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midday08-24-99's MIDDAY UPDATE

August 24, 1999


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Market Data as of 8/24/99, 1:02 PM ET:

o Dow Jones Industrial Average: 11,292.48 down 7.28, -0.06%

o Nasdaq Composite Index: 2,759.11 up 39.54, 1.45%

o S&P 500: 1,364.50 up 4.28, 0.31%

o TSC Internet: 576.59 up 4.88, 0.85%

o Russell 2000: 437.07 down 0.18, -0.04%

o 30-Year Treasury: 10 207/32 up 9/32, yield 5.963%

In Today's Bulletin:

o Midday Musings: Market Takes Prelude to Fed Decision in Stride
o Herb on TheStreet: Was Nvidia Stuffing Its Distribution Channel With 'Anything That Wasn't Nailed Down?'

Also on

Wrong! Dispatches from the Front: Why Berko's Getting Fan Mail

Cramer says his partner's got the mental horsepower to make the right call.

Internet: AOL Picks Generals to Lead Its Brand Fleet

New hires and promotions aim to grab more ad revenue from a multifront strategy.

Taxes: Congress Dangles a To-Die-For Tax Break

A well-timed death could yield an estate tax bill of zero. But don't make plans yet: President Clinton will surely veto the measure.

Dear Dagen: Dear Dagen: Many Goals Could Add Up to Too Many Funds

Also, a word about personal trading by fund managers.

Midday Musings: Market Takes Prelude to Fed Decision in Stride


Brian Louis

Staff Reporter

8/24/99 1:15 PM ET

Traders and investors seem for the most part to be sloughing off today's


meeting, the way

Andy Gibb

used to blow off his scheduled shows on Broadway.

Market players right now are just watching the ticks of the clock click off as they await the results of today's

Federal Open Market Committee

get-together in Washington. The FOMC is expected -- how many times you read this phrase lately? -- to raise short-term interest rates by 25 basis points. Results of the convocation are expected around 2:15 p.m. EDT.

While many expected the session to be mostly a sleeper ahead of the results of the gathering of


& Chums -- and in some ways they're right -- technology stocks were enjoying some solid improvement as the semiconductor sector was becoming bloated again with gains. The

Nasdaq Composite Index

was up 34, or 1.2%, to 2753.26.


(MSFT) - Get Free Report

-- the company with the biggest market cap of them all -- was enjoying a solid session thanks to a favorable appellate court ruling.

Semiconductor stocks, which this summer have acted like Gilligan in the

Gilligan's Island

episode when he had that jet pack and was flying all over the place, were soaring. The

Philadelphia Stock Exchange Semiconductor Index

was up 2.5%. Positive analysts' comments have helped boost the sector. SOX component

Micron Technology

(MU) - Get Free Report

was sporting a chunky gain of 7.6%.


(INTC) - Get Free Report

was up 1.2%.

Computer makers were going the

Orson Welles

route and fattening up. The

Philadelphia Stock Exchange Computer Box Maker Index

was up 1.5%. The

Nasdaq 100

was up 1.2%. Heavyweights in the NDX other than Mister Softee and Intel --


(CSCO) - Get Free Report


MCI WorldCom




(DELL) - Get Free Report

-- were all higher, although the gains weren't dramatic.

As for the blue-chip

Dow Jones Industrial Average

, it was up 2 to 11,301. The

S&P 500

was up 2 to 1363. The small-cap

Russell 2000

was off a fraction to 437.

Online retailer

(AMZN) - Get Free Report

was leading the Internet Sector

index higher, up 3.8%. The DOT was up 6, or 1.1%, to 578.

Financials were stepping back a bit from their recent highflying ways. The

Philadelphia Stock Exchange/KBW Bank Index

was up, but only fractionally, while the

American Stock Exchange Broker/Dealer Index

was down 0.9%.

While major stock proxies were mixed, the majority of stocks in the market were softer.

Dan Marciano, head of trading at

First Albany

, said the market's slip was just a little correction and retracement from its recent rally.

One of the reasons for the market's rally was traders and investors pinning hopes on the conviction the Fed won't raise rates any more this year -- after today of course.

Marciano said he expects the Fed to raise rates today and that it's going to indicate a neutral stance on rates going forward. And he said he's not expecting the Fed to do anything for the rest of the year.

In the Treasury market, the 30-year bond was lately up 8/32 to 102 6/32, yielding 5.97%. (For more on the fixed-income market, see today's early

Bond Focus.)

Christopher Rupkey, senior financial economist at

Bank of Tokyo-Mitsubishi

, said he expects the bond market to run up over the next two weeks thanks to pent up demand for Treasuries, a further extension of the recent rally and the fact that the August refunding is behind the market and the Fed meeting will be out of the way. Rupkey, however, sees his projected rally in the long bond yield stalling out around the 5.88%-to-5.75% level.

Market internals were poor. And, as one would expect on the day of a Fed meeting, volume was unimpressive.

On the

New York Stock Exchange

, decliners were running ahead of advancers 1,704 to 1,110 on 375 million shares. On the

Nasdaq Stock Market

, losers were leading winners 1,942 to 1,613 on 559 million shares.

On the NYSE, 66 issues had set new 52-week lows while 39 had touched new highs. On the Nasdaq, 84 issues had set new 52-week highs while new lows totaled 47.

Meanwhile, among other indices, the

Dow Jones Utility Average

was up 0.3%, the

Dow Jones Transportation Average

was up 0.4% and the

American Stock Exchange Composite Index

was down 0.3%.

On the Big Board,

Time Warner


was most active with 10 million shares changing hands. It was down 7.1% after

Merrill Lynch

cut its earnings estimates on the media giant.

On the Nasdaq, Dell was most active with 33.3 million shares changing hands. It was up 1 3/16 to 46 7/8.

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter


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




was jumping 9 3/8, or 20.1%, to 56 1/8 after it unveiled a union with



to provide Internet telephony services to new Compaq Presario customers in certain countries. According to the deal, a button on the Presario keyboard would link Net users to a Compaq and Net2Phone joint Web site that includes free computer-to- telephone software, downloading instructions and Net2Phones rates. Compaq has started distributing the keyboards in Canada, Latin America, Japan and Asia-Pacific. Shares of Compaq were off 1/4 to 23 13/16.

Separately, Net2Phone appointed former

Bloomberg New Media

General Manager Jonathan Fram as its president. Earlier today,

Deutsche Banc Alex. Brown

started coverage of Net2Phone at buy.

Mergers, acquisitions and joint ventures

Cyprus Amax Minerals


is facing pressure from shareholders to break ranks with


(AR) - Get Free Report

on their pending get-together in light of

Phelps Dodge's

(PD) - Get Free Report

unsolicited bids to acquire Cyprus and Asarco for $2.7 billion in stock,

The Wall Street Journal

reported, citing people familiar with the situation. Shares of Cyprus were up slightly to 17 7/8, while Asarco was off 1/8 to 22 3/8. Phelps Dodge shares were off 1/8 to 59 15/16.

Gentner Communications


was up 9/16, or 9.3%, to 6 5/8 after it set a strategic partnership under which

NextLink Communications


will distribute Gentner's conference-calling services to its long-distance customers in Arizona, Colorado, Nevada, New Mexico, Oregon, Utah and Washington. NextLink shares were hopping 2 3/8 to 95.

Nortel Networks


was down 3/4 to 42 7/8 after it said it plans to buy


(PERI) - Get Free Report

for an estimated $436 million in stock. Shares of Periphonics were climbing 2 3/16, or 8.7%, to 27 7/16.

Earnings/revenue reports and previews

Brown Shoes


was up 3/8 to 17 1/4 after it posted second-quarter earnings of 58 cents a share, beating both the single-analyst estimate of 54 cents and the year-ago 24 cents.



was down 1/16 to 8 after it reported second-quarter earnings of 27 cents a share, beating the two-analyst estimate of 25 cents but down from the year-ago 64 cents.

Just For Feet


was off 9/16, or 10.4%, to 4 13/16 after it reported a second-quarter loss of 83 cents, falling short of the five-analyst estimate of a 73 cent loss and the year-ago 25 cents gain.

Perry Ellis International

(PERY) - Get Free Report

was up 3/4, or 6.2%, to 13 5/16 after it posted second-quarter earnings of 23 cents a share, ahead of the two-analyst estimate of 17 cents and up from the year-ago 15 cents.



was up 1/2 to 19 15/16 after it posted fourth-quarter earnings of 32 cents a share, which excludes nonrecurring items, in line with the six-analyst estimate and up from the year-ago 27 cents.

Smithfield Foods


was down 15/16 to 28 5/8 after it posted first-quarter earnings of 15 cents a share, missing the three-analyst estimate of 18 cents but up from the year-ago 14 cent-loss.

Offerings and stock actions

Siebel Systems


was soaring 5 1/8, or 8.3%, to 66 7/8 after its board approved a 2-for-1 stock split.

Analyst actions


(APA) - Get Free Report

was up 3/8 to 45 1/16 after

ING Barings

upped its rating on the shares to a buy from a hold and set a new price target of $51 to $53.



was off 3/16 to 7 15/16 despite

J.P. Morgan

starting coverage of the stock with a buy rating.

Creo Products


was up 1/8 to 20 1/4 after Merrill Lynch initiated coverage of the stock with a near-term accumulate and a long-term buy.

Duke Energy

(DUK) - Get Free Report

was up 19/16 to 57 3/16 after

Morgan Stanley Dean Witter

upgraded the stock to a strong buy from outperform.


(DY) - Get Free Report

was advancing 3 3/8, or 8.6%, to 42 1/2 after

Banc of America Securities

upped its rating to strong buy from buy.



was off 15/16, or 8.9%, to 9 9/16 after Banc of America analyst Susan Silverstein cut her rating on the stock to a market perform from a buy.


(GPS) - Get Free Report

was down 11/16 to 41 1/16 after Deutsche Banc Alex. Brown cut the stock to market perform from buy.

IMC Global


was down 7/16 to 18 1/4 after Morgan Stanley Dean Witter downgraded it to neutral from outperform.



was unchanged at 11 after

U.S. Bancorp Piper Jaffray

initiated coverage of the stock with a strong buy and a price target of 20.



was increasing 2, or 8.5%, to 25 1/2 after

Credit Suisse First Boston

initiated coverage of the stock with a buy rating and put a price target of 29 on the stock.

ING Barings gave

Ocean Energy


a boost, raising its rating to a buy from a hold. Despite the upgrade, shares of Ocean Energy were off 1/2 to 11 at the midday.

Procter & Gamble

(PG) - Get Free Report

was climbing 2 1/16 to 100 5/16 after


upgraded it to attractive from neutral.

Robert Mondavi


was off 1 to 37 1/4 after Banc of America lowered its rating on the shares to market performer from buy.

Strategic Diagnostics


was up 7/8, or 17.9%, to 5 13/16 after Deutsche Banc Alex. Brown started coverage with an initial buy rating.



was popping 2 1/4, or 7.5%, to 32 3/16 after PaineWebber initiated coverage of the stock with a buy rating.

Time Warner was falling 4 5/8, or 6.9%, to 61 9/16 after Merrill Lynch slashed its 1999 earnings estimates to 35 cents a share from 48 cents and its 2000 view to 80 cents from 82 cents.

Transocean Offshore

(RIG) - Get Free Report

was off 1/16 to 34 3/4 after ING raised its rating on the shares to a strong buy from a buy.

Triangle Bancorp


was down 1/8 to 21 3/8 after

Wachovia Securities

upped it's the stocks rating to a strong buy form a long-term buy. Yesterday,

Centura Banks


said it plans to acquire Triangle for $608.4 million in stock. Centura shares were down 3/8 to 49 1/2.


(W) - Get Free Report

was up 1 to 30 3/4 after Deutsche Banc Alex. Brown initiated coverage of the stock with a strong buy rating.




said it would extend its marketing agreement with

America Online



to include a subscription-free British service by AOL unit Netscape. The pact calls for Verio to advertise its e-commerce features, which include Web site set-up and maintenance on the free Netscape service. The latest deal expansion increases the companies established relationship involving ventures in the United States and the AOL UK and CompuServe UK units. Shares of Verio were hopping 2 3/4, or 7%, to 39 3/4, while AOL was up 1 5/16 or 100 3/8.


(BCRX) - Get Free Report

was jumping 3 1/2, or 15.3%, to 26 3/8 after it said its new flu remedy is both safe and effective, reducing the Influenza A virus in patients tested in preliminary Phase II trials.

Johnson & Johnson

(JNJ) - Get Free Report

is developing the flu fighting neuraminidase inhibitor. If approved, BioCryst stands to reap undisclosed future royalties on the drug's sales.


(EBAY) - Get Free Report

was up 15/16 to 125 1/8 after the online auctioneer responded to protests by reduced a new fee and suspended plans to change bidding policies for some items, the



SBC Communications


was unchanged at 51 after it announced plans to launch telephone-service "bundles," aiming to compete with similar packages planned by


(T) - Get Free Report

, the



Graphics computer maker



was sliding 1 3/8, or 11%, to 11 1/16 after acting CEO Richard Belluzzo resigned to accept a position at another company.

wrote about the situation in a story

last night.

Waste Management


was off 7/16 to 23 after the company named Donald R. Chappel CFO.

Herb on TheStreet: Was Nvidia Stuffing Its Distribution Channel With 'Anything That Wasn't Nailed Down?'


Herb Greenberg

Senior Columnist

8/24/99 6:30 AM ET

Tuesday's trash:

Too graphic?:

The last time this column

mentioned graphics chip maker


(NVDA) - Get Free Report

, the issue was whether



purchase of Nvidia customer,

Diamond Multimedia


, would put a crimp in Nvidia's sales.

The S3/Diamond deal came on the heels of




acquisition of

STB Systems

, another Nvidia customer. Nvidia's response: No big deal. And judging by the 46% jump in Nvidia's stock since then, investors apparently agreed. Easy to understand why, based on last week's report of a 543% increase in revs for Nvidia, with an equally impressive spike in earnings.

Until you take a little closer look at the numbers.

Remember what this column said recently about how quality of earnings is more important than quantity of earnings? Nvidia is a classic.

According to a post-earnings report by

Hambrecht & Quist

analyst David Wehner, at quarter's end Nvidia had 15 days of inventory on hand, "far below the company's target of 30 to 45 days." Days outstanding of receivables, meanwhile, were 59 days, "higher than the company's target of 45 days, indicating a heavily back-end-loaded quarter due to new products shipping in the last several weeks."

Hello! Sharply lower inventories and higher receivables? Last time I heard a company explain away high receivables to late shipments of new products was by

Cabletron Systems

(CS) - Get Free Report

-- just before its earnings, and stock, blew up!

Wehner didn't appear alarmed by the numbers. (Can ya' blame him? His firm is one of Nvidia's underwriters.) But short-sellers are having a field day with them, and one went so far as to tell me it smacked of a company stuffing the distribution channel with merchandise. "This is a heads-you-win, tails-you-win situation," the short-seller says. "The head of the coin shows that days receivables were too high, which means they stuffed the channel. The tail is that they shipped everything off the loading dock that wasn't nailed down."

This short's own analysis, using Wehner's published figures, is that if Nvidia's inventory and receivables had been in line with the company's own targets, earnings would've been more like 12 cents per share, not 19 cents, as reported, which actually beat Wall Street estimates by a penny.

Nvidia officials couldn't be reached.

Delta ... looking more like a disaster?:

The plot continues to thicken at

Delta Financial


, the subject of two items here. Last week this column

pointed out how the subprime lender had failed to issue a press release about how, out of the blue, it had disclosed in an


filing that it had reached a new "global settlement" with not only the New York attorney general, but -- oh, by the way -- also with the

U.S. Justice Department

and New York's banking department. (The company had announced the attorney general settlement a few weeks earlier, but Delta never mentioned it was also under scrutiny by the Justice and banking departments.) The company hailed the agreement as good news, because it puts to rest charges of questionable lending practices.

Apparently Delta's financial VP Marty Cohen spoke too soon: Late last week the New York attorney general decided that instead of joining in the "global" settlement, it would sue Delta. According to

The New York Times

, the Attorney General said it didn't believe Delta would ever live up to a court order to stop making bad loans. In a news release, Delta responded that that Attorney General's action was "unfortunate." Yesterday Delta slipped 1, or 16%, to close at 5 3/8.

How low can it go?:

Can't help but wonder when it comes to




no stranger to this column -- which blew up


yesterday, plunging another 57% to 2 3/4 after it released another barrage of bad news. Reminds me of a conversation I had a few weeks back with CEO Shan Padda, who asked me what he could do to get rid of the short-sellers. "Perform," I said. Apparently that wasn't an option. Yesterday the company disclosed he's stepping down.

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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