Banks are in the headlines today as a slew of the financial companies announced earnings before the bell. Financial companies have been hit by weakness in the economy. So while several companies reported earnings that beat expectations, they are showing lower profits than the same period a year ago.

Included among the banks in the news today are giants

Citigroup

(C) - Get Report

,

First Union

and

Bank Of America

(BAC) - Get Report

.

Citigroup reported earnings of 71 cents a share this morning, a penny ahead of analyst expectations, but down from 78 cents a year ago due in part to declining income in its advisory services. First Union, which has been troubled by bad acquisitions and loan losses, met analyst expectations when it said it earned 62-cents a share. The focus for First Union today, however, is on news the bank is buying

Wachovia

(WB) - Get Report

.The deal, if completed, will create the nation's fourth largest bank. The deal would cost First Union $13 billion in stock, and the merged bank will have some $331 billion in assets.

Earnings/revenue reports and previews

Bank of America beat the Street's earnings estimate of $1.12 a share by reporting earnings of $1.87 billion, or $1.15 a share. The bank, however, fell short of the $2.24 billion, or $1.33 a share it reported in the year-ago period.

Fifth Third Bancorp

(FITB) - Get Report

met Wall Street's expectations, reporting earnings of $244.3 million, or 51 cents a share for the first quarter, up from the $206.4 million, or 44 cents it reported in the year-ago period.

Here's good earnings news investors aren't used to hearing these days.

Continental Airlines

(CAL) - Get Report

handily beat Wall Street's expectations. It posted earnings of 16 cents a share, ahead of the 5-cent-a-share forecast.

Among the other companies reporting financial results:

Drug czar

Eli Lilly

(LLY) - Get Report

beat analyst forecasts by a penny with 74 cents a share.

Online travel outlet

Expedia

(EXPE) - Get Report

posted a net loss of 37 cents a share for its fiscal third quarter, on revenue of $110 million.

On Thursday after the close, handheld PC maker

Handspring

TST Recommends

(HAND)

met the Street's expectations for the fiscal third quarter, losing 6 cents per share on $123.8 million in revenue, compared with a loss of 13 cents on $34.3 million a year ago. Financial markets were closed on Friday.

The company said its new product line has been well-received by consumers. Handspring's Chief Financial Officer Donna Dubinsky said in a statement, "We believe this growth demonstrates both acceptance of our new products as well as ongoing growth in the handheld computing sector in spite of an economic slowdown."

And online advertising agency

DoubleClick

(DCLK)

posted a narrower-than-expected loss of 8 cents a share, with revenue climbing 4% to $114.9 million. On average, Wall Street analysts were expecting the company to post a loss of 9 cents a share.

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Analyst actions

Merrill Lynch's

Henry Blodget expects

Microsoft

(MSFT) - Get Report

to meet its earnings targets when it reports financial results on Thursday, but he said the software giant could miss its revenue goals.

"Due to cutbacks in general IT spending, and soft PC sales in particular, we estimate that revenue will be approximately $6 billion, less than the original target of $6.3 billion to $6.4 billion," Blodget wrote this morning. "This target, established on the company's January earnings call, represents 12% year-over-year growth off of a tough 23% year-over-year comparison. We believe actual revenues will be closer to our current $6.0 billion estimate." The top line number, the $6 billion expected by Blodgett, won't affect the bottom line earnings estimate range given by the company back in January. The analyst still expects the company to hit its original earnings target between 42 and 43 cents a share -- even if revenues come in lower than expected.

Blodget said he thinks fiscal 2002 earnings would come in between $1.70 and $1.80 a share, showing just about zero growth for the company. And Microsoft will need to dodge some bullets in the next few quarters. "In addition, lower investment income, due to falling valuations for tech and telecom companies, could knock an additional nickel from earnings per share," he wrote. "Finally, we expect operating margin to decline slightly, as high margin PC software declines as a percentage of total revenues and as price competition heats up in Microsoft's enterprise businesses."

The Cheap Shot

Goldman Sachs

analyst David Fleischer lowered his rating on

NiSource

(NI) - Get Report

to market outperform from the U.S. recommended for purchase list based purely on stock price. This is another downgrade based on the dreaded valuation call -- that is, changing one's rating based on the price of a stock rather than making a change based on fundamental issues.

"Near-term upside potential has diminished because of higher interest expense than initially projected, a possible modest electric rate cut and modestly warmer weather in the first quarter," Fleischer wrote.

The analyst said the company had reached his near-term price target, warranting the action. Indeed, NiSource, which closed Thursday's trading session at $31.04, has rallied back from a February selloff and is about a buck and a half away from a 52-week-high.

Du Hast DuPont?

Looking for some guidance ahead of

DuPont Photomask's

(DPMI)

earnings release on Wednesday? This just in, courtesy of Goldman Sachs' Hwee-Kwan Chua: "We maintain a cautious stance as slowing design activity, particularly for the non-leading edging chips, slows down photomask demand," the analyst wrote to investors in a note this morning. Chua expects the company to earn 53 cents a share, well off the 57-cent consensus and at the absolute bottom of earnings guidance provided by DuPont Photomask.

And with the company expected to miss estimates -- at least at Goldie anyway -- what else should you be looking for in the company's release? Look for a company plan to deal with the problem of sliding sales. "It will be important for DuPont Photomask to address its capital expenditure plan and cost reduction efforts as its sales growth is likely to decelerate over the next few quarters."

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Miscellany

Broadbase Software

(BBSW)

and

Kana Communications

(KANA)

announced Thursday that their merged company will trim its workforce by 35%, or about 450 employees. The companies' merger, which totals $75.8 million, is expected to close by July 2001.

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