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August 20, 1999

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Market Data as of 8/20/99, 1:20 PM ET:

o Dow Jones Industrial Average: 11,036.98 up 73.14, 0.67%

o Nasdaq Composite Index: 2,632.82 up 11.39, 0.43%

o S&P 500: 1,330.12 up 6.96, 0.53%

o TSC Internet: 553.49 up 4.35, 0.79%

o Russell 2000: 433.76 up 0.99, 0.23%

o 30-Year Treasury: 10 122/32 up 13/32, yield 5.989%

In Today's Bulletin:

o Midday Musings: Market Enjoys Gains on Modest Preweekend Volume
o Herb on TheStreet: Will the Sun Finally Shine on Ancor Communications?

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TheStreet Recommends

TSC readers will be familiar with this week's "Stock Drill" guest, Craig Ellis of the Orbitex Info-tech & Communications Fund. A participant in's Net Stock Summit, Ellis will be sharing his favorite stockpicks with TSC's Herb Greenberg and Jeff Berkowitz, Jim Cramer's partner at Cramer Berkowitz.

And, we'll go back inside the foxhole with Cramer at the trading desk. He'll tell us and show us why the individual investor is better off making most investing decisions instead of paying an expensive broker.

The show airs Saturday 10 a.m. ET and again on Sunday 1 p.m. ET. For more info and how to find Fox News in your area, please see our TSC on Fox page, at Or watch a Web simulcast of the show at (look for the "24 Hour Broadcast" box).

Also on

Trader's Turret: Humming a Favorite Simon and Garfunkel Tune

Sing along with JJC's partner as the canyons of Wall Street empty out.

Internet: Ready to Bid? uBid Hopes So as It Rolls Out Secondary Offer

The stock's fallen sharply from its IPO price, but the company keeps returning to the well.

Consumer Products: Betting on Consumer Staples to Beat the Rate Blues

After getting clobbered, stocks in the food and consumer-staples sectors could make a comeback.

Online Brokers: Online Brokerage Analysts Grope for New Metrics as Trading Growth Slows

With volume off its earlier breakneck pace, analysts are looking for new numbers to track.

Fixed-Income Forum: What's Going On With the Money-Market Funds Stuck With General American Paper?

Plus, a list of the affected funds (not just the companies).

Midday Musings: Market Enjoys Gains on Modest Preweekend Volume


Thomas Lepri

Staff Reporter

8/20/99 1:08 PM ET

Shall we compare this market to a summer's day?

The early-afternoon mercury in Lower Manhattan was reading a temperate, if not quite lovely, 73 degrees Fahrenheit. And the major proxies were all solidly higher on positive breadth, though the air was still a bit heavy in anticipation of next week's

Federal Open Market Committee


At midday, the

Dow Jones Industrial Average

was up 82, or 0.7%, to 11,046, led by

American Express


, up nearly 3%. The

Nasdaq Composite Index

was up 14, or 0.5%, to 2635, and the

S&P 500

had advanced 8, or 0.6%, to 1331. Internet Sector

index was up 4, or 0.8%, to 553, while the small-cap

Russell 2000

was up 1 to 434.

Let's start with today's quarterly expiration of stock and stock-index options -- you can chalk up a certain amount of today's upside to that phenomenon. "There were a lot of buy programs this morning, then a selloff that just re-encouraged the buying again," observed Barry Hyman, senior market strategist at

Ehrenkrantz King Nussbaum


The expiration effect might be tough to predict going through the afternoon, though. "Things turn so fast that the

expiration bias could turn down at the end of the day," said Scott Bleier, chief investment strategist at

Prime Charter


Apart from expiration, and notwithstanding the usual light August trading volume, sentiment seemed to be generally positive today -- perhaps strangely so, given the gloomy cloud that the dollar's recent slide against the yen put over the markets yesterday. "It's just the silly back-and-forth action of the markets as they pore over all the silly minutiae of data that comes before them," said Bleier, not one to pull punches.

"This is a market going nowhere, with just enough action to keep the near-term, daytrading investor in business."

Bleier wasn't the only one sensing some goofiness in the market. Hyman said he's been hearing a bit of improbable talk to the effect that the


won't raise rates at all next Tuesday. Exactly what's changed to merit a reassessment of a rate-hike's likelihood? "Nothing," Hyman said. "Psychology," he speculated. (Hyman himself expects the Fed to raise rates by 25 basis points and maintain its neutral bias.)

In a less-silly practice, the stock market continues to watch the yield on the long bond. "It looks like the flex point between up and down days seems to be 6% on the bond

yield," Hyman said. "The market reacts well when it goes below 6%." The 30-year Treasury was lately up 18/32 to 101 25/32, its yield at 5.996%, just under toward the magic threshold.

Meanwhile, news of "the world's first trillion-dollar bank" (see below) -- get used to the phrase, you'll be hearing it a lot -- wasn't having the same effect in New York that it did in Tokyo overnight. The

Philadelphia Stock Exchange/KBW Bank Index

was essentially flat, though

Merrill Lynch


was up about 3% amid the latest appearance of the oft-disinterred



-Merrill takeover rumors. Merrill was two-timing in the rumor mill this morning, with vague word also flying around that it might be buying

Hambrecht & Quist


, which was lately up about 4%.

Breadth was looking fairly good. Advancers were topping decliners 1,605 to 1,154 with 380 million shares changing hands on the NYSE, where there were 38 new 52-week highs against 41 new lows. In Nasdaq action, advancers were beating decliners 1,804 to 1,600, with 449 million shares trading, and 55 new highs and 23 new lows.

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter


Earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified


Mergers, acquisitions and joint ventures

Copper miners




Cyprus Amax Minerals


said that

Phelps Dodge


placed an unsolicited offer to buy both companies for stock. Asarco and Cyprus directors decided to proceed with their own pending merger after considering a number of contingencies that would be associated with Phelps's bid. Shares of Asarco were up 2 7/16, or 13.9%, to 21, while Cyprus was up 1 7/8, or 12.9%, to 16 3/8. Phelps Dodge shares popped 2 1/8 to 60 11/16.



was up 1/4 to 36 5/8 after shareholders gave their approval for the company to be bought by defense contractor

Lockheed Martin


. Comsat said more than 39 million shares cast by proxy favored the deal out of 53 million shares outstanding. Although the value of the merger has decreased to $2.2 billion from $2.7 billion, fewer than 400,000 shares showed opposition to the transaction. Lockheed's June profit warnings, which sent its stock tumbling, are blamed for the cash and stock deal's value decline.

Cooper Cameron


was up 1 1/2 to 40 3/4 after announcing the sale of its rotating compressor unit to

Rolls Royce

for $180 million.



was up 3/8 to 29 13/16 after it said it would sell its

Fairchild Publications

division, which publishes

Women's Wear Daily



, for $650 million to

Conde Nast Publications

, the publisher of magazines like



Vanity Fair




The New Yorker


The New York Times



, a unit of

General Electric


, is speaking with

Paxson Communications


about taking a 32% stake in the company,

The Wall Street Journal

reported, citing people familiar with the discussions. Shares of GE were up 7/8 to 111 7/8, while Paxson was off 1/4 to 15 15/16.

Bank of Tokyo-Mitsubishi


was up 1 1/8, or 7.1% to 16 15/16 on the heels of word that

Industrial Bank of Japan


Dai-Ichi Kangyo Bank


Fuji Bank

confirmed plans to form a giant holding company. You know, the world's first trillion-dollar bank (we said you'd be hearing it a lot).

German utilities



was jumping 3 3/16 to 66 5/16 after it said it was in talks with


to merge in a transaction that could be valued at about $15 billion, the


reported, citing people familiar with the situation.

Earnings/revenue reports and previews



was plunging 6 1/2, or 22%, to 23 after it posted second-quarter earnings yesterday of 34 cents a share, down from both the 12-analyst estimate of 48 cents and the year-ago 45 cents.

Morgan Stanley Dean Witter

downgraded Dillard's to neutral from outperform, while

Banc of America Securities

cut its rating to underperform from a buy.

Dun & Bradstreet


was slipping 4 1/8, or 13.4% to 26 9/16 after it warned yesterday that it doesn't expect to meet analysts' earnings estimates of 40 cents to 41 cents a share for the third quarter and $1.73 to $1.75 a share for full-year 1999. The company now expects full-year earnings to be $1.62 to $1.65.

Merrill Lynch

lowered its rating on the stock to near-term accumulate from buy.

Offerings and stock actions

Agile Software


was soaring 26 1/4, or 121.4%, to 46 1/8 in its trading debut.

Morgan Stanley Dean Witter

priced the 3 million-share IPO above-range at $21 a share. The estimated range for the IPO had been raised to $18 to $20 from $15 to $17. Agile, based in San Jose, Calif., is a content-management software company.



was hopping 8 1/8, or 67.7%, to 20 1/8 on its first day of trading.

Goldman Sachs

priced the 7.7 million-share IPO mid-range at $12 a share. The deal was reduced to 9 million shares from 12 million and then finally to 7.7 million. LookSmart is an Internet directory company based in San Francisco.

New York Times


was up 1/8 to 37 5/8 after it said it was pondering an IPO for its Internet unit,

Times Co. Digital

, although a final decision on an IPO hasn't been made yet, the


reported. Chairman Arthur O. Sulzberger Jr., in a staff memo, also said the company is considering allowing all employees and not just those who work for the Net division to buy stock at the IPO price, the


article said. New York Times is a minority shareholder in Inc.


, the publisher of this Web site.

Analyst actions

Bank United


was off 3/8 to 37 after

Warburg Dillon Read

downgraded the stock to buy from strong buy.



was up 3/16 to 16 3/4 after Banc of America initiated coverage with a strong buy rating and a $25 price target.



was up 5/16 to 19 1/16 after

Goldman Sachs

started coverage with a market perform rating.



was falling 4 15/16, or 14.9%, to 27 15/16 after Morgan Stanley cut its rating to outperform from strong buy.

Donaldson Lufkin & Jenrette

started coverage of



with an initial market perform rating. Shares of Genentech were sliding 4 to 151.



popped 2 13/16 to 105 1/2 after

Lehman Brothers

analyst Eric Ende started coverage with an initial buy rating and a 12-month price target of 169.



was climbing 3 1/8, or 5.8%, to 57 after Goldman Sachs began coverage of the stock with a recommended list rating.

Optical Coating Laboratory


was plunging 5 7/16, or 8.8%, to 55 13/16 despite beating third-quarter estimates. Banc of America maintained a buy rating on the stock, upped its 1999 estimate to $1.49 from $1.43 and raised its 2000 estimate to $1.94 from $1.75.

Park Place Entertainment


was off 3/8 to 11 after

Deutsche Banc Alex. Brown

cut its rating to a buy from a strong buy.



was down 3/16 to 35 9/16 despite Banc of America's upgrade to strong buy from buy.

Province Healthcare


was up 1/2 to 17 5/8 after DLJ analyst John Hindelong initiated coverage with a market perform rating.

Lehman Brothers downgraded



to outperform from buy. Shares of Sprint were falling 5 7/16, or 11%, to 43 5/8.



popped up 2 7/16, or 5.1%, to 49 9/16 after Goldman Sachs initiated coverage with a market outperform rating. Yesterday, Merrill Lynch retail analyst Peter Caruso named the

Radio Shack

parent the firm's Focus One stock of the week.

Western Resources


was up 3/16 to 23 7/16 after


initiated coverage with an attractive rating.


The Chicago Stock Exchange

announced its plans to extend trading hours beginning Oct. 1, making it the first U.S. exchange to set definitive plans to offer individual investors post-trading hours service. The CHX board of governors said yes to a plan to trade all

S&P 100


Nasdaq 100

stocks as well as 50 to 100 of the most active issues not included in the S&P 100 and the Nasdaq 100. The close of trading will be extended to 6:30 p.m. EDT from 4:30 p.m. EDT.

Herb on TheStreet: Will the Sun Finally Shine on Ancor Communications?


Herb Greenberg

Senior Columnist

8/20/99 6:30 AM ET


The games people play: You know the old story. Little company, starved for cash, announces contract with giant company. Its stock reacts by zooming higher before investors ever get around to reading the fine print.

Such is the hype and hope behind

Ancor Communications


. This cash-starved Minnetonka, Minn., maker of fibre-channel switches that are used to deliver large amounts of data has never earned a penny in six years as a public company. Last year its deficit hit a staggering $14.5 million -- especially staggering when its revenue this year, at best, is expected to be just $15 million (and that's being generous).

But that's all about to change. Or so hope (pray?) investors.

Earlier this summer Ancor announced that it had struck a deal for

Sun Microsystems


to buy and distribute its products. The news caused Ancor's stock to almost immediately quadruple before settling to its current price of 28 1/2, giving it a market value of $720 million. Seven-hundred twenty million bucks for a company that has barely any biz? How many switches can Sun sell, anyway? Quite a few if you listen to Ancor. Using figures supplied by

International Data Corp.

, the company has been saying that the fibre-channel switch market could be worth $235 million in 1999, $558 million in 2000, $1.1 billion in 2001 and a whopping $1.7 billion by 2002.

Short-sellers aren't so sure; even if the market does grow, they note that Ancor isn't without competition.

Brocade Communications Systems


, its largest competitor, is expected to do about $75 million in rev this year, or about five times Ancor. Two others, privately held



Gadzoox Networks


, which recently went public, are expected to sell about $20 million worth of switches between them. (Both companies, by the way, only recently started selling switches.)

What's more, Ancor investors with half a memory recall Ancor's previous relationship with Sun. Sun helped co-develop with Ancor the very switch it now plans to distribute. Sun, in fact, was expected to be a customer for the switch a year ago, but backed out, causing Ancor's stock to drop to a low of 1 before recovering in the mid-single digits, where it stayed before the most recent Sun-related run-up.

Why did Sun return? Neither officials from Sun nor Ancor could be reached, but considering the terms of the deal, it would appear Ancor was desperate. The deal calls for Sun to get warrants to purchase 1.5 million Ancor shares at $7.30 per share. Dilution, anybody? Warrants, when exercised, can be terrible for investors. Ancor itself warns in several recent


filings that terms of the deal could cause gross margins to be "impacted significantly" as the warrants vest.

But wait, there's more: It's not yet even certain that Sun will go ahead and buy the switches because it's still trying to make sure they work with Sun's products. (If they don't, according to the documents, Sun can walk away from the deal.) Plus, the company warns that there's no guarantee Sun will stick around even if the switches do work with Sun products. If Sun does walk away, Ancor's "business would be materially harmed." Boilerplate, sure, but it's worth taking to heart in light of Sun's recent history with Ancor.

Alas, poor Hollywood: Earlier this week the company announced it's going to seek bankruptcy protection, prompting the NYSE to give its stock the hook because the shares are being scrapped by the company.

Reminds me that back in December 1996 I wrote a story for



Planet Hollywood


. It started, "Is this company really worth $2.5 billion? When Robert Earl says, 'I intend to build an empire,' it has a certain ring of inevitability." The story pointed out that he had better be right, "otherwise, Planet Hollywood's stock will be headed toward planet earth."

Who was to know it would have a crash landing?

Herb Greenberg writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

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