Wednesday's Winners & Losers: Isis, Brunswig, Manugistics, Applied Micro, Dell

Author:: TSC Staff
Publish date:: Nov 8, 2000 5:03 PM EST

Updated from 10:25 a.m. ET

AT&T

isn't just

splitting into four pieces -- it'll be selling close to $25 billion worth of assets, according to the

Wall Street Journal

, which reported that the company was selling in order to keep itself out of the credit rating doghouse. Likely on the block: equity investments AT&T received when it purchased cable companies

TCI

and

MediaOne

The reason? AT&T has a debt load of $62 billion, which kinda makes that credit card bill you racked up during the senior year of college look like a Denny's check. That is a

lot

of money, and AT&T is scared that its credit rating could be adversely affected. Again.

On Monday, AT&T's credit rating took a hit as

Standard & Poor's

dropped the company's long-term rating two notches, to "A" from "AA-minus," and its short-term rating one notch to "A-1" from "A-1-plus," its highest rating. And S&P didn't stop there. The credit agency warned that it could lower its ratings even further if the balance sheet doesn't improve. AT&T closed down 44 cents, or 1.95%, to $22.

Mergers, acquisitions and joint ventures

Dashing Japanese company seeks European Internet service provider. According to the

Asian Wall Street Journal

, Japan's

NEC

(NIPNY)

is making advances toward

AOL's

(AOL)

European unit regarding a possible alliance, one that might include equity ties. The

Journal

ran a quote from NEC President Koji Nishigaki, in which the head honcho said the company was also in talks with

France Telecom SA

unit

Wanadoo

, another ISP.

NEC's advances are interesting, especially given that, according to the paper, Germany's

Bertelsmann AG

has offered to put its half of

AOL Europe

on the block. NEC closed flat at $108.50; AOL was down $1.31, or 2.3%, to $56.30.

After Tuesday's Close

AmeriPath

(PATH)

said it will acquire

Pathology Consultants of America (Inform DX)

in a stock deal. Management anticipates the acquisition should be completed by the end of the year, but is working to achieve a closing as early as the end of November.

AmeriPath estimates that the completion of its plans to integrate Inform DX and to restructure the combined operations during 2001 should result in annual operating efficiencies and cost savings between $3 million and $4 million. The majority of these savings likely will not be achieved until the second half of 2001 and after that, the results of Inform DX will dilute AmeriPath's EPS from current 2000 fourth-quarter estimates by 3 cents to 5 cents. The acquisition is expected to be accretive for the entire year of 2001 and 2002. AmeriPath closed down 31 cents, or 1.9%, to $16.44.

NRG Energy

(NRG) - Get Report

, a holding company of power generation plants, said it plans to buy -- for $658 million -- a portfolio of operating projects as well as projects in construction and advanced development from privately held

LS Power

The deal is subject to purchase price adjustments at closing time, expected to be the first quarter of 2001. The facilities in Florida, Illinois, Mississippi and Texas provide access to the Chicago, New Orleans and Tampa, Fla., electricity markets, the company said. Additionally, NRG Energy said it has the opportunity to acquire ownership interests in the next 3,000 megawatts of generation projects offered for sale by East Brunswick, N.J.-based LS Power and its partners.

NRG said its expects the deal to help it achieve its 2001 earnings forecast. In addition, it expects the deal to add about 30 cents to 50 cents a share to 2003 earnings. NRG closed up 44 cents, or 1.7%, to $25.94.

Earnings/revenue reports and previews

Comdisco

(CDO)

boogie-oogie-oogied past analyst estimates, announcing fourth-quarter earnings that more than doubled from the year-ago quarter. The company, which provides technology services, not "hustle" lessons, announced fourth-quarter earnings of 44 cents a share, better than the 38 cent

First Call/Thomson Financial

estimate and the year-ago 19 cents. Comdisco closed down 56 cents, or 3.6%, to $14.88.

Polo Ralph Lauren

(RL) - Get Report

announced second-quarter earnings in line with analysts' expectations. The company said its second quarter came in at 50 cents a share, exactly what the guys at

First Call/Thomson Financial

had predicted. And yes, although it isn't exactly a fashion faux pas to be in line with estimates, it's not as good to finish 6 cents lower than the same quarter last year. That's a 12% drop in second-quarter operating profit for the clothier. The stock ended the day up 25 cents, or 1.1%, to $22.81.

After Tuesday's Close

Abercrombie & Fitch

(ANF) - Get Report

posted earnings of 43 cents a share, 2 cents better than the 20-analyst estimate and up from year-ago earnings of 36 cents a share.

The retailer said it continues to be cautious about the holiday season, but it remains comfortable with its fourth-quarter earnings guidance of 84 cents, which is the same as the

First Call/Thomson Financial

19-analyst estimate. The company added that it is well-positioned in women's inventory for the fourth quarter. A&F closed up $2.69, or 12.3%, to $24.63.

Allied Waste

(AW)

posted third-quarter earnings of 27 cents, in line with the six-analyst estimate. The year-ago figure was not provided. AW ended the day up 69 cents, or 6.3%, to $11.69.

AOL Latin America

(AOLA)

posted a narrower-than-expected first-quarter loss, amid growing subscription rates in the region.

The Fort Lauderdale, Fla., company, a joint venture between

Cisneros Group

and

America Online

(AOL)

, lost $98.1 million, or 36 cents a share. The three-analyst estimate predicted a loss of 37 cents a share. There were no comparable prior-year financials because AOL Latin America's first service, America Online Brazil, launched in November 1999.

The company also said it added 191,000 members during the quarter to make a total of 314,000 subscribers in Argentina, Brazil and Mexico. AOLA closed up 25 cents, or 3.9%, to $6.63.

Catalytica

(CTAL)

said it plans to restructure its pharmaceuticals division to improve efficiency, resulting in a $12 million to $14 million pretax charge in its fourth quarter. Catalytica closed down 13 cents, or 0.95%, to $13.06.

Simon Property Group

(SPG) - Get Report

posted third-quarter earnings of 80 cents a share, in line with the 15-analyst estimate and up from year-ago earnings of 70 cents a share.

A division of the company, Simon Brand Ventures, announced that it renewed its marketing and vending alliance with

Pepsi-Cola

in which Pepsi will remain Simon's preferred soft-drink provider at more than 175 of its retail properties for the next two years. Simon Property closed up 6 cents, or 0.3%, to $22.25.

TMP Worldwide

(TMPW)

posted third-quarter earnings of 30 cents a share, beating the 13-analyst estimate of 27 cents and up from year-ago earnings of 21 cents a share. The figure excludes merger and integration costs for companies acquired under the pooling-of-interests method. TMP closed down 38 cents, or 0.5%, to $71.75.

Trammell Crow

(TCC)

posted third-quarter earnings of 46 cents a share, well above the five-analyst estimate, but in line with year-ago earnings. Trammell Crow ended the day up 50 cents, or 3.9%, to $13.50.

Analyst actions

Dell

(DELL) - Get Report

will make revised third-quarter estimates. That's the latest from

Merrill Lynch

analyst Steve Fortuna, who said the company would make the 25 cent estimate when it releases its earnings tomorrow night. He also reiterated his buy rating and set a price target of $42. Dell closed down $2.25, or 6.9%, to $30.31.

Upgrades

Brunswig

(BBC) - Get Report

: UP to buy from hold at

Credit Suisse First Boston

, price target: $19. Brunswig closed up 88 cents, or 7.3%, to $12.88.

Citrix Systems

(CTXS) - Get Report

: UP to buy from neutral at

Lehman Brothers

, price target: $30. Citrix closed up 63 cents, or 2.5%, to $25.25.

Costco

(COST) - Get Report

: UP to outperform from neutral at

Morgan Stanley Dean Witter

. Costco closed down 19 cents, or 0.5%, to $35.56.

May Department Stores

(MAY)

: UP at Morgan Stanley Dean Witter, price target to $35 from $32. May closed up 69 cents, or 2.4%, to $29.44.

Merck

(MRK) - Get Report

: UP to buy from outperform at Lehman Brothers. Merck closed up $3.94, or 4.5%, to $90.81.

Microsoft

(MSFT) - Get Report

: UP at Lehman Brothers, price target to $115 from $85. Microsoft closed down $1.06, or 1.5%, to $69.44.

Target

(TGT) - Get Report

: UP at Morgan Stanley Dean Witter, price target to $35 from $30. Target closed up $1.75, or 6.2%, to $30.13.

Downgrades

American Home Products

(AHP)

: DOWN to outperform from buy at Lehman Brothers. AHP ended the day up $1.19, or 1.97%, to $61.38.

Initiations

ANC Rental

(ANCX) - Get Report

: NEW outperform at

Salomon Smith Barney

. ANC closed down 6 cents, or 1.1%, to $5.69.

Applied Micro Circuits

(AMCC)

: RESUMED strong buy at Credit Suisse First Boston; price target: $115. AMCC closed down $7.56, or 10.98%, to $61.31.

Barclays

(BCS) - Get Report

: NEW buy at

Bear Stearns

. Barclays closed up 44 cents, or 0.4%, to $115.38.

Kinder Morgan

(KMI) - Get Report

: NEW buy at Salomon Smith Barney; price target: $50. Kinder Morgan closed down 13 cents, or 0.3%, to $40.06.

Manpower

(MAN) - Get Report

: NEW buy at Merrill Lynch. Manpower closed up 31 cents, or 0.9%, to $34.63.

RealNetworks

(RNWK) - Get Report

: NEW outperform at Morgan Stanley Dean Witter; price target: $35. RealNetworks closed down $2.50, or 9.8%, to $23.06.

Group Moves

Salomon Smith Barney initiated coverage on the cable industry:

Cablevision Systems

(CVC)

Charter Communications

(CHTR) - Get Report

Comcast

(CMCSK)

Cox Communications

(COX)

Offerings and stock actions

Manugistics

(MANU) - Get Report

said its board approved a 2-for-1 stock split. Manugistics closed down $20, or 15.4%, to $110.

Miscellany

Biotechnology giant

Amgen

(AMGN) - Get Report

announced that it expects the launch of its next-generation anemia drug

Aranesp

to speed up earnings and sales growth over the next five years. Amgen closed down 19 cents, or 0.3%, to $61.63.

British Telecom

(BTY)

swiped a play from the

AT&T

(T) - Get Report

playbook and, according to the

Wall Street Journal

, is undergoing a major restructuring. The company plans to offer the public shares in its wireless unit, divide its telephony business into retail and infrastructure portions while possibly spinning off its Internet division. That's eerily reminiscent of the AT&T plan, which also took its wireless unit public, albeit in a tracking stock for now, while cleaving its telephony business into two separate entities.

The major reason why BT is undergoing such a transformation touches on a problem that AT&T is currently struggling with. Both major players in the telecommunications biz are carrying huge amounts of debt. The

Journal

reported that BT's debt is expected to hit $50 billion (that's 35 billion pounds) next year, while AT&T's $62 billion debt load raised eyebrows at

Standard & Poor's

, the credit-rating agency, which cut its ratings on the company. BT closed up $1.88, or 1.7%, to $114.75.

Isis Pharmaceuticals

(ISIP)

is on the fast track. This morning, the U.S. Food and Drug Administration gave the company's lung cancer drug "fast track" status, reviewing the drug in just six months instead of the usual 10. A month ago, Isis began testing the drug on people with non-small-cell lung cancer, which the company says is the most widespread form of lung cancer, affecting half a million people. Isis closed up $1.25, or 10.6%, to $13.

Telecom equipment manufacturer

Lucent

(LU)

has been shaking up its management. But the efforts to get the company back on track aren't stopping there.

The Wall Street Journal

reported this morning that Lucent may end up with 10,000 fewer jobs -- that's 10% of its work force.

Yesterday, the company continued to shake up its management. Vice Chairman Ben Verwaayen will be in charge of worldwide marketing, sales and services. And former executive vice president of corporate operations, Bob Holder, will leave his post to head up Lucent's product organizations, manufacturing and supply chain management. The changes came two weeks after Lucent ousted its chief executive officer and said it had beaten lowered earnings estimates. At the same time, Lucent also warned that it expected revenues from continuing operations to fall 7% in its first fiscal quarter and those operations to break even.

Lucent closed down 6 cents, or 0.3%, to $24.06; its 52-week high was near $78.

The highest court in the United Kingdom ruled that

Pfizer's

(PFE) - Get Report

Viagra patent was invalid, leaving the door open for

Eli Lilly

(LLY) - Get Report

and

ICOS

(ICOS)

to manufacture an impotency drug of their own.

In response, Pfizer shot back comments that said the ruling did not affect the company's basic product patent, which expires in 2013. The ruling really affects the role of PDE5 inhibitors, a vital part of the Viagra drug's ability to (ahem) work. Now other companies, per the ruling, are free to explore the use of these inhibitors. Pfizer still holds the rights on the molecular structure of Viagra and is currently reviewing the decision in possible consideration for an appeal.

Pfizer closed up 56 cents, or 1.3%, to $45.38; Eli Lilly was up $3.19, or 3.7%, to $90.44; and ICOS was down 56 cents, or 1.1%, to $52.