Winners & Losers: Microsoft, Guess?, Lexmark, CoSine - TheStreet

Updated from 1:32 p.m. EDT

The Supreme Court presented

Microsoft

(MSFT) - Get Report

a victory today by agreeing that the software giant's appeal of antitrust violations should first go to a intermediary appellate court. Microsoft closed up $1.44, or 2.4%, to $62.69.

Picture this:

Eastman Kodak

(EK)

is hopping aboard the bandwagon of companies saying their earnings are being hit by higher materials costs and weak overseas currencies.

The company said this morning that its third-quarter earnings would be lower than expected.

Analysts polled by

First Call/Thompson Financial

expected Kodak to earn $1.60 a share. Kodak said it expects earnings 20 cents to 25 cents a share lower than expectations.

Credit Suisse First Boston

cut the stock to buy from strong buy on the news. The company's stock closed down a whopping $14.63, or 24.8%, to $44.38.

Mergers, acquisitions and joint ventures

Ssshhhhhhh.

America Online

(AOL)

has quietly linked up its two instant messaging systems. That's the word from today's

Wall Street Journal

, anyway.

According to the paper, AOL's Instant Messenger, the popular person-to-person chat application, will be linked up to ICQ, the Internet-based chat function far more popular with phreaks than

AARP members. This latest action scares the bejeezus out of the competition,

Yahoo!

(YHOO)

and Microsoft, which are furiously trying to capture a portion of the instant-messaging market.

Linking these two ways to chat could give AOL 138 million potential users. AOL ended the day down, though, by 84 cents, or 1.5%, to $55.60.

Hewlett-Packard

(HWP)

said it would distribute

RealNetworks'

(RNWK) - Get Report

audio and video software, offering the company's RealSystem on its HP-UX 11 enterprise servers.

RealNetworks and Hewlett-Packard plan to market the products jointly to corporations and their service providers. The combined product is expected to offer users an integrated approach to broadcasting interactive multimedia content through the Internet and intranets. Hewlett-Packard closed down 63 cents, or 0.6%, to $98.25, while RealNetworks ended the day up 38 cents, or 0.97%, to $39.

Dallas-based

Kaneb Pipe Line Partners

(KPP)

agreed to acquire terminal owner

Shore Terminals

for $106 million in cash and $2 million of Kaneb's partnership units.

The acquisition of Shore's seven terminals, with tanks holding 7.8 million barrels, is Kaneb's largest, and it strengthens the company's presence on the West Coast. The companies expect the deal to close in late October or early November. Kaneb closed today up by 75 cents, or 2.7%, to $28.13.

Newell Rubbermaid

(NWL) - Get Report

said it has received antitrust go-ahead to acquire

Gillette's

(G) - Get Report

stationery-products business. The acquisition includes the Paper Mate, Parker, Waterman and Liquid Paper brands and is expected to close by the end of the year. Newell Rubbermaid finished the day down by 25 cents, or 1.1%, to $22.44, while Gillette closed up 38 cents, or 1.3%, to $30.13.

SBC Communications

(SBC)

will collaborate with

Bell Canada International

(BI)

and

Telefonos de Mexico (TMX)

to form a new company in South America that will serve as the three companies' principal vehicle for expansion there.

Under the agreement, originally announced in June and expected to close this fall, SBC 's wholly owned subsidiary, SBC International, will take an 11.4% stake in the new cable and telephone company by contributing its assets in the region. The new company's initial capitalization will increase to about $4 billion with Telefonos de Mexico and Bell Canada each holding a 44.3% interest.

Bell Canada has agreed to sell its stake in the Vesper companies for $875 million to its U.S. partner,

VeloCom

, and reinvest the proceeds into the new company. SBC ended the day up 6 cents, or 0.1%, to $48.56.

Security Capital Group

(SCZ) - Get Report

and

SC-U.S. Realty

(RTY)

said they have agreed to a merger worth $1.4 billion.

Shareholders of SC-U.S. Realty will receive 1.15 shares of Securities Capital's Class B common stock for each share of SC-U.S. outstanding stock.

Security Capital's Board also increased its previously announced $100 million stock buyback program to a total of $450 million, which includes up to $200 million that will be available to dissenting SC-U.S. Realty shareholders.

As part of the deal, SC-U.S. Realty will use cash received from Security Capital to deal with its outstanding 2% senior unsecured convertible bonds due in 2003. Security Capital Group ended the day up 19 cents, or 1%, to $18.88; SC-U.S. Realty closed up $1.69, or 8.9%, to $20.75.

California home builder

J.F. Shea

said it remains interested in acquiring retirement-community builder

Del Webb

(WBB)

even though Webb dismissed Shea's current $600 million offer, saying it was "deficient."

Phoenix-based Del Webb said Shea offered $30 per share to acquire it, and that then, the privately held Shea had launched a proxy fight to unseat Del Webb's board after the offer was rejected. Del Webb ended the day up $1.69, or 6.2%, to $28.94.

United Dominion Industries

(UDI)

, which closed today up $5.25, or 28.8%, to $23.50, is discussing its possible sale with several parties.

The industrial and building products company has annual sales of $2.5 billion and 14,000 employees in 20 countries.

J.P. Morgan

is advising the company.

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Earnings/revenue reports and previews

Countrywide Credit

(CCR) - Get Report

closed down 13 cents, or 0.3%, to $37.63, after posting second-quarter earnings of 77 cents a share, a penny better than the 13-analyst estimate but down from year-ago earnings of 91 cents a share.

Cummins

(CUM)

closed up 6 cents, or 0.2%, to $31.44, after issuing an earnings warning for the third quarter, blaming a decline in the heavy truck market and the weak euro. The diesel-engine maker said it expects to earn 65 cents a share in the third quarter; the nine-analyst

First Call/Thomson Financial

consensus estimate was 85 cents.

Earthgrains

(EGR)

ended the day down 25 cents, or 1.5%, to $16.75, after saying its second-quarter earnings would be below analyst expectations due to a strike by 4,000 workers that ended Sept. 22.

The company said the strike would cut its earnings by about 13 cents a share. An eight-analyst consensus estimate by

First Call/Thomson Financial

had forecast 33 cents.

M.D.C. Holdings

(MDC) - Get Report

closed up $2.19, or 9.9%, to $24.19, after saying its third-quarter EPS will exceed the high end of analysts' estimates due to higher home sales prices and a lower tax rate. The announcement came after its open IRS income-tax examination was resolved.

The company cited analyst earnings estimates of between $1.10 and $1.27 a share. A five-analyst

First Call/Thomson Financial

survey gave the company an estimate of $1.19 a share.

Micron Electronics

(MUEI)

closed down $1.50, or 12.1%, to $10.88, after CFO Jim Stewart, in a conference call with analysts, reported record PC sales for the fourth quarter and said he expects profitability to return in its second quarter, which ends in February.

The Idaho-based PC maker posted earnings of 24 cents a share for its fourth quarter, up from 14 cents a year earlier and higher than

First Call/Thomson Financial's

10-analyst consensus of 9 cents. Revenue rose to $500 million from $333.1 million in the quarter.

National Discount Brokers

(NDB)

posted a first-quarter loss of 6 cents a share, higher than the four-analyst estimate of an 8 cent loss, but lower than year-ago earnings of 2 cents a share. The company's stock closed down $1.50, or 4.7%, to $30.50.

Citing lower-than-expected European revenues from the embattled euro,

Sitel

(SWW)

said it expects to see third- and fourth-quarter EPS fall below estimates. A two-analyst

First Call/Thomson Financial

survey produced a third-quarter estimate of 6 cents and a single-analyst fourth-quarter estimate of 10 cents.

The company blamed lower revenue expectations on the strengthening of the dollar in Britain and Spain and several clients making their customer acquisition business in-house. Sitel also said it doesn't expect to meet estimates of 42 cents to 45 cents for next year. Sitel ended the day down $1.63, or 35.6%, to $2.94.

After Monday's Close

Insurer

Alfa

(ALFA) - Get Report

said its third-quarter profits would be decreased by 7 cents a share because of to storm claims. The current two-analyst estimate calls for Alfa to come in at 42 cents a share. Alfa ended the day down 56 cents, or 2.9%, to $18.69.

Borden Chemicals

(BCU)

announced that it would come in below analyst expectations and post a loss in the third quarter, citing soaring natural gas prices. Borden expects to lose 22 cents to 27 cents a share, compared to the analyst forecast of a 10 cent profit. The company closed down $1.44, or 46%, to $1.69.

Internet-equipment maker

Cabletron Systems

(CS) - Get Report

said its fiscal second-quarter results topped analysts' forecasts. Cabletron reported pro-forma earnings of a penny a share, ahead of the 13-analyst prediction that the company would lose one cent, but below the year-ago 7 cent result. Cabletron finished the day down $1.88, or 5.6%, to $31.63.

Consumer-products manufacturer

Chattem

(CHTT)

posted third-quarter earnings of 55 cents a share, in line with the three-analyst forecast but below the year-ago 59 cent per share profit.

Additionally, Chattem warned that it expects fourth-quarter earnings to come in between 18 cents and 22 cents a share, sharply off the three-analyst estimate of a 33 cent result. Chattem finished the day down 94 cents, or 8.6%, to $9.94.

Retailer

Guess?

(GES) - Get Report

warned that it will report third-quarter earnings below expectations, and that it has a cautious outlook for the next two quarters. The clothing manufacturer is looking to record earnings of 35 cents to 38 cents per share, compared to the eight-analyst estimate of a 44 cent profit. Guess? Closed today down a whopping $10.19, or 51.4%, to $9.63.

Huffy

(HUF)

closed up 81 cents, or 8.7%, to $10.13 after saying it expects 2000 profits to exceed expectations due to strong scooter and bike sales. Additionally, the company said it expects third-quarter earnings of 30 cents to 34 cents a share, up from the year-ago loss of $1.04 a share.

Landstar System

(LSTR) - Get Report

reported that it is comfortable with the range of analyst earnings estimates of $1.40 to $1.53 per diluted share. Landstar ended the day up $6.45, or 16.9%, to $44.58.

Printer manufacturer

Lexmark

(LXK)

closed down $14.75, or 28.4%, to $37.25 after saying its third- and fourth-quarter earnings would be lower than expected because of slow inkjet cartridges sales and euro weakness. (

TheStreet.com/NYTimes.com

joint newsroom detailed Lexmark's

warning in a separate story.)

Lexmark, which warned for the second time since July, said it expects third-quarter earnings between 45 cents and 50 cents, compared to 56 cents a year ago. For the fourth quarter, the company expects earnings between 55 cents and 65 cents a share. Analysts had expected third-quarter earnings of 60 cents a share and fourth-quarter earnings of 80 cents a share.

This morning,

Bear Stearns

downgraded the stock to neutral from attractive, while

Credit Suisse First Boston

cut the stock's third-quarter EPS estimate to 45 cents from 60 cents;

Lehman Brothers

cut its 2000 EPS outlook to $2.27 from $2.60 and its 2001 EPS outlook to $2.65 from $3.

After the closing bell Monday,

Palm

(PALM)

revealed that it had first-quarter earnings in its hands. The maker of hand-held electronic organizers posted a 4 cent per share profit, beating the 12-analyst 2 cent estimate and the year-ago 2 cent result.

The company, recently spun off from

3Com

(COMS)

, listed sales of $401 million, up from the year-ago $176.5 million. (

TheStreet.com/NYTimes.com

joint newsroom covered

Palm's results in a separate story.) Palm ended the day up $3.25, or 6.2%, to $55.50.

Transportation-services holding company

Yellow

(YELL)

predicts that third-quarter estimates will meet or exceed the four-analyst estimate of 70 cents a share. Yellow ended the day up 63 cents, or 4.3%, to $15.13.

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Analyst actions

Upgrades

Charles River Laboratories

(CRL) - Get Report

: 12-month price target UP to $45 from $37 at

Lehman Brothers

. Charles River closed up $1.81, or 6.8%, to $28.56.

Connectics

(CNCT)

: UP to $48 from $31 at Lehman. The stock closed up $1.69, or 10.6%, to $17.69.

Downgrades

Dollar General

(DG) - Get Report

: CUT from

Goldman Sachs'

U.S. recommended-for-purchase list. The stock ended down $2.94, or 14.7%, to $17.

Northwest Airlines

(NWAC)

: 2000 EPS estimate DOWN to $3 from $3.20 at DLJ. Northwest closed down 56 cents, or 2.1%, to $26.50.

Initiations

JDS Uniphase

(JDSU)

: NEW outperform at Lehman. The stock closed down $3.75, or 3.5%, to $103.06.

Group Moves

Credit Suisse First Boston

started coverage on four clothing retailers:

Buckle

(BKE) - Get Report

: NEW buy. Buckle closed down 44 cents, or 3.7%, to $11.50.

Charlotte Russe

(CHIC) - Get Report

: NEW buy; 12-month price target: $16. The stock ended the day up by 94 cents, or 9.3%, to $11.

Gadzooks

(GADZ)

: NEW buy; 12-month price target: $25. The stock closed up 69 cents, or 4.3%, to $16.69.

Hot Topic

(HOTT)

: NEW buy; 12-month price target: $40. Hot Topic ended the day up 31 cents, or 0.96%, to $32.94.

Salomon Smith Barney

initiated coverage of several biotech companies:

  • Affymetrix (AFFX) : NEW neutral; price target: $67. The stock closed down $8.94, or 13.6%, to $56.63.
  • Millennium Pharmaceuticals (MLNM) : NEW outperform; price target: $155. The stock closed down $6.13, or 3.99%, to $147.44.
  • Incyte Genomics (INCY) - Get Report: NEW buy; price target: $54. Incyte ended the day up 44 cents, or 1.2%, to $38.56.
  • Celera Genomics (CRA) : NEW outperform; price target: $114. Celera finished down $3.06, or 2.97%, to $100.

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Offerings and stock actions

Insmed

(INSM) - Get Report

filed a registration statement with the

Securities and Exchange Commission

relating to a proposed public offering of 6 million shares of common stock. Of these shares, 5 million will be offered by the company and 1 million will be offered by certain selling shareholders. The stock closed down $2, or 13.3%, to $13.

After Monday's Close

CoSine Communications

(COSN)

priced a 10 million-share IPO -- above the expected $20 to $22 range -- at $23 a share. In its debut, CoSine stock surged $40.06, or 174%, to $63.06.

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Miscellany

AT&T

(T) - Get Report

CEO and Chairman C. Michael Armstrong shouldn't quit his day job. Then again, he may not be given a choice.

The Wall Street Journal

reported that big investors are not pleased with the top exec, especially give the company's dismal stock performance so far this year. (The company's intrayear high is $61. And yesterday, well, AT&T closed at $28.88, a slim quarter above the year's low.)

The

Journal

cited letters from a pair of New York comptrollers who were displeased with the company's falling price. In addition to institutional investors, the paper also quoted some individual investors. As per

Securities and Exchange Commission

regulations, AT&T did not comment on the rumors. Its stock closed today down 56 cents, or 1.95%, to $28.31.

Ford

(F) - Get Report

and

Firestone

may not be best friends anymore, but the duo is sure joined at the hip. Especially when it comes to legal actions. A group of 40 attorneys general, not the kind of folks companies usually want to tussle with, announced that they will assist each other in probing the deaths and company actions surrounding the tire recall. Ford's stock closed down $1.06, or 4.2%, to $24.38.

France Telecom

(FTE)

plans to invest $200 million to build a 15,000 mile transmission-backbone network that would connect 28 major cities in North America.

Scheduled to be completed by the end of 2001, the network will be provided through Global One, France Telecom's wholly owned subsidiary, and will be able to support Internet, data, voice and multimedia traffic. France Telecom's stock ended the day up $1, or 0.97%, to $104.38.

Kos Pharmaceuticals

(KOSP)

and

DuPont's

(DD) - Get Report

drug subsidiary submitted a new drug application to the FDA for a new cholesterol-fighting drug called Nicostatin.

In June, DuPont made a $20 million initial investment in Kos Pharmaceuticals, following clearance from the FTC.

The companies will jointly market the product, which they expect to have out by the end of 2001. They also plan to create a new brand name. Kos closed up $1.25, or 7.8%, to $17.25; DuPont was down $1.19, or 2.99%, to $38.50.

Novartis'

(NVS) - Get Report

eye-care unit,

Ciba Vision

, received both FDA and European regulatory approval to reintroduce its MemoryLens product, which it voluntarily withdrew in April after discovering traces of an inflammatory compound.

Novartis intends to relaunch the lens first in Europe, then in the U.S., by the end of September. Novartis ended the day up 19 cents, or 0.5%, to $38.63.

Sotheby's

(BID) - Get Report

biggest shareholder might put his stock on the auction block.

The Wall Street Journal

reported that the company's former chairman,

A. Alfred Taubman

, who just

sounds

like the kind of guy who'd own a chunk of an auction house, might be selling all or part of his 13.2 million shares, valued at $309 million. Sotheby's ended the day up 19 cents, or 0.8%, to $23.63.

The announcement came on the

heels of Sotheby's and privately held Christie's recent half-billion dollar settlement with the federal government on charges of price fixing.

Vodafone Group

(VOD) - Get Report

said that CEO Klaus Esser, former head of German rival

Mannesmann

, is leaving its board on Saturday.

Vodafone bought Esser's firm earlier this year in a deal worth about 180 billion euros, or $158 billion, after several months of scuffling. Vodafone closed up 63 cents, or 1.8%, to $35.69.

After Monday's Close

Standard & Poor's

announced that

Avaya

, a

Lucent

(LU)

unit, will replace glass-fiber manufacturer

Owens Corning

(OWC)

in the

S&P 500 stock index. Lucent closed down 47 cents, or 1.5%, to $30.41; Owens Corning was down 44 cents, or 12.5%, to $3.06.

The CEO of biotechnology firm

Gliatech

(GLIA)

, Thomas Oesterling, has announced his retirement. An external investigation determined that the clinical study of its main product -- a gel to prevent scarring after surgery -- had not used "good clinical practices." The stock closed down 16 cents, or 2.2%, to $6.84.

Watson Pharmaceuticals

(WPI)

announced that it has received approval from the

Food & Drug Administration

to market generic treatments for hypertension. Watson ended the day up 69 cents, or 1.1%, to $63.13.

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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.

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