Stocks to Watch: Microsoft Settles With DOJ, Compaq Downgraded

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Microsoft

(MSFT) - Get Report

was giving back some of Thursday's gains after the Justice Department confirmed the widely reported antitrust settlement. As expected, Microsoft agreed to loosen restrictions on PC makers, essentially agreeing not to retaliate when they load competing software on new machines. The software giant now must convince 18 states to go along with the deal.

Analyst Actions

ABN Amro upgraded several semiconductor equipment companies to buy from add. The firm's two favorite large-caps are

Applied Materials

(AMAT) - Get Report

and

KLA Tencor

(KLAC) - Get Report

. ABN's small-cap picks are

Cymer

(CYMI)

and

Credence Systems

(CMOS)

.

Merrill Lynch downgraded

Compaq

(CPQ)

to near-term neutral from accumulate based on a bleak outlook for the company at least for the next two to three quarters. Compaq has signed a deal to merge with

Hewlett-Packard

(HWP)

, but both companies have seen their shares tank since the agreement was announced.

Miscellaneous News

Health Management Associates

(HMA)

will be added to the

S&P 500 after the close of trading Tuesday. The company will replace

GPU

(GPU)

, which is being acquired.

Patterson UTI-Energy

(PTEN) - Get Report

will replace Health Management in the S&P MidCap 400.

United Parcel Service

(UPS) - Get Report

is implementing an average rate increase of 3.5% for commercial ground services. Rates for overnight and two-day express services will increase about 4%, and rates for U.S. export services will increase 3.9%. The company said the 2002 rate increase, which will take effect Jan. 7, is in line with previous years, but starting one month earlier than in the past.

After Thursday's Close

Computer Sciences

(CSC)

earned 40 cents a share in the second quarter, beating the consensus estimate carried on First Call by 3 cents. Revenue for the quarter rose 10.7% to $2.8 billion. The company also guided higher for the full-year bottom line.

priceline.com

(PCLN)

posted third-quarter revenue of $302 million, down 11% from the year-ago period but above the sharply reduced consensus. Earnings were 3 cents a share, excluding certain costs. This was 2 cents above Wall Street's estimates, according to Thomson Financial/First Call. In last year's third quarter, the company lost a penny a share on $341 million in revenue. The company also gave guidance for the fourth quarter that exceeded current estimates, although it left open the possibility of a slight shortfall on the earnings side.

BEA Systems

(BEAS)

, the applications server software firm that recently had a change at the helm, warned that earnings and revenue for the fiscal third quarter would be lower than expected. The company also took down its guidance for the fiscal fourth quarter and set plans to cut 9% to 10% of its 3,300 employees by the end of the year. The company expects to report earnings of 5 cents to 6 cents a share on revenue of $217 million to $221 million for the third period. Analysts were expecting the company to show earnings of 8 cents a share on $253.5 million in revenue.