Wednesday's Winners & Losers: Isis, Brunswig, Manugistics, Applied Micro, Dell
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
TheStreet Recommends
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) - Get UiPath Inc. Class A Report
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 NRG Energy Inc. 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.
Back to top
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 Ralph Lauren Corporation 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 Abercrombie & Fitch Company 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 Simon Property Group Inc. 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.
Back to top
Analyst actions
Dell
(DELL) - Get Dell Technologies Inc. Class C 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 Virtus LifeSci Biotech Clinical Trials ETF 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 Citrix Systems Inc. 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 Costco Wholesale Corporation 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 Merck & Company Inc. Report
: UP to buy from outperform at Lehman Brothers. Merck closed up $3.94, or 4.5%, to $90.81.
Microsoft
(MSFT) - Get Microsoft Corporation 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 Target Corporation 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 Access National Corporation 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 Barclays PLC Report
: NEW buy at
Bear Stearns
. Barclays closed up 44 cents, or 0.4%, to $115.38.
Kinder Morgan
(KMI) - Get Kinder Morgan Inc. 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 ManpowerGroup Report
: NEW buy at Merrill Lynch. Manpower closed up 31 cents, or 0.9%, to $34.63.
RealNetworks
(RNWK) - Get RealNetworks Inc. 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) : NEW buy, price target $95. Cablevision closed down 44 cents, or 0.6%, to $74.81.
Charter Communications (CHTR) - Get Charter Communications Inc. Report: NEW buy, price target $26. Charter closed down 13 cents, or 0.7%, to $19.13.
Comcast (CMCSK) : NEW buy, price target $50. Comcast closed down 44 cents, or 1.1%, to $38.69.
Cox Communications (COX) : NEW outperform, price target $48. Cox closed down 19 cents, or 0.5%, to $39.31.
Back to top
Offerings and stock actions
Manugistics
(MANU) - Get Manchester United Ltd. Class A Report
said its board approved a 2-for-1 stock split. Manugistics closed down $20, or 15.4%, to $110.
Back to top
Miscellany
Biotechnology giant
Amgen
(AMGN) - Get Amgen Inc. 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
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) - Get Lufax Holding Ltd American Depositary Shares two of which representing one Report
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 Pfizer Inc. Report
Viagra patent was invalid, leaving the door open for
Eli Lilly
(LLY) - Get Eli Lilly and Company 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.
Back to top