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September 13, 1999

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Market Data as of 9/13/99, 1:03 PM ET:

o Dow Jones Industrial Average: 11,019.88 down 8.55, -0.08%

o Nasdaq Composite Index: 2,867.60 down 19.46, -0.67%

o S&P 500: 1,344.91 down 6.75, -0.50%

o TSC Internet: 624.09 down 2.69, -0.43%

o Russell 2000: 441.01 down 0.18, -0.04%

o 30-Year Treasury: 100 26/32 down 10/32, yield 6.059%

In Today's Bulletin:

o Midday Musings: Another Day, Another Anemic Session
o Herb on TheStreet: A Soaring Stock Hasn't Scared the Shorts Away From Diamond Technology

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Midday Musings: Another Day, Another Anemic Session


Justin Lahart

Senior Writer

9/13/99 1:11 PM ET

It's supposed to be back-to-school week on Wall Street. Investors back in the market, all the kids back at their trading desks.

But instead the week has begun in a tepid fashion. Volume has been light, and major indices -- despite a number of attempts to get them into the black -- have been chopping to the downide. "Every time this market tries to get into positive territory, it gets beaten down," said Sam Ginzburg, managing director of equity trading at


. "I still don't like the action here. The mood is not good."

More dollar weakness against the yen -- the greenback is at a three-year low -- and some resulting weakness in bonds is giving investors a pretty good reason to stay out of the market. Moreover, people are keeping their eye out for a some key economic reports:

retail sales

tomorrow, the

Consumer Price Index

on Wednesday. Investors' apparent need for constant affirmation that the economy isn't getting too hot bothers Ginzburg a little, because even in the best of times some numbers are going to come in strong. "Everybody is micromanaging every specific number," he said. "My experience is whenever you get a market where every single number is important, we're going down short-term."


Dow Jones Industrial Average

was lately down 1.59 to 11,026.84, while the broader

S&P 500

was down 6.06 to 1345.60. Four-letter issues were giving back a good portion of Friday's gains: The tech-steeped

Nasdaq Composite

was down 15.62 to 2871.44. Internet Sector

index was off 4.25 to 622.53.

America Online


was taking the brunt of the Internet selling after


permabear Alan Abelson penned some disparaging things about the stock over the weekend. AOL was down 4.4%. The small-cap

Russell 2000

was down 0.33 to 440.86.

Banks continued to trade badly, dashing hopes that the sector would get a boost from the

Merrill Lynch Banking & Financial Services Conference

that kicked off today in New York. The

Philadelphia Stock Exchange KBW Bank Index

was down 5.73 to 772.12.

The 30-year Treasury was off 11/32 to 100 28/32, lifting the yield to 6.06%.

Volume was low and breadth was to the downside. On the

New York Stock Exchange

, decliners were leading advancers 1,577 to 1,150 on 325 million shares. There were 53 new highs and 115 new lows. On the

Nasdaq Stock Market

, decliners were ahead of advancers 1,898 to 1,518 on 509 million shares. There were 96 new highs and 34 new lows.

In all, the trading through midday Monday was emblematic of a market that has been mired in a range the spring. And that will likely be the way things go for a while longer, according to

Lehman Brothers

technical analyst Steve Shobin.

"There are compelling bullish and bearish cases -- enough to say we're locked in a range that will continue for some time," said Shobin. The bullish case is simple: Stocks have held in well despite higher interest rates and a bit of trouble with the dollar. "On the other hand, the bearish observer could point to the fact that the S&P 500 and the

New York Stock Exchange Composite

have been virtually unchanged for the past six months despite low inflation and torrid earnings."

In the end, it will come down to interest rates, thinks Shobin. If the yield on the 30-year can get down below 5.82%, that would be a significant breakout in bonds, sending out an all clear for stocks. The opposite case would be if the yield got up above 6.28%.

Shobin thinks eventually all this will get resolved on the upside -- though he worries that stocks and bonds have not moved up off some pretty good news on the data front. "We really have been able to make no significant progress," he said. "For now I think we're locked in a range. You buy oversold. You sell overbought."

Monday'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

Bell Atlantic


was up 15/16 to 63 7/16 after it confirmed that it was in talks with

Vodafone AirTouch

(VOD) - Get Vodafone Group Plc Report

to consolidate the companies' U.S. cellular phone operations,

The New York Times

reported Sunday. An agreement would create a U.S. network capable of rivaling




MCI WorldCom




(T) - Get AT&T Inc. Report

. Shares of Vodafone were soaring up 6 15/16 to 201 3/4.

BP Amoco





are in aggressive, last-minute negotiations to set terms for Mobil to leave a European downstream joint venture with the company before it merges with


(XON) - Get Intrexon Corporation Report



reported. Shares of Mobil were off 5/8 to 104 1/2, while Exxon was down 1/2 to 79 15/16.



was sinking 4 13/16 to 93 13/16 after it said it was in talks to acquire

General Instrument


in an all-stock deal worth about $10 billion,

The Wall Street Journal

reported. Under the deal, each General Instrument common share would be exchanged for little more than half of a Motorola share. The proposed merger is aimed at giving the companies a presence in the broadband market, which provides high-speed access for interactive voice, data and video service over cable TV lines. Shares of General Instrument were off 7/16 to 52.

Mark IV Industries


was up 1/16 to 20 15/16 after it said it sold its

Percolator Industrial Filters




in a deal valued at $144.8 million. Shares of Clarcor were down 1/16 to 18 3/8. Inc.


, publisher of this Web site, was up 6, or 30%, at 25 3/4 after saying it would launch a sister financial news site in the U.K. in early 2000.

Total Fina

(TOT) - Get Total SA Report

agreed to acquire

Elf Aquitaine

(ELF) - Get e.l.f. Beauty, Inc. Report

for $54.24 billion in stock, a move that puts an end to the noisy French fracas and will create the world's fourth-largest oil company. Elf agreed to the offer after Total Fina sweetened a $45 billion hostile bid it made in early July.



was up 1, or 6.7%, to 15 3/4 after it said it was not discussing a possible sale of the company to Rupert Murdoch's

News Corp.

(NWS) - Get News Corporation Class B Report


Earnings/revenue reports and previews

Computer Task


was off 1 1/4, or 7.4%, to 15 9/16 after it warned investors that it expects to miss analysts' earnings estimates for the remainder of the year. The company said it would post 1999 earnings between $1.13 and $1.17 per share, missing both the consensus estimate of $1.50 and last year's earnings of $1.42.


(HSY) - Get Hershey Company Report

was up 1 3/8 to 53 5/16 after it said it would miss third-quarter and 1999 earnings estimates by 8% to 10%, citing start-up costs for new business systems in July.

Offerings and stock actions


(HLIT) - Get Harmonic Inc. Report

was leaping 7 7/8, or 5.9%, to 143 1/8 after it set a 2-for-1 stock split.

Paradyne Networks


was sliding 3 13/16, or 8.3%, to 41 3/4 after it announced plans for a secondary 5.5 million-share secondary offering.

Analyst actions

Alliance Resources

(ARLP) - Get Alliance Resource Partners, L.P. Report

was off 3/8 to 15 1/4 after

Morgan Stanley Dean Witter

rolled out coverage of the stock with an outperform rating and set a price target of 19.

American Express

(AXP) - Get American Express Company Report

was up 11/16 to 140 11/16 after

Merrill Lynch

analyst Michael Hughes rolled out coverage of the stock with near-term accumulate and long term-buy ratings and set a price target of 160.

BancBoston Robertson Stephens

started coverage of hotel properties REITs

MeriStar Hospitality


, with a buy rating, and

Felcor Lodging Trust



Innkeepers USA Trust


, with long-term attractive ratings. Shares of MeriStar were up 3/8 to 16 7/8, while Felcor was up 1/16 to 18 5/16. Innkeepers USA shares were advancing 3/8 to 9 3/8.


(CSCO) - Get Cisco Systems, Inc. Report

was up 1 3/8 to 71 7/8 after Merrill Lynch analyst Mike Ching upped his rating to near-term buy from accumulate.



was down 1 1/16 to 42 5/8 after

Salomon Smith Barney

raised its fiscal 1999 and 2000 earnings estimates to $2.35 from $2.30 and $2.70 from $2.55 respectively.

Delhaize America


was off 1/4 to 24 1/16 after Merrill Lynch sliced its rating to near-term neutral from accumulate.

Idec Pharmaceuticals


was jumping 9, or 8%, to 114 after Merrill Lynch biotech analyst Eric Hecht upped his rating on the stock to a near-term buy from accumulate.

Incyte Pharmaceuticals

(INCY) - Get Incyte Corporation Report

was falling 13 1/4, or 32%, to 28 1/4 after

ING Barings

sliced its rating to sell from hold.

Lyondell Chemical


was up 3/16 to 15 1/8 after ING Barings boosted its rating to a buy from a hold.



was off 7/8 to 40 7/8 after

Banc of America Securities

downgraded its shares to market perform from buy. Salomon Smith Barney also cut its rating to outperform from buy.



was down 2 5/8, or 6.2%, to 39 5/8 after Merrill Lynch started coverage of the shares with near-term accumulate and long-term buy ratings.

Nomaved Eyecare

(NOVA) - Get Sunnova Energy International Inc Report

was slipping 3/8 to 14 3/4 after

Donaldson Lufkin & Jenrette

initiated coverage with a buy rating.

SBC Communications


was up 1/2 to 48 after Lehman Brothers analyst Blake Bath sliced pro forma 2000 earnings estimates to $2.36 from $2.46, maintaining his buy rating.

Wink Communications


was decling 3 1/4, or 6%, to 50 7/8 after Donaldson Lufkin & Jenrette analyst Kim Zia began coverage of the shares with a buy rating.

Deutsche Banc Alex. Brown

also initiated coverage with a market perform rating.


America Online


could experience rough seas ahead, including a drop as sharp as 50% in its share price, Doug Kass of hedge fund

Seabreeze Partners



. Kass said AOL could be forced to lower its subscription fees if competitors such as Microsoft and AT&T offer cheaper service. Shares of AOL were sliding 4 5/8, or 4.4%, to 92.

Barr Laboratories


was off 1 9/16 to 33 1/8 after it said that it anticipates launching clinical trials for a proprietary prostate drug to remedy symptoms related to prostate cancer.

Commerce One


was soaring 8, or 11/9%, to 74 3/4 after

Credit Suisse First Boston

eliminated its price target for the company.



was off 3/8 to 24 7/8 after it said it would slash computer prices by up to 17%. Compaq's price cut is only days behind rival


(DELL) - Get Dell Technologies Inc Class C Report

announcement it would slice its business line PC prices by up to 18%. In August, the company trimmed prices on most of its


computer line by up to 11%. Dell shares were off 3/4 to 48 13/16.


(FDX) - Get FedEx Corporation Report


Viking Freight

said as of Oct. 11 it would raise rates by 5.3%. FDX was down 1 1/8 to 45 1/8.


(IBM) - Get International Business Machines Corporation Report

unveiled a new line of powerful Unix servers to run Web sites. The company said the RS/6000 S80 servers are more powerful than those of

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

, but cost as little as one-third as much. Shares of IBM were off 1 1/8 to 133 7/8, while Sun Micro was up 1 1/16 to 86 3/4.

School bus operator



was up 7/8 to 7 7/16 said it plans to sell off its U.S. health care operations and seek a buyer for its 44% stake in



. The company said it expects to realize proceeds of about $2 billion from the divestitures. Safety-Kleen was up 1 5/16, or 9.5%, to 13 5/8


(SNE) - Get Sony Corp. Report

was up 4 1/2 to 136 13/16 after it unveiled plans to launch its next generation

Sony Playstation 2

in Japan on March 4, 2000. The company expects unit distribution to hit 1 million.


(MSFT) - Get Microsoft Corporation Report

plans to announce a new strategy acknowledging the company will increase its focus on the Web, as compared with stand-alone computers, the


reported in its online edition. Shares of Microsoft were off 1 1/8 to 93.



was up 1 7/16 to 28 after it announced plans to sell shares in its

Palm Computing

subsidiary to stockholders in early 2000, in an effort to bolster its strength and allow it to create more Internet products and services.

Herb on TheStreet: A Soaring Stock Hasn't Scared the Shorts Away From Diamond Technology


Herb Greenberg

Senior Columnist

9/13/99 6:30 AM ET


Cutting diamonds:


Van Christenson

recalls that one of my sources thought

Diamond Technology Partners


, a consulting firm, "was a good short back in May. The price was considerably lower (24 vs. 41). Has he changed his mind, or are we now looking at a really winning short?"

The latter, according to the short-seller, who claims to have been adding to his short position at current levels. Diamond is considered a high-quality information-technology consulting firm, with a special focus on e-commerce. Back when it was first mentioned

here, on June 1, the key concern of short-sellers was high receivables. After all, this was a company that had gone on record saying it wouldn't accept clients who don't pay on time. At the time, the short-seller believed the rise in receivables was the result of a fundamental deterioration in Diamond's base biz and that it was pulling revs from future quarters.

Diamond President Mike Mikolajczyk shrugged off the rise in receivables to payments from two customers that arrived a week after the quarter closed. He blamed "bureaucracies" at those companies.

Well, apparently this bureaucracy problem with its customers is getting way out of hand. Last quarter receivables shot up 122% on a revenue gain of only 40%. (It's not generally good to see receivables rise more than revenue; it suggests a company is pulling out all stops to make their numbers look better than they really are.)

What's more, last quarter Diamond's cash flow from operations went negative to the tune of $4.5 million.

Finally, last week



completed its purchase of

Mitchell Madison Group

, a Diamond rival, for $300 million. Based on Mitchell's 550 consultants, that breaks down to $550,000 per consultant. As of July 29, Diamond had 296 consultants. Put another way: If it was acquired at the same multiple per consultant, it would sell for $163 million or $10 to $12 per share. Friday, Diamond closed at 42 1/8.

Diamond officials didn't get back to me, but if they do, I'll give them the same fair-and-equal treatment as I give anybody else who responds.

Speaking of which:

Last week a column

here, with a

response from



Robert Sillerman, generated quite a few responses from readers who liked seeing Sillerman's letter. It gave them a chance to compare both sides of the story (though we haven't even gotten into a full-scale battle, based on what the short-sellers are saying about the company's balance sheet -- including a slide in cash from operations -- and the nuances of the entertainment biz; it's their words vs. his execution).

Some wondered if there'd be a follow-up or whether it changed my opinion on the company. To which I say: No change here (the red flags are still flying) and there will only be a follow-up when events warrant.

I thought Sillerman's response showed how firmly in control he is of his company; can't imagine his attorneys wanted him to write it. Attorneys, leery of litigation, never want


CEO to respond.

And Bob (may I call you Bob?), from several readers: If it wasn't you, whoever wrote the letter deserves a raise; it was really excellent.

And one question from me: What does FX stand for?

Amazon antics:

I'm hearing from


about the $10-off coupons they're receiving in their emails from


(AMZN) - Get, Inc. Report

. The only catch: They must use them by Sept. 23. Amazon's quarter, of course, ends Sept. 30.


(What I wanna know is why I didn't get one; I'm a customer in good standing!)

Closed-end, update:

Back in February, David Tepper of

Tepper Capital Management

in San Francisco, one of this column's longtime closed-end fund sources,

recommended the

H&Q Healthcare Investors

(HQH) - Get Tekla Healthcare Investors Report


H&Q Life Sciences Investors

(HQL) - Get Tekla Life Sciences Investors Report

funds. Since then, H&Q Healthcare is up around 12.8% and H&Q Life Sciences has gained 18.8%. "Both funds have positions in

Gilead Sciences

(GILD) - Get Gilead Sciences, Inc. Report

, which has helped," Tepper says.

Yet they both still trade at steep discounts to their net asset values, and "we have seen a fair amount of merger and acquisition activity in the biotech/medical tech area that probably will continue," which is why he remains bullish on both.

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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Copyright 1999,