Stocks to Watch Friday: Ravisent, Litton, Ford, 3Com

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Updated from 11:15 a.m. Friday

Ford

(F) - Get Report

said it will miss analysts' reduced expectations for the fourth quarter by about 10 cents a share due to weather-related losses in North America and parts shortages outside the continent.

Sixteen analysts polled by

First Call/Thomson Financial

were expecting the company to earn 74 cents a share in the quarter. These forecasts were reduced following a Dec. 1 warning that the company would miss projections by 10 cents.

Ford also said it has lowered the number of vehicles it plans to make during the first quarter of 2001 by 9% due to a slowing economy and reduced demand. The company will now produce 943,000 vehicles, 107,000 short of the 1.05 million initially anticipated for the quarter. In order to reduce production the company will idle most North American assembly plants, mostly in the second-half of January.

"It's clear that U.S. economic growth is slowing, and surveys of consumer sentiment point to lower levels of spending in the future. The revised first-quarter plan is intended to align our U.S. inventories with consumer demand," the company said in a statement.

Earlier on Thursday,

General Motors

(GM) - Get Report

announced it will idle six of its assembly plants during the first quarter. Plants in Ste. Therese, Quebec; Kansas City; Shreveport, La.; Linden, N.J.; Morain, Ohio, and Janesville, Wis., will all be idled during the first week of January for varying periods of time, according to

Reuters

.

Mergers, acquisitions and joint ventures

Shares of

DoubleClick

(DCLK)

rose 88 cents, or 9.5%, to $10.06 in morning

Nasdaq

trading following yesterday's news that

NetCreations

(NTCR)

has nixed an agreed-upon merger of the companies.

NetCreations, an email marketing firm, said an unidentified third party offered to acquire all of its outstanding stock for $7 a share in cash, a proposal DoubleClick declined to match. DoubleClick had offered to buy NetCreations in October in a stock swap valued at $191 million. But DoubleClick's stock was trading around $26 at the time, and has fallen substantially since then.

DoubleClick said NetCreations is required to pay a breakup fee of $8.6 million plus expenses.

"We are disappointed that NetCreations won't be a part of our success, but considering NetCreations' recently announced operating results and our own internal progress on email, we have decided not to raise our existing offer," DoubleClick said in a statement.

Earlier this month NetCreations said it expects fourth-quarter earnings of 0 cents to 2 cents per share, well short of the 11 cents Wall Street was predicting.

Shares of NetCreations were down three cents, or 0.5%, to $6.63 in recent

Nasdaq

trading.

Despite the failed merger, two analysts said Friday they were not changing their outlook for DoubleClick, despite disappointment the deal fell through.

An

SG Cowen

report said the firm will stick with its neutral rating on the stock even though, "DCLK's logic not to counter is lost on us, since DCLK was so aggressive in stating only two months ago how strategic NTCR was to boosting their email product marketing efforts for advertising clients."

A

Lazard Freres

report reiterated its hold rating. "DoubleClick is left with a strong email marketing business, but will not be the leader in the market," the firm wrote. "DoubleClick has had the opportunity to make other strategic acquisitions, but may have been too conservative in using its stock or cash."

Netpliance

(NPLI)

said an investor group headed by its chief executive officer has offered to buy out the remaining shares of the company for 65 cents per share, or about $20.3 million.

The Austin, Texas, Internet infrastructure company said the investor group headed by John McHale owns 31,205,185 shares, or about 52% of Netpliance's common stock. The cash deal for 65 cents a share represents a premium from the stock's closing share price of 34 cents on the

Nasdaq

Thursday.

The company said it expects other stockholders will be joining the investor group. Netpliance said the investor group requested "an opportunity to discuss a possible tender offer and merger transaction" for the remaining outstanding shares not owned by the group.

Netpliance's board of directors will form a special committee of independent directors to consider the proposal.

No. 5? Meet No. 7.

The fifth-largest defense contractor,

Northrop Grumman

(NOC) - Get Report

, announced that it would be buying the seventh-largest defense contractor,

Litton Industries

(LIT) - Get Report

, for $5.1 billion. The deal is pretty straightforward. Northrop, which makes really cool weapons of mass destruction, will spend $80 for every share of Litton's common stock. It will also pay $35 for each Class B share and pick up $1.3 billion in debt. In return, Northop gets Litton's shipbuilding and electronics business.

That's quite a premium over Litton's stock price, which closed Thursday at $62.63, less than a buck away from 52-week highs. Litton's Class B shares, which attract far less interest than their common counterparts, closed at $24.

The company said the shopping spree would help it cut costs by $250 million over the next couple years, while boosting 2001 earnings by 7% to 10%, before pension income and stock actions are factored in. And, in order to finance this major purchase, Northrop will put more stock on the market and took out $6 million in financing from

Credit Suisse First Boston

and

Chase Manhattan

(CMB)

.

Litton will become a subsidiary, with its president, Ronald Sugar, getting the sweet nod as top boss at the new Northrop unit. Current Litton Chairman Michael Brown will be retiring.

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Earnings/revenue reports and previews

Something wicked this way COMS.

3Com

(COMS)

announced pro forma second-quarter losses of 15 cents a share, better than the analyst expectation of a 20 cent loss, but not as good as last year's pro forma 12 cent loss. Simply put, the company may have topped expectations, but it lost more money this quarter than it did last year, losing $52.4 million this quarter vs. the year-ago $41.3 million.

The company blames slowing telecom spending on the heavy losses, pointing a finger at the wide spate of reorganizations, which 3Com believes disrupted purchasing habits. Also, some companies have deferred equipment purchases, further impacting the bottom line. Sales at 3Com's carrier networking business dropped 43% from the previous quarter, solid statistical evidence that some companies aren't ponying up the bucks the way they used to.

Other parts of the company saw softening sales, as well. 3Com's consumer-networking business suffered lower-than-expected sales because of deployment issues at service providers, meaning that if customers can't get the cable, then they won't buy 3Com's modems and other equipment that use the line.

Frontier Airlines

said Friday an improved outlook for its fiscal third quarter has led to increased earnings projections of 50 cents to 56 cents a share.

The Denver-based airline had previously forecast earnings of 46 cents to 54 cents a share for the period. Three analysts polled by

First Call/Thomson Financial

are calling for the company to earn 51 cents a share for the quarter, significantly higher than the 16 cents Frontier earned in the year-ago period.

The company said the upward revision resulted from strong revenue during November and December traffic that appears "very strong" compared with last year's levels, which were impacted by Y2K concerns.

The company also reported revenue per seat mile of $11.05 and cost per available seat mile of $9.52 for November.

Furniture retailer

La-Z-Boy

(LZB) - Get Report

said Friday it expects sluggish sales and higher expenses to result in lower-than-expected third-quarter earnings.

The manufacturer and distributor of those oh-so-well-known reclining chairs said it now sees third-quarter earnings of 25 cents to 31 cents a share, down from 41 cents a share in the same period last year. This range falls sharply below the seven-analyst estimate of 40 cents a share, according to a poll by

First Call/Thomson Financial

.

The Monroe, Mich., company did not provide any figures for sales, but said it sees third-quarter sales "below earlier anticipated levels," amid weak consumer demand for furniture during the Thanksgiving season.

R.R. Donnelley & Sons

(DNY)

warned today of lower-than-expected full-year 2000 earnings, citing disappointing results in its logistics business and lower overall sales.

The print supplies company, based in Chicago, said it sees full-year 2000 earnings per share of $2.15 to $2.20, down from its previous estimates in "the upper $2.20s to the lower $2.30s." The company said the estimated ranges include a one-time gain of 6 cents. Six analysts polled by First Call/Thomson Financial produced a consensus estimate of $2.24 a share, compared with actual earnings of $2.20 a share in 1999.

The company said higher outsourced transportation and fuel costs, as well as higher costs to meet service commitments for both packages and printed material hampered its logistics business. Sales in its direct-mail business, RRD Direct, and sales in its Mexican operations "continue to fall short of expectations," the company said. R.R. Donnelley did not provide any revenue guidance.

The company also announced it will immediately resume its share repurchase program, in which it is authorized to spend up to $165 million.

After Thursday's Close

Avocent

(AVCT)

announced that it will report fourth-quarter earnings between 34 cents and 36 cents a share, missing analyst estimates. The First Call/Thomson Financial estimate was 39 cents a share. In a press release touting the fourth-quarter results, Avocent compared its fourth-quarter to its third, boasting of higher revenues and better earnings. And while it's true that expected fourth-quarter revenues of $78 million to $81 million are better than the $77.2 million in the third, it's probably more accurate to say that Avocent pissed off analysts.

Canuck

Cognos

(COGN)

beat third-quarter estimates, announcing earnings of 18 cents a share, topping the 16 cent estimates. This quarter featured record revenue growth, 28% better than the year-ago period. The company said the record revenue could be attributed to higher sales of its new Business Intelligence platform, which helped offset a decline in its older application-development tools product line.

Is

Harmonic Lightwave

(HLIT) - Get Report

some kind of must-have Christmas toy? Nope. It's a Sunnyvale, Calif., broadband company, and it said that fourth-quarter results wouldn't be so playful. The company said fourth-quarter losses will be steeper-than-expected, coming in between a 20 cent and 30 cent loss, much lower than the 10 cent loss expected by First Call. One of the bigger reasons for the earnings shortfall was Harmonic's Broadband Access Networks division, which posted revenues of $25 million to $27 million, far less than the previous quarter's $40.4 million.

And wouldn't you know it, that division is seeing a bit of a shake-up. Current vice president of marketing, Patrick Harshman, will be replacing President Kirk Flatow.

Ruddick

(RDK)

, which owns Harris Teeter, a southeastern supermarket chain, and American & Efird, an industrial thread manufacturer, said that its first-quarter sales would be lower-than-expected. Last quarter, the company said that earnings would be weak, and that's no different now. Ruddick said that the first quarter could be lower than the 26 cents a share it had in the fourth quarter. Analysts, on the average, expected 27 cents a share. Expect the official results on Jan. 23.

SPX

(SPW)

to Wall Street: "We're comfortable." The massive conglomerate, which makes vehicle parts, antennas, fare collectors and industrial valves, among other things, said it was comfortable with Wall Street expectations for fiscal 2001. Although comfortable with the $5.90 estimate, the company did say that the second half would be stronger than the first. Further handicapping the situation, SPX said earnings would grow 10% in a slowing economy vs. 15% for what it termed a "reasonable economy," whatever

that

is.

UAL

(UAL) - Get Report

, the parent company of United Airlines, announced that bad weather would snow in December revenues. That's something of a no-brainer, since delays and canceled flights have become an epidemic lately as weather tortures would-be flyers.

The company filed a document with the

Securities and Exchange Commission

that said October and November revenues were lower-than-expected, with December taking the biggest hit. One of United's major hubs located in Chicago, which has been swathed in white stuff lately as the Midwest feels the icy grip of winter.

Valassis Communication

(VCI)

announced that it will report 2000 earnings per share at the low end of its $2.22 to $2.28 a share guidance range. That's too bad, because the analysts expected the company to make $2.24 a share.

And so, with the company set to release fourth-quarter results that, judging from the full-year forecast, could be lower than expectations, Valassis went ahead and talked about 2001. The company said its first quarter will come in between 59 cents and 65 cents a share, lower than the 71 cent analyst call. But, Valassis did say the rest of 2001 would be pretty good, with the next three quarters appearing to be in the ballpark of estimates.

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Analyst Actions

IBM

(IBM) - Get Report

was finally picking up some lost ground Friday following a note from

Salomon Smith Barney

entitled "It's Back Up the Truck Time on IBM Shares."

Presumably, backing up the truck would reveal the deep tread marks investors have left on IBM in recent weeks. The computing giant has gotten crushed amid the general swoon in technology stocks. In that time, a number of tech firms, including IBM competitors

Gateway

(GTW)

and

Compaq

(CPQ)

, have warned of slowing growth. And the slowdown talk has led many observers to question whether companies like

Hewlett-Packard

(HWP)

,

Sun Microsystems

(SUNW) - Get Report

and, yes, IBM will also have to lower their guidance.

Not so, says Solly. "Rumors about a pre-announcement are, in our opinion, completely unfounded," wrote analyst John Jones. Why? For one thing, IBM, unlike Compaq, Gateway and

Apple

(AAPL) - Get Report

, has very little exposure to consumer PCs, having withdrawn from the retail market in that segment. As for IBM's commercial PC business, no one was really expecting much growth there, anyway. Jones claimed that strong results in Big Blue's servers, services, microelectronics and financing businesses should compensate nicely.

Jones wrote that IBM is undervalued on the basis of its price-sales ratio relative to the

S&P 500

, which currently stands at 0.53. In other words, IBM's price-to-sales ratio is just 53% of the S&P 500's. "This is a five-year low vs. a median number of 0.66 and a high performance of a 0.89 ratio," he wrote.

Jones reiterated his buy rating and price target of 130.

Thursday,

Merrill Lynch

analyst Tom Kraemer downgraded IBM and H-P on his suspicion that corporate spending on information technology is slowing.

Shares of

Micron Technology

(MU) - Get Report

enjoyed gains despite a report from

Prudential Securities

that cut forecasted earnings for the company's next two fiscal years.

Prudential analyst Hans Mosesmann slashed his earnings estimate for the Boise, Idaho-based computer memory chip maker to 80 cents a share from $2.28 a share for fiscal 2001, and to $2 a share from $4.60 a share for 2002. Analysts polled by

First Call/Thomson Financial

are expecting $1.81 a share for 2001 and $3.12 a share for 2002.

In his report, Mosesmann said Micron stock "poses an interesting proposition for a patient investor willing to withstand some volatility over the next six months."

On Wednesday, Micron

reported disappointing first-quarter earnings that missed analysts' expectations by 2 cents, as shipments declined by about 25% and prices fell by about 10%.

This morning,

Morgan Stanley Dean Witter

lowered its earnings estimates for both

General Motors

(GM) - Get Report

and

Ford

(F) - Get Report

. The firm cut GM's 2001 estimate to $4.50 from $4.80 and Ford's to $2.80 from $3.20.

In a research report, Morgan Stanley also said it expects GM's sales to be down 14% and Ford's to be off by 15%.

Upgrades

Edison International

(EIX) - Get Report

: UP to buy from hold at

ABN Amro

.

Tiffany

(TIF) - Get Report

: added to recommended for purchase list from market outperformer at

Goldman Sachs

.

Visx

(EYE) - Get Report

: UP to outperform from neutral at

Lehman Brothers

.

Downgrades

Allegiance Semiconductor

(ALSC)

: 12-month price target DOWN to $13 from $18 at

Prudential

.

Avici

(AVCI)

: Price target DOWN to $90 from $115 at Morgan Stanley.

Viasystems

(VG) - Get Report

: price target DOWN to $17 from $30 at

Banc of America

.

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Miscellany

Medtronic

(MDT) - Get Report

said it has received approval from the

Food and Drug Administration

for its latest model of implantable cardioverter defibrillators, which use electrical stimulation to treat diseases that cause the heart to beat too fast.

The world's largest maker of medical devices, based in Minneapolis, said its new GEM III VR is a single-chamber defibrillator. A dual-chamber version, the GEM III DR system, received FDA approval earlier this month. Implantable systems provide diagnostic capabilities that can signal potentially lethal heart rhythms that can lead to sudden cardiac arrest.

Medtronic said the FDA is also reviewing another defibrillator, the GEM III AT system, which manages tachyarrhythmias in both upper and lower chambers of the heart. The device has received the regulatory clearance for sale in countries of the European Economic Community.

Egghead.com

(EGG)

said that a hacker accessed its computer systems, and "potentially" got into its customer databases.

The Menlo Park, Calif., Internet retailer of computer, electronics, sporting and vacation goods, said it had taken "immediate steps" to protect its customers by contacting the credit companies with which it works. The company also said it is working with law enforcement authorities who are investigating the hacking.

Shares of

Ravisent Technologies

(RVST)

rocketed after the company announced it had been selected by

Microsoft

(MSFT) - Get Report

to provide DVD playback software for the software giant's Xbox video game console.

Ravisent's shares had lately climbed $1.69, or 112.5%, to $3.19 in trading on the

Nasdaq, up from its 52-week low of $1.47. The shares have a 52-week high of $47.50. Microsoft also pulled higher this morning, recently gaining $2.88, or 6.62%, to $46.31.

The Malvern, Pa., company, which provides digital audio and video software, said it had reached a five-year agreement to license its CineMaster DVD engine for DVD playback on Microsoft's Xbox, which will be launched in Fall 2001.

Microsoft's much-anticipated Xbox video game console reportedly delivers three times the graphics performance of the newest generation of game consoles.

After Thursday's Close

Break out the lipstick,

Cinergy

(CIN)

and the

U.S. Environmental Protection Agency

have kissed and made up. But it's not going to be that easy.

The EPA and other organizations, including the

Department of Justice

and several state governments, have agreed to drop their lawsuits against Cinergy, if the company would be willing to clean up some of its operations, which have come under fire for possible violations of the Clean Air Act.

Under the agreement, Cinergy will shut down nine small, coal-fired boilers and either repower them with natural gas or leave them shuttered. The company will also build additional sulfur dioxide scrubbers by 2008, upgrade pollution control systems and begin installing devices to control nitrogen oxide levels.

The company said the scrubbers will set it back $500 million, in addition to the $700 million it plans to spend on the nitrogen oxide controls.

Per the settlement, Cinergy admits no wrongdoing, but must invest $21.5 million in environmentally beneficial projects over the next five years and pay a penalty of $8.5 million to the U.S. government.

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