Tuesday's Winners & Losers: Nike, Gateway, First American Health, IBM

Author:: TSC Staff
Publish date:: Feb 27, 2001 6:05 PM EST

Updated from 12:32 p.m.

Goldman Sachs

today reduced estimates on a plethora of enterprise hardware companies, the big guns of the tech world.

Analyst

Laura Conigliaro cut revenue and earnings-per-share figures on

EMC

(EMC)

Hewlett-Packard

(HWP)

IBM

(IBM) - Get Report

Network Appliances

(NTAP) - Get Report

Silicon Graphics

(SGI)

and

Storage Technology

(STK) - Get Report

. Clearly, Conigliaro thinks these guys were not out of the woods yet.

"While valuations are becoming more tempting and we are getting closer to a bottom, with revenue and EPS bias still to the downside, we see little reason to rush into these stocks immediately," she wrote.

EMC closed down $3.34, or 7.4%, to $41.66; H-P was down $1.40, or 4.7%, to $28.60; IBM was down $2.71, or 2.6%, to $102.59; Network Appliances was down $1, or 3%, to $32; Silicon Graphics was down 9 cents, or 1.9%, to $4.75; and Storage Tech was down 48 cents, or 4.4%, to $10.36.

Here's a look at those revisions:

Oh, Steve Fortuna! (Insert operatic music here.)

The

Merrill Lynch

technology analyst downgraded

Gateway

(GTW)

to mid-term neutral from accumulate, telling investors that more earnings revisions from the computer company would be likely. He also said that consumer demand was unlikely to rebound in the second half of the year and that management was helpless to turn the ship around to deal with the dearth of demand.

"Also, and very importantly, we think there is a high likelihood that management significantly lowers its earnings per share outlook during its analyst meeting this week, well below the current $1.28 Street consensus. We are currently reviewing our fiscal 2001 EPS estimate of $1.42 pending the results of Gateway's analyst meeting," Fortuna wrote.

So when is Gateway's meeting? Tonight and tomorrow. And Fortuna advised investors to use the meeting as an "opportunity to exit the shares."

He also said that Merrill was likely to readjust its estimates after the meeting, but really, advising investors to sell and citing future difficulties points to more operatic difficulties for the boxmaker. The markets have acted accordingly, dropping Gateway down $1.09, or 6.1%, to close at $16.72.

Mergers, acquisitions and joint ventures

After Monday's Close

AremisSoft

(AREM)

agreed to acquire

Fourth Shift

for $3.70 a share, giving the transaction a total value of $40.5 million.

AremisSoft, based in the U.K., will absorb Fourth Shift's business software line into its own. Fourth Shift, an application software provider based in Minneapolis, has about 10.8 million shares outstanding.

The boards of both companies have approved the deal. Fourth Shift shareholders are scheduled to vote on the acquisition in mid-May. AremisSoft closed down 31 cents, or 1.2%, to $25.25; Fourth Shift was up 94 cents, or 35.7%, to $3.56.

Luxottica

(LUX)

agreed to acquire

First American Health Concepts

(FAH)

for $25 million in cash.

First American is a managed vision care company based in Phoenix. The company's stockholders will receive $9.06 in cash for each common share they own. The company has about 2.6 million shares outstanding.

Luxottica will combine First American with its

EyeMed Vision Care

division. The company expects to close the acquisition in the second quarter. EyeMed will cover 30 million members after the deal closes.

Last week, Milan-based Luxottica agreed to acquire

Sunglass Hut

(RAYS)

for $462 million. Luxottica closed down 49 cents, or 3.1%, to $15.60; First American Health was up $1.15, or 14.9%, to $8.85; Sunglass Hut was up 3 cents, or 0.3%, to $11.34.

Earnings/revenue reports and previews

First Sherman and now this.

Cadmus Communications

(CDMS)

, a publishing services firm, announced that it will close its logistics operation in Atlanta, taking an $8 million pretax charge. The now-displaced operations will be consolidated in Charlotte, N.C. Cadmus closed flat at $10.38.

Remember

Prodigy Communications

(PRGY)

? Way back in the day -- when Internet usage required things like Gopher and Pine and new would-be Web portals competed with BBSes, local electronic bulletin boards -- Prodigy was a major player against

AOL Time Warner

(AOL)

, then known as

America On-Line

. The struggling Internet service provider announced fourth-quarter losses of $1.04 a share, more than double the year-ago 46 cents a share. The company said that it was confident it would meet first-quarter guidance however.

Prodigy closed down 6 cents, or 2.1%, to $2.88; AOL closed down $1.42, or 3.1%, to $44.70.

After Monday's Close

Dycom Industries

(DY) - Get Report

said Monday that fiscal second-quarter earnings exceeded Wall Street's significantly lowered expectations.

The company said income for the quarter totaled $13.1 million, or 31 cents a share, on contract revenue of $195.8 million in the quarter. Nine analysts polled by

First Call/Thomson Financial

were calling for the company to earn 29 cents in the period.

In late January, the company had said it expected earnings to be between 28 cents and 31 cents, well below consensus estimates of 39 cents at the time. The company also said that revenue should be between $190 million and $195 million, 8% to 10% lower than previously expected. Dycom closed down $1.91, or 10.6%, to $16.10.

Electronic Data Systems

(EDS)

still expects to achieve double-digit "organic base" revenue growth for 2001, the company said during its annual meeting with securities analysts Monday.

The computer services provider said its "base" revenue excludes revenue from

General Motors

(GM) - Get Report

and "organic" revenue is adjusted to remove the impact of acquisitions and divestitures.

Earlier this month, the Plano, Texas, company

reported earnings that beat slightly lowered estimates for the fourth quarter, but jumped 9 cents from the year-ago period. Although earnings figures weren't specifically addressed in the press release, 14 analysts polled by First Call/Thomson Financial are calling for the company to earn 56 cents a share in the first fiscal quarter. EDS closed up $1.26, or 2.1%, to $62.70; GM was down 95 cents, or 1.7%, to $54.60.

Nike

(NKE) - Get Report

lowered its fiscal third-quarter earnings projections, citing sluggish U.S. footwear sales and problems implementing new demand and supply planning systems.

The shoe and apparel maker said it is reducing its earnings expectations for the third quarter ending Feb. 28 to between 34 cents and 38 cents a share, down from the range of 50 cents to 55 cents previously forecast. Eleven analysts polled by First Call/Thomson Financial were calling for the company to post earnings of 53 cents a share.

Nike, which is based in Beaverton, Ore., said its fourth-quarter earnings should be unaffected and reaffirmed its previous guidance of 60 cents to 65 cents a share in the period. Wall Street is calling for a profit of 63 cents.

For the full year, Nike said it doesn't expect to achieve its goal of earnings per share growth in the mid-teens, but did project "positive" EPS growth. Nike closed down $9.57, or 19.5%, to $39.60.

Sawtek

(SAWS)

warned today that its second-quarter earnings and revenue will be lower than previously projected, citing a slowdown in the wireless communications sector and low order flow and backlog.

For the second quarter ending March 31, Sawtek expects earnings of 22 cents to 24 cents a share. On Jan. 25, the company said it expected to

report flat earnings compared with the year-ago period at 29 cents a share. Nine analysts surveyed by First Call/Thomson Financial currently estimate the company will earn 29 cents a share, down from the original consensus of 43 cents a share. Sawtek closed up 6 cents, or 0.4%, to $17.13.

Analyst actions

Again is a rather special word. It changes everything. Consider the case of

Texas Instruments

(TXN) - Get Report

After lowering its first-quarter outlook, again, it got shellacked by brokerage Merrill Lynch, which reduced its 2001 fiscal estimate -- again. Yesterday, Merrill cut its 2001 earnings estimate to a range between 95 cents and $1 a share from $1.11 a share.

Well, now it's

Credit Suisse First Boston's

turn to reduce Texas Instrument's estimates -- again. CSFB analyst

Charlie Glavin cut his estimates on Texas Instruments for the second time in two weeks, cutting much deeper and harder than Merrill did. The fiscal 2001 forecast was dropped to 77 cents a share from 92 cents on revenue of $10.4 billion, down from the previous $11.4 billion.

"While TI may be nearing a bottom, we believe the stock could be dead money for at least another quarter or so until visibility, capacity, and looming pricing issues are resolved," Glavin wrote. Texas Instruments, which we prefer to spell out in this acronym-crazy world, closed up 85 cents, or 2.9%, to $30.

Upgrades

Luxottica

(LUX)

: UP to buy from accumulate at

Merrill Lynch

. The company's stock, as mentioned above, closed down 49 cents, or 3.1%, to $15.60

Downgrades

Extreme Networks

(EXTR) - Get Report

: DOWN to buy from strong buy at

Lehman Brothers

. Extreme Networks closed down $1.06, or 4.1%, to $24.75.

Foundry Networks

: DOWN to buy from strong buy at Lehman Brothers. Foundry Networks closed down 88 cents, or 6.6%, to $12.44.

Nike

(NKE) - Get Report

: DOWN to hold from buy at Credit Suisse First Boston. As mentioned above, but we will

just do it

again, Nike closed down $9.57, or 19.5%, to $39.60.

Initiations

Netegrity

(NETE) - Get Report

: NEW buy at

UBS Warburg

. Netegrity closed down $3.11, or 6.2%, to $47.

Offerings and stock actions

Symbol Technologies

(SBL)

, a company specializing in bar code scanners and such, announced a 3-for-2 stock split. Yay. The split happens on April 16. Symbol Tech closed down $1.69, or 4%, to $40.26.

Trendwest Resorts

(TWRI)

runs timeshare resorts and other vacation destination properties. And now, if you've got two shares of the company, you've got another share to go with it. Trendwest announces a 3-for-2 stock split. It will go into affect on March 28. Trendwest Resorts closed up 94 cents, or 3.4%, to $28.50.

Miscellany

There's one aspect of

Aspect Communications

(ASPT)

, a Web-based customer-relations provider, that'll be a little different from now on -- its workforce. The company announced that it would be laying off 160 employees, or 6% of its staff, taking a $4 million to $6 million charge in the first quarter. Aspect closed down $1.50, or 11.5%, to $11.50. Whoa! Numbers synchronicity.

After Monday's Close

AvalonBay Communities

(AVB) - Get Report

named Bryce Blair, aged 42, president and chief executive, effective immediately.

Blair, previously the real estate investment trust's president and chief operating officer, will assume the titles of president and CEO. Richard L. Michaux, the current chairman and chief executive, will become executive chairman.

Tim Naughton, currently chief investment officer, will assume the chief operating officer position from Blair, who has been with AvalonBay for 16 years. AvalonBay closed up 56 cents, or 1.2%, to $47.06.

eToys

(ETYS)

Monday said it plans to file for bankruptcy within 10 days, noting that it doesn't expect to be in business beyond March and that its shares are "worthless."

The e-tailer also said it would be delisted shortly from

Nasdaq

on grounds that it fails the exchange's net tangible assets requirement. eToys shares plunged 3 cents Monday to close at 9 cents, where it stood at the close today, too.

Once a highflying e-commerce company, Los Angeles-based eToys effectively went out of business Feb. 5, when it said it would wind down its operations this spring.

By the Numbers

The data on NYSE and Nasdaq percent winners and losers are filtered to exclude stocks whose previous day's volume was less than 25,000 shares; whose last price was less than 5; and whose net change was less than 1/2.

Dow point gain and loss data are based on New York closing prices and do not reflect late composite trading.