Publish date:

Stocks to Watch Tuesday: Vodafone, Hewlett-Packard, FreeMarkets

Author:

(Updated from 1:27 p.m. EDT)

Dresdner Bank

is in talks to buy U.S. investment bank

Wasserstein Perella

in a deal that could be worth between $1.2 billion and $1.5 billion, according to

The Wall Street Journal

, citing people familiar with the matter. A deal between the two would increase Dresdner's presence in mergers and acquisitions in the U.S. Wasserstein Perella is the fifth-largest merger-and-acquisition adviser in the country, and Dresdner's investment house

Dresdner Kleinwort Benson

is No. 14.

The

Journal

reported that although merger talks are in advanced stages, price is still the sticking point.

The talks come on the heels of several major deals in financial services.

Credit Suisse First Boston

announced last month that it is

buying

Donaldson, Lufkin & Jenrette

(DLJ)

. And in

July Swiss bank UBS agreed to buy

PaineWebber

(PWJ)

.

Vodafone's

(VOD) - Get Report

(VOD) - Get Report

Airtouch unit received two formal bids for its Italian Internet unit

Infostrada

, including one of about $10 billion, according to

The Wall Street Journal

. Still, the company isn't backing away from plans to take 49.9% the unit public if the bids aren't improved, the story says, citing people familiar with the talks. The company needs cash, in part, to pay for its acquisition of

Mannesmann

.

The leading bid, a combination of cash and high-rated bonds, came from

Wind

, which is a venture of Italian state-controlled electric utility

Enel

(EN)

and

France Telecom

(FTE)

. The second offer, including a large proportion of lower-rated securities, was from

Albacom

, an Italian telecommunications company whose shareholders include

British Telecommunications

(BTY)

, Italian state-controlled oil group

Eni

(E) - Get Report

and Italian television broadcaster

Mediaset

.

The

Journal

also reported that Vodafone is talking to two non-Italian telecom companies about a bid for Infostrada.

Mergers, acquisitions and joint ventures

FreeMarkets

(FMKT)

agreed to provide

Microsoft

(MSFT) - Get Report

with access to its eMarketplace, a business-to-business supply portal. Financial terms weren't disclosed.

FreeMarkets said Microsoft will use the portal to source certain services for its operations. EMarketplace is an alliance with

American Management Systems

, an information-technology consulting firm.

After Monday's Close

Medical device maker

Cyberonics

(CYBX)

said its board rejected a $480 million offer from

Medtronic

(MDT) - Get Report

, in favor of remaining independent. Cyberonics said it made a decision after consulting with adviser

Morgan Stanley Dean Witter

.

Genzyme General

(GENZ)

announced that it will buy

GelTex Pharmaceuticals

(GELX)

for $1 billion in cash and stock. GelTex has two drugs currently in wide use -- Welchol, a cholesterol fighting drug, and Renagel, a drug used in dialysis.

Siebel Systems

(SEBL)

said it agreed to acquire Canada's

Janna Systems

in a stock swap valued at about $975 million, boosting Siebel's software products for financial firms.

Under terms of the deal, each outstanding Janna share would be exchanged for 0.497 shares of Siebel. The deal will result in Siebel issuing up to about 11 million additional shares.

Back to top

Earnings/revenue reports and previews

Kroger

(KR) - Get Report

posted second-quarter earnings of 28 cents a share, in line with the 16-analyst estimate and up from year-ago earnings of 24 cents a share.

The company said earnings in the quarter were driven by solid performances in all divisions, and cited "combined synergy savings" of $257 million from the merger with

Fred Meyer

through the second quarter.

Kroger said it remains comfortable with the consensus earnings estimate for the fiscal year, which is currently $1.36 a share.

NetCreations

(NTCR)

fell almost 38% after the company warned that it expects to miss third-quarter earnings estimates by at least a nickel. The single-analyst estimate on the stock is currently 11 cents, and the company said it's expecting earnings in the range of 4 cents to 6 cents because of lower net revenue expectations. The company's anticipating its fourth quarter to be on track. NetCreations is an email direct marketing firm.

PRI Automation

(PRIA)

lately sunk 41%, or $17.50, to $25.19 after the semiconductor industry supplier warned of lower-than-expected fourth-quarter earnings. The company, which provides automation systems and software to the semiconductor industry, said it sees fourth-quarter net excluding items, slightly above break-even. The 13-analyst estimate called for earnings of 52 cents. PRI cited manufacturing, capacity and supply chain problems as reasons for the shortfall.

The warning sparked several actions from analysts.

Credit Suisse First Boston

cut the company's 2001 earnings estimate to $1.15 from $2.20, while

Merrill Lynch

cut the company's ratings to neutral from accumulate.

Bear Stearns

downgraded it to neutral from attractive and

Morgan Stanley Dean Witter

slashed PRI to outperform from strong buy.

Tenet Healthcare

(THC) - Get Report

said it's expecting to exceed earnings expectations for its first quarter. The 23-analyst estimate is currently 44 cents a share for the quarter, which is up from year-ago earnings of 39 cents. The company attributed the increased earnings in part to strong hospital admissions trends and continued upward trends in pricing.

After Monday's Close

National Steel

(NS) - Get Report

said it sees a third-quarter net loss between $1.50 and $1.60 a share, wider than the six-analyst estimated loss of 65 cents. The company citing continued weakening demand for steel brought about by high levels of steel imports into the U.S. and high inventory levels at many of its customers.

But not all earnings pre-announcements came with a dark cloud attached. Sportswear and accessory maker

Oakley

(OO)

had a sunny outlook. The company said based on current sales trends, it expects its third-quarter net sales to rise by more than $100 million, or about 40%. The company also expects higher earnings-per-share of at least 21 cents a share, better than the three-analyst estimate of 18 cents.

The company earned 15 cents a share and reported net sales of $70.8 million in the same period a year ago.

Industrial products maker

Crane

(CR) - Get Report

said it sees third-quarter net income in the range of mid-30 cents a share, while the four-analyst estimate calls for 50 cents. The company also said it sees 2000 net income in the range of $2.01 to $2.06 a share, including a onetime gain of 26 cents a share. The current five-analyst estimate is for $1.99.

Leggett & Platt

(LEG) - Get Report

said it sees third-quarter earnings between 34 and 37 cents per share, below the nine-analyst estimate of 41 cents. The company also said its full-year earnings will be flat with 1999 results of $1.45 a share.

Solectron

(SLR)

posted fourth-quarter earnings of 27 cents a share, a penny better than the 22-analyst estimate and up from the year-ago 17 cents a share. The company said it expects to generate sales between $4.8 billion and $5.1 billion for the first quarter of 2001 and earnings-per-share between 27 cents and 28 cents citing strong customer demand. The current 19-analyst estimate is for 27 cents.

TheStreet Recommends

Back to top

Analyst actions

Bear Stearns

said

Hewlett-Packard

(HWP)

could be under pressure in the near term and maintained the stock as a buy.

Upgrades

Argosy Gaming

(AGY)

: UP to strong buy from outperform at

Morgan Stanley Dean Witter

.

Catalina Marketing

(POS)

: price target: UP to $50 from $43 at

Donaldson Lufkin & Jenrette

.

Goldman Sachs

(GS) - Get Report

: price target UP to $150 from $120 at DLJ.

Integrated Device Technology

(IDTI) - Get Report

: 12-month price target: UP to $125 from $100 at

Banc of America Securities

.

Precise Software

(PRSE)

: UP to intermediate-term buy from accumulate at

Merrill Lynch

.

Solectron

(SLR)

: price target UP to $60 at

Credit Suisse First Boston

.

Downgrades

Chevron

(CHV)

: DOWN to market perform from buy at

Deutsche Banc Alex. Brown

.

Heller Financial

(HF) - Get Report

: DOWN to buy from strong buy at Alex. Brown.

Knight Trading

(NITE)

: DOWN to buy from strong buy at

CIBC World Markets

; price target DOWN to $40 from $60.

Textron

(TXT) - Get Report

: DOWN to long-term buy from buy at

J.P. Morgan

.

Initiations

Check Point Software

(CHKP) - Get Report

: NEW accumulate at Merrill; price target: $175.

Dover Downs

(DVD) - Get Report

: NEW buy at CSFB.

Liberty Digital

(LDIG)

: NEW strong buy at

Thomas Weisel

partners.

O2 Wireless Solutions

(OTWO)

: NEW buy at CSFB.

Physiometrix

(PHYX)

: NEW buy at CIBC.

Group Moves

Goldman Sachs

added

Edison

(EIX) - Get Report

,

FPL

(FPL) - Get Report

and

Entergy

(ETR) - Get Report

to its U.S. recommended for purchase list.

Bear Stearns initiated coverage of these Internet companies:

Salomon Smith Barney

downgraded these financial companies:

  • Americredit (ACF) : DOWN to outperform from buy.
  • MBNA (KRB) DOWN to outperform from buy.

CSFB initiated coverage of car racing companies:

  • Championship Auto Racing Teams (MPH) : NEW buy with a price target of $35.
  • International Speedway (ISCA) - Get Report NEW strong buy.
  • Speedway Motorsports (TRK) - Get Report: NEW strong buy.

Morgan Stanley Dean Witter started coverage of large packaged food companies:

  • General Mills (GIS) - Get Report: NEW outperform; price target: $41.
  • Sara Lee (SLE) : NEW outperform; price target: $25.
  • Kellogg (K) - Get Report: NEW neutral; 2000 EPS, $1.63; 2001 EPS; and 2002 EPS, $1.90.
  • Hershey (HSY) - Get Report: NEW neutral; 2000 EPS, $2.36; 2001 EPS, $2.65; and 2002 EPS, $2.92.

Back to top

Offerings and stock actions

H.J. Heinz

(HNZ)

raised its quarterly dividend on its common stock by 6.8%, to 39.25 cents from 36.75 cents.

Fast-food giant

McDonald's

(MCD) - Get Report

has beefed up its annual dividend 10% to 21.5 cents a share.

Patterson Energy

(PTEN) - Get Report

said it's planning an offering of 3 million shares to close Sept. 15.

After Monday's Close

Sabre Holdings

(TSG) - Get Report

said it made a cash tender offer at $17.75 a share for all of the outstanding shares of

GetThere.com

(GTHR)

. The second step of the merger includes offering all remaining GetThere shareholders the same cash price paid in the tender offer.

Back to top

Miscellany

Caraustar

(CSAR)

, a packaging company, has filed a breach of contract suit against

Georgia-Pacific

(GP)

for reducing purchases.

According to Caraustar, Georgia-Pacific's cuts will force it to close a mill and result in lowered earnings estimates. Caraustar expects earnings per share to be reduced by five-to-seven cents in the third quarter. The current eight-analyst estimate calls for Caraustar to come in at 47 cents a share.

In recent trading, Caraustar was down 69 cents, or 5%, to $13, while Georgia-Pacific was behind 13 cents to $27.13.

Hewlett-Packard

(HWP)

has introduced a new mainframe computer, the Superdome server, which will pump up the boxmaker's earnings and profit margins, beginning in the first fiscal quarter ending next January. The new server, unveiled today, is designed to support Internet businesses. Targeting the high-end market, the Superdome is priced at about $400,000 and will begin shipping in December.

Medical device maker

Novoste

(NOVT) - Get Report

won an important endorsement for its artery-clearing device that uses radiation to unclog blockages. A

Food and Drug Administration

advisory panel voted to recommend U.S. approval for the system.

Back to top

Diane Hess, Eileen Kinsella and Betsy Riley contributed to this column.