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Stocks to Watch: MSFT, ETR, NZRO, OCLR, CERN

Published reports cite plan to break up company along product lines.

Federal antitrust officers are leaning towards a forced spin-off of Microsoft's (MSFT) - Get Microsoft Corporation Report Office software business in an effort to end the company's monopoly in the U.S. computer industry, The Wall Street Journal reported, citing people familiar with the situation. Office software is the largest part of Microsoft's applications unit, accounting for more than 40% of total revenue and a significant portion of profits. The story also said Microsoft would be subject to restrictions on its conduct until the unit is divested as well as during any appeal of a breakup decision.

USA Today

and

The Washington Post

published separate accounts about the proposed plan, also involving splitting the company along product lines.

For more on this

story, see coverage from

TheStreet.com/NYTimes.com's

joint newsroom.

A number of firms released negative research on Microsoft in the wake of the company's downward revision of its revenue outlook and disappointing March-quarter revenue report.

Goldman Sachs

analyst Rick Sherlund took the stock off the recommended for purchase list and downgraded the stock to market outperform from buy

. SG Cowen

cut its rating to buy from strong buy.

Lehman Brothers

cut its price target on the stock. Microsoft plunged 13, or 16.3%, to 65.

TheStreet Recommends

Mergers, acquisitions and joint ventures

Qualcomm

(QCOM) - Get Qualcomm Inc Report

said it invested $144 million in

NetZero

(NZRO)

, an advertising-supported free Internet access provider, for a 10% stake. The wireless communications company now owns about 11.5 million shares of NetZero.

For more on this

story, see coverage from

TheStreet.com/NYTimes.com's

joint newsroom.

American Trans Air

will lease about 40 new planes, worth about $2.3 billion, from

Boeing

(BA) - Get Boeing Company Report

, the

Journal

reported.

Separately,

Lucent

(LU)

said it has tapped former Boeing CFO Deborah Hopkins, as its new CFO. Hopkins is replacing Don Peterson, who is CEO of an $8 billion Lucent equipment unit that will be spun off in 2000.

Corning

(GLW) - Get Corning Inc Report

announced that it will acquire the remaining equity in

NZ Applied Technologies

of Woburn, MA, for up to $150 million in Corning common stock. Corning had held a 20% equity ownership position in the company in 1999.

Louis Dreyfus Natural Gas

(LD) - Get iPath Bloomberg Lead Subindex Total Return ETN Report

said it agreed to acquire the oil and gas assets of

Costilla Energy

for $100 million.

Diversified energy company

Entergy

(ETR) - Get Entergy Corporation Report

and closely held

Koch Industries

said they plan to form an energy marketing and trading company. Entergy and Koch said the new company will have $1 billion in assets, including a pipeline.

Separately, Entergy posted first-quarter earnings of 48 cents a share, well above the 10-analyst estimate of 28 cents and the year-ago 21 cents a share. The company also said it is on pace to meet its 2000 EPS target of $2.35 to $2.45 a share. Entergy was raised to accumulate from neutral at

Merrill Lynch

.

Kellogg

(K) - Get Kellogg Company Report

and

Salton

(SFP)

said they entered a marketing alliance. The companies said the initial products included in the agreement are Kellogg's Pop Tarts and Eggo waffles and Salton's Toastmaster products.

Ocular Sciences

(OCLR) - Get Oclaro, Inc. Report

said it is working with

Wesley Jessen VisionCare

(WJCO)

to find a white knight to help them save their proposed merger, now valued at about $625 million in stock.

Wesley Jessen, the target of a $600 million hostile bid by

Bausch & Lomb

(BOL)

, earlier said it was in talks with an unnamed third party for a possible transaction. Wesley Jessen said the preliminary talks with the third party were being conducted with the consent of Ocular Sciences.

For more on this

story, see coverage from

TheStreet.com/NYTimes.com's

joint newsroom.

Westvaco

(W) - Get Wayfair, Inc. Class A Report

-- a paper, packaging and specialty chemicals company -- announced plans to pay $500 million to acquire IMPAC Group, a consumer goods packaging and printing products supplier. Westvaco said the price includes the assumption of $271 million of net debt and the assumption of $23 million of preferred stock.

For more on this

story, see coverage from

TheStreet.com/NYTimes.com's

joint newsroom.

--

Eileen Kinsella

Earnings/revenue reports and previews

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.

)

American Express

(AXP) - Get American Express Company Report

posted first-quarter earnings of $1.44 a share, slightly above the 15-analyst estimate of $1.42 and up from the year-ago $1.26. The company also said shareholders approved a 3-for-1 stock split.

Days before

AT&T's

(T) - Get AT&T Inc. Report

more than $10 billion planned offering of its wireless division, the company said the unit saw strong revenue and operating growth in the first quarter. First-quarter revenue for the wireless group mobility unit grew 40.7% to $2.2 billion from $1.6 billion a year earlier. Adjusted for its purchase of

Vanguard Cellular

last year, revenue increased 33.1%, the company said.

Chewing-gum giant

Wrigley

(WWY)

reported first quarter earnings of 65 cents per share, missing the 4-analyst estimate of 67 cents, but up from the year-ago figure of 60 cents.

--

Eileen Kinsella

Offerings and stock actions

AVX

(AVX) - Get AVX Corporation Report

set a 2-for-1 stock split.

Cabletron Systems'

(CS) - Get Credit Suisse Group AG Report

board approved a $400 million share repurchase plan.

First Security

undefined

said it revoked its 15 million-share buyback plan announced April 3.

Analyst actions

Upgrades

CommScope

(CTV) - Get Qwest Corp 6 7/8 % Notes 2014-1.10.54 Sr Report

: fiscal 2000 earnings estimates UP to $1.67 from $1.60; fiscal 2001 estimate set at $1.95 at Merrill Lynch.

Nordstrom

(JWN) - Get Nordstrom, Inc. Report

: UP to intermediate-term buy from accumulate; price target up to 40 at Merrill Lynch.

Silicon Valley Group

(SVGI)

: UP to outperform from neutral at

Lehman Brothers

Simpson Manufacturing

(SDD) - Get ProShares UltraShort SmallCap600 Report

: UP to buy from long-term attractive at

Robertson Stephens

.

Independent refiner

Sunoco

(SUN) - Get Sunoco LP Report

: UP to buy from attractive at

Bear Stearns

; price target: 38 per share. The upgrade was announced after Sunoco reported sharply higher first-quarter earnings last week.

Downgrades

Cerner

(CERN) - Get Cerner Corporation Report

: DOWN to hold from buy based on valuation.

Earthlink

(ELNK)

: Price target DOWN to 34 from 46 at

Morgan Stanley Dean Witter

.

Legato Systems

(LGTOE)

: DOWN to neutral from outperform; price target LOWERED to 15.

Quintiles Transnational

(QTRN)

: DOWN to neutral from attractive at Bear Stearns.

Salomon Smith Barney

lowered its opinion on two regional banks:

  • Sky Financial (SKYF) : fiscal 2000 estimates DOWN to $1.69 from $1.72 and fiscal 2001 earnings estimates DOWN $1.85 from $1.90 a share; DOWN to outperform from buy.
  • Wilmington Trust (WL) : DOWN to neutral from outperform; price target LOWERED to 50 from 62.

Initiations

Satellite Radio

(XMSR)

: NEW buy rating at CSFB.

Group Moves

Telocity

(TLCT)

: NEW buy rating and a 12-month target of 18 at CSFB.

TMP Worldwide

(TMPW)

: RE-STARTED as an accumulate at Merrill Lynch.

Credit Suisse First Boston initiated coverage of

Freemarkets

(FMKT)

,

Ventro

(VNTR) - Get Venator Materials PLC Report

and

VerticalNet

(VERT)

.

  • Online business auctioneer FreeMarkets was rated a buy with a six- to 12-month price target of 85 to 90.
  • Ventro, which operates a B2B e-commerce, marketplace, was rated a buy with a 12-month target of 45.
  • VerticalNet, which runs B2B Web sites, was rated a strong buy with a 12-month target of 110 to 120.

Merrill Lynch raised its opinion on two gaming companies:

  • Station Casinos (STN) - Get Stantec Inc Report: UP to an intermediate-term buy from accumulate.
  • Argosy Gaming (AGY) : fiscal 2000 earnings estimates UP to $1.65 from $1.55 a share; UP to buy from accumulate.

--

Eileen Kinsella

Miscellany

Envision Development

(EDV) - Get Vanguard Extended Duration Treasury ETF Report

named William Patch as chairman and CEO.

A possible merger between the London and Frankfurt exchanges, the top two in Europe, could include a link to the

Nasdaq Stock Market

, the

Journal

reported, citing people familiar with the situation. According to the story, any link would stop short of a three-way merger.

--

Eileen Kinsella