29.

Back to top

Offerings and stock actions

Barr Laboratories

(BRL)

set a 3-for-2 stock split. Barr Laboratories lifted 1 1/4 to 53 1/4.

Salomon Smith Barney

priced 28.17 million shares of

NRG Energy

(NRG) - Get Report

at $15 a share, below the estimated $16-$18 range. The company is a wholly owned unit of

Northern States Power

(NSP) - Get Report

, one of the largest independent power generators in the U.S. NRG Energy moved up 1, or 6.7%, to 16.

Back to top

Miscellany

AT&T's

(T) - Get Report

cable unit's programming will include a hard-core adult-movie channel as part of a agreement that could leave the telecom company with a hefty portion of the movies' profits, reported in

The Wall Street Journal

. According to the

Journal

, AT&T's cable division is facing pressure to produce results after using billions to upgrade its networks for new digital fare. The company's shares were off 5/16 to 35 1/16.

Warnaco

(WAC)

shares tumbled 1, or 12%, to 7 5/16, after

Calvin Klein

said it would bring a lawsuit against the company for alleged trademark infringement. Calvin Klein also plans to terminate its jeans and underwear agreement with the clothing maker.

ECI Telecom's

(ECIL)

shares hopped up 1 5/8, or 6.4%, to 26 15/16, after its fully owned subsidiary, InnoWave ECI Wireless Systems, was chosen by

Global Village Telecom

in Brazil to supply fixed wireless access systems. Under the deal, GVT will deliver advanced Internet, data and telephony services to residences and businesses in south and central Brazil.

Reuters

said the deal is valued at up to $165 million.

ECI Telecom is offering GVT long-term financing. In conjunction, ECI Telecom has decided to invest up to $35 million in GVT's parent company, GVT Holding NV, in convertible subordinated notes.

Kmart

(KM)

signed Charles Conaway, former president of

CVS

(CVS) - Get Report

to a five-year contract as its chairman and CEO.

Conaway succeeds the retiring Floyd Hall. CVS' current chairman and chief executive, Thomas Ryan, will take on the additional duties of president. Kmart's shares were up 1 1/16, or 13.9%, to 8 11/16. CVS shares were just 5/16 higher to 42.

LifePoint Hospitals

(LPNT)

was 1 5/8 lower, or 7.1%, to 21 1/8 after it announced that its chairman and CEO, Scott Mercy, died in an airplane accident yesterday. The company named DeWitt Ezell its interim chairman. Day-to-day operations of the company will continue to be led by Jim Fleetwood, the company's president and COO.

Microsoft

(MSFT) - Get Report

shares lost 11/16 to 62 11/16. The company is set to respond today to a plan modified by the government to divide the software giant into two companies. The response could be the last before a federal judge makes a final decision on the matter. The

Justice Department

and 17 states on Friday brought the revised plan, which included comments from District Court Judge Thomas Penfield Jackson, who has been presiding over the antitrust case. The proposed split would create two companies: One company would offer the Microsoft Windows applications and another would focus on Microsoft Internet Explorer and Office products. A decision could come later this week.

Pfizer

(PFE) - Get Report

was 5/16 higher to 44 1/2. The company was sued by a Florida man who was prescribed a Pfizer drug called Cardura for hypertension. The man claimed the pharmaceutical company failed to warn users about serious risks related to the drug.

The purported class-action suit seeks emergency notification to all Cardura users about scientific research in March that found the drug was less effective than a standard diuretic pill in preventing certain consequences of heart disease. Pfizer currently markets Cardura as an alpha blocker. The study found that while Cardura was as effective as a diuretic in preventing heart attacks and mortality, patients who took Cardura during a trial had a greater chance of suffering congestive heart failure or stroke than those who took a diuretic.

Tandy's

(TAN) - Get Report

shareholders gave their stamp of approval to change the company's 40-year-old family name to

RadioShack Corp.

. The name change is part of Tandy's plan to gain investor recognition by focusing on the RadioShack brand name. Shares of RadioShack will begin trading on the

New York Stock Exchange

under the ticker symbol "RSH" today. RadioShack shares were 7/8 higher to 43 11/16.

Back to top