TheStreet.com's MIDDAY UPDATE

September 15, 1999

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Market Data as of 9/15/99, 12:58 PM ET:

o Dow Jones Industrial Average: 10,899.25 down 11.08, -0.10%

o Nasdaq Composite Index: 2,842.07 down 26.22, -0.91%

o S&P 500: 1,331.49 down 4.80, -0.36%

o TSC Internet: 619.94 down 5.62, -0.90%

o Russell 2000: 437.86 down 0.38, -0.09%

o 30-Year Treasury: 100 04/32 up 4/32, yield 6.099%

In Today's Bulletin:

o Midday Musings: A Hearty Breakfast Fails Stocks as Energy Flags Around Midday
o Herb on TheStreet: How Estee Lauder May Have Tried to Sweeten Up Its Earnings

TheStreet.com on the Fox News Channel

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To find the Fox News Channel in your area, call your local cable operator or see our TSC on Fox page at http://www.thestreet.com/tv (look for the yellow box in the upper right hand corner).

Also on TheStreet.com:

Wrong! Dispatches from the Front: Sorting Out the Swirl of Rumors

Give me a break, Cramer says, and stop blaming Tiger for all this. Remember that a triple-witch looms ahead.

http://www.thestreet.com/comment/wrong/784066.html

Bob Gabele: Compuware and Walter Industries: The Yin and Yang of Insider Trading

A tumbling share price can bring out the buyers -- or the sellers.

http://www.thestreet.com/comment/gabele/783707.html

Software:

TSC

Chats With Oracle CFO Jeff Henley

The executive talks revenue growth and touches on the company's plans for its iStore.

http://www.thestreet.com/tech/software/783962.html

Dear Dagen: Dear Dagen: Readers Rise to Defense of Fund Company Phone Reps

Also, more on business models and the S&P 500 index.

http://www.thestreet.com/funds/deardagen/783984.html

Midday Musings: A Hearty Breakfast Fails Stocks as Energy Flags Around Midday

By

Eileen Kinsella

Staff Reporter

9/15/99 1:02 PM ET

Stocks happily feasted on an inflation-friendly

Consumer Price Index

report for breakfast, but by lunch the good news was but a memory and proxies were hungrily demanding more. The rally was quickly overtaken by a recent market mainstay: fear of a potential

Fed

interest-rate increase.

The

Dow Jones Industrial Average

jumped more than 100 points at the open, quickly passing 11,000 after core CPI numbers came in weaker than expected. The headline CPI gained 0.3% overall, in line with the consensus estimate in the

Reuters

poll, while the core rate, which excludes food and energy prices, gained 0.1%.

But the optimism was short-lived as investors quickly came back to Earth and refocused their attention on the bigger picture, including a recently skittish market. After a dive into negative territory, the Dow was lately edging up 9.82 to 10,920. "The rally was more an emotional one," said Jim Herrick, managing director of equity trading at

Robert W. Baird

in Milwaukee. "Now that this number is out of the way, we're already on to the next number. It just indicates the market is still skittish and in a trading range."

The

Nasdaq Composite Index

was taking its lumps, down 22.72, or 0.8%, to 2845, about even with yesterday's closing gain. "People are taking a little bit off the table on some of these pretty strong stocks," said Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, Mo. "The weakness in Nasdaq has been increasing and there has been some early profit-taking over the last few days," Belski said, as people realize the

Nasdaq Stock Market's

internal readings are weak or ambiguous.

Financials, which theoretically should have been enjoying a pretty good day, were largely unmoved with the exception of

J.P. Morgan

(JPM) - Get Report

, up 2 1/2, or 2.1%, to 124 1/2. Meanwhile,

Citigroup

(C) - Get Report

and

American Express

(AXP) - Get Report

barely budged. Citigroup was down 1/4 to 42 13/16, while American Express climbed 3/4 to 140 1/8.

Oil stocks were trending down again as a result of profit-taking, with the

American Stock Exchange Oil & Gas Index

down 5.38, or 1%, to 528.02 and the

Philadelphia Stock Exchange Oil Service Index

up fractionally to 86.84.

Atlantic Richfield

(ARC) - Get Report

was off 1 13/16, or 2%, to 88.

Investors can expect more volatile fun and games this week, ahead of Friday's triple-witching, the quarterly expiration of stock options, stock index options and stock index futures, which usually throws a few curveballs at major proxies. "Riding out this week is going to be interesting. The action has gotten more rampant toward the middle of the week" instead of just at the end, said Belski.

On the

New York Stock Exchange

, decliners were leading advancers 1,379 to 1,337 on 417 million shares, while Nasdaq laggards were beating leaders 1,802 to 1,624 on 564 million shares. New lows were leading new highs 96 to 37 on the Big Board, and Nasdaq's new highs led new lows 84 to 43.

The

S&P 500

was down 2.86 to 1333, and the

Russell 2000

was down 0.14 to 438.1

The benchmark 30-year Treasury was up 8/32 to 100 10/32, its yield at 6.1%.

Wednesday's Midday Watchlist

By Tara Murphy
Staff Reporter

(

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

.)

Mergers, Acquisitions and Joint Ventures

Autocam

(ACAM) - Get Report

was hopping 2 3/4, or 18.3%, to 17 3/4 after it said it is negotiating a possible $21-per-share sale of the company.

Bestfoods

(BFO) - Get Report

was up 3 11/16, or 7.5%, to 52 5/8 after denying a report in today's editions of

The Wall Street Journal

that it was in merger talks with

Heinz

(HNZ)

. For its part, the Pittsburgh-based ketchup-and-pickles concern was up 1 3/8 to 44 9/16.

Dime Bancorp

(DME)

was up 1/8 to 17 7/8 after it agreed to merge with

Hudson United Bancorp

(HU)

. Hudson United shares were up 1/2 to 30 5/8.

Microsoft

(MSFT) - Get Report

was slipping 1 3/4 to 933/8 after it said it plans to buy diagramming and technical drawing software maker

Visio

(VSIO)

in a stock swap valued at $1.3 billion. The deal calls for each Visio common share to be swapped for 0.45 Microsoft share. Visio was soaring 6 13/16, or 20.3%, 40 5/16.

Motorola

(MOT)

was plummeting 5 1/2, or 5.9%, to 87 5/8 after it confirmed that it will acquire

General Instrument

(GIC)

for about $11 billion in stock. The transaction calls for each General Instrument common share to be swapped for 0.575 Motorola share. Motorola expects the acquisition to "modestly dilute earnings" through 2000 but to strengthen earnings thereafter. Shares of General Instrument were sliding 2 7/16 to 48 1/16.

Friede Goldman

(FGI)

and

Halter Marine

(HLX) - Get Report

disclosed late Tuesday they have amended the terms of their pending merger. Under the new terms, each Halter share will be converted to 0.57 Friede share. The original terms of the merger, announced in June, called for each Halter share to be exchanged for 0.4614 Friede share. Friede Goldman shares were off 9/16 to 11 9/16, while Halter Marine was up 1/2, or 9.3%, to 5 7/8.

Earnings/Revenue Reports and Previews

AAR

(AIR) - Get Report

was up 7/8 to 21 15/16 after it reported first-quarter earnings of 39 cents, in line with the eight-analyst estimate and up from 34 cents a year ago.

Dress Barn

(DBRN)

was up 3/4 to 16 1/4 after it posted fourth-quarter earnings of 56 cents a share, beating both the three-analyst estimate of 45 cents and the year-ago 48 cents.

Fairchild

(FA)

was unchanged at 9 1/8 after it said it expects to report a first-quarter 11-cent-a-share gain on the sale of assets included in its England-based

Camloc Gas Springs

unit to

Arvin's

(ARV)

Arvin Motion Controls

division.

Hi/fn

(HIFN)

was falling 9 1/8, or 7.3%, to 115 despite reporting third-quarter earnings of 35 cents a share, greatly surpassing both the five-analyst estimate of 23 cents and the year-ago 4 cents.

BancBoston Roberston Stephens

reiterated its buy rating, referring to the earnings as "tremendous."

Latitude Communications

(LATD)

was advancing 2 13/16, or 9.9%, to 31 7/16 after it posted second-quarter earnings of 4 cents a share, beating both the three-analyst estimate of 3 cents and the year-ago 1 cent-profit.

Oracle

(ORCL) - Get Report

was declining 3 7/16, or 7.5%, to 42 after it posted first-quarter earnings of 16 cents a share, in line with the 30-analyst expectation and up from 13 cents a year ago.

Polycom

(PLCM)

was climbing 2 1/2, or 5.7%, to 46 1/2 after it posted second-quarter earnings of 20 cents a share, beating both the six-analyst estimate of 19 cents and the year-ago 10 cents.

Progress Software

(PRGS) - Get Report

was up 5/8 to 33 3/4 after it reported third-quarter earnings of 43 cents a share, above the three-analyst estimate of 39 cents and 31 cents a year ago.

Offerings and Stock Actions

NETsilicon

(NSIL)

was leaping 6 1/16, or 86%, to 13 1/16 after making its trading debut.

CIBC Oppenheimer

priced the shares below its $8-to-$10 range at $7.

Staples

(SPLS)

was up 3/4 to 22 1/4 after it said it will issue a tracking stock for its e-commerce unit. The company also expanded its share-repurchase plan to $300 million from $200 million.

Analyst Actions

Advanced Fibre

(AFCI)

was up 1 1/2, or 7.7%, to 21 after

SG Cowen

upped its rating on the stock to a strong buy from a buy.

Aurora Biosciences

(ABSC)

was up 3 11/16, or 30.7%, to 15 7/8 after BancBoston Robertson Stephens upgraded the stock to a strong buy from a buy and set a price target of 31.

Barr Laboratories

(BRL)

was off 1 1/2 to 30 15/16 after

Banc of America Securities

sliced its fiscal 2000 earnings estimate to $2.14 a share from $2.42.

Boston Scientific

(BSX) - Get Report

was sliding 6 9/16, or 18.5%, to 28 3/4 after

PaineWebber

cut the shares rating to attractive from buy and

Morgan Stanley

lowered its rating to neutral from outperform. In addition,

Lehman Brothers

sliced its rating to neutral from buy, while Banc of America Securities downgraded it to a buy from a strong buy. Yesterday, Boston Scientific said it would report third-quarter revenue of about $690 million, missing its initial estimate.

Cambridge Technologies

(CATP)

was down 1 1/2, or 10%, to 13 1/2 after Lehman Brothers cut its fiscal 2000 earnings estimate to 70 cents a share from 87 cents and lowered its price target to 22 from 25.

Crestline Capital

(CLJ)

was up 9/16 to 21 7/8 after Deutsche Bank Alex. Brown rolled out coverage of the stock with a buy rating.

Hartford Life

(HLI) - Get Report

was up 1 1/2 to 43 7/8 after

Merrill Lynch

upped its rating to near-term accumulate from neutral.

Nationwide Financial

was up 7/8 to 35 3/4 after Merrill Lynch analyst Ed Spehar raised his rating to near-term accumulate from neutral.

Verity

(VRTY)

was jumping 4 1/16, or 7.1%, to 61 3/8 after Banc of America raised its fiscal 2000 earnings estimate to $1.48 from $1.24 and set a price target of 74.

Miscellany

AT&T

(T) - Get Report

was off 5/16 to 44 3/16 after it announced plans to extend broadband services to businesses.

DaimlerChrysler

(DCX)

was down 1 to 73 9/16 after it said it was hopeful it can reach a deal on a new employment pact with the

United Auto Workers

without further work stoppages in the wake of unauthorized strikes at key plants yesterday, according to a

Reuters

report.

DuPont

(DD) - Get Report

was off 1 7/16 to 64 3/4 after it announced plans to abandon or halt $600 million worth of ventures in the Asia-Pacific region, in an attempt to realign its nylon business. The company said it would take a third-quarter charge of 35 cents a share for its departure from the projects.

Maytag

(MYG)

was up 1 3/8 to 39 5/16 after it said it will realign its business into four operating groups: home appliances, commercial appliances, worldwide and emerging business. The company said the move would allow it to streamline decisionmaking and brand focus.

Herb on TheStreet: How Estee Lauder May Have Tried to Sweeten Up Its Earnings

By

Herb Greenberg

Senior Columnist

9/15/99 10:47 AM ET

Wednesday wallop:

Earnings-quality alert:

Estee Lauder

(EL) - Get Report

, the cosmetics company, has been smelling awfully sweet to Wall Street, especially after meeting or beating earnings estimates (again!) last quarter. But as readers of this column are no doubt sick of hearing, meeting or beating estimates isn't enough; the real question ought to be

how

the company did it. Until earlier this week, when Estee's 10-K was released, the only thing analysts had to go on was what the company said in its regular earnings press release. And the only hint there that the quality of last quarter's earnings might not have been quite up to snuff was a slightly lower-than-expected tax rate, as

TSC's

Katie Hobson

detailed last month.

Which brings us to the 10-K: Financial statement sleuths scanning for signs of earnings-quality issues stumbled on a real eye-opener. It seems the company's allowance for doubtful accounts -- for customers who might not pay -- unexpectedly fell to 6.3% of receivables last quarter from 8.1% a year ago.

Why the change? An Estee Lauder spokesman told me Wednesday morning that it merely reflected the fiscal year-end "settlement of deductions that some of our retailers have taken, and we do get quite a few of them and it takes a while to settle some of that up."

But one seasoned short-seller who has been actively following (and shorting) the stock for months says that's nonsense. He notes that the doubtful-account reserve also involves estimates for losses going forward, and therefore can be jiggled by management. He goes on to say that if the doubtful-accounts reserve at Estee Lauder had been in line with the year-earlier reserve -- which presumably included the same retailer settlements -- earnings would've been light by around 2 cents per share.

The Estee Lauder spokesman says

that's

nonsense. He insists it's a balance-sheet issue, not an EPS issue.

To which the short-seller replies, "Any reduction in reserves gets run through the P&L."

The company's interpretation vs. the interpretation of someone who has spent two decades seeing through the tricks companies use to put a pretty face on ugly numbers. Doesn't get better than this!

Is auto supplier Federal-Mogul spending too much time in the fast lane?:

Actually, that was the headline above this column a year ago, in an item that

questioned whether

Federal-Mogul

(FMO) - Get Report

was growing too fast, with one acquisition after the other, for its own good.

Never mind that the column was a big yawner at a time of Internet insanity. Federal-Mogul was around 50, and the column in question was generally shrugged off by Wall Street and the company as being ill-informed. (I did hear from numerous ex-Federal Mogul execs who said otherwise.)

Well, gentlemen, start your engines: Late Monday the company warned that third-quarter profits may be as much as 20% below forecasts. Seems the savings and sales from all of those acquisitions haven't paid off as planned. The stock reacted by dropping 9, or 23%, to 30 3/8.

You can't blame investors if they were angry. Not long ago, at an investment conference, company officials made light of concerns over its strategy by doing a knockoff of

David Letterman's

Top 10 list with a list of the top 10 questions they receive. I wasn't there, but our friend Jeff Matthews of

Ram Partners

was. Jeff raised the original red flag on this stock, and he takes copious notes.

According to those notes, No. 10, paraphrased, was:

When will you have revenue growth?

"We've always said two years after integrating

the acquisitions and we're comfortable with that," the company replied.

No. 9:

When are you going to have a clean quarter?

"I think we kind of had one this quarter" except for the integration costs. (This from a company that effectively keeps two sets of books: One set, called "preintegration," that's used to show revved-up growth. The other, which doesn't show revved-up growth, is governed by generally accepted accounting principles. Analysts, of course, used the preintegration numbers to justify their estimates.)

No. 1:

Can you keep growing via acquisitions?

"Yes, absolutely."

Learning more about Lernout:

So,

Lernout & Hauspie

(LHSP)

, the Belgian translation-software company, makes a big deal about getting a text-translation pact with

Yahoo!

(YHOO)

. The stock rose 9.5% on the news. Only the company didn't give any financial details, and no analysts raised numbers on the deal. One reason it's no big deal, says short-seller Marc Cohodes of

Rocker Partners

, is because it has nothing to do with software-licensing -- which is where the big money is made -- and is merely a contract to translate language on the Web site.

What does Lernout have to say? Since the company appears to have a blackout on returning my calls, I sent in my mole, er, assistant,

Mark Martinez

.

Mark to the assistant to PR chief Ellen Spooren: "Hi, I just wanted to make sure that I properly identified myself. This morning I told you that I was a reporter from

TheStreet.com

. But what I didn't get a chance to tell you..."

Spooren's assistant, after cutting Mark off: "We have guys like Mark Cohodes and Mr. Greenberg calling in. As a result we usually tell you guys that we have no response."

Mark: "But what I didn't tell you is that I actually work directly with Herb. Just wanted to give you a heads-up, because whatever you tell me may show up in our column. It's only fair that you know who you are speaking with."

Spooren's assistant: Because of Herb Greenberg and Mark Cohodes, "We have a tendency not to talk with you guys. Sorry."

Fine, have it your way. Less space for you. More for me.

What a farce:

DSL, that is.

Bell Atlantic

(BEL)

has taken out big, splashy ads in the Northeast trumpeting its new, superfast DSL service for homes. Considering my cable operator has never lived up to its promise of delivering cable Internet access, I was thrilled when the DSL offer came in. Couldn't wait to network all the computers in my home. When I called a few weeks ago, a very pleasant Bell Atlantic operator said the switching wasn't yet available in my New Jersey town's central switching office, but would be in September.

And true to their word, it is: Except ... I can't have it. Seems it works only if you live 2 1/2 miles from the central office, which I do, give or take a few feet. Also, the guy said something like there couldn't be any trees or other obstructions in the way. I didn't quite get it, but his bottom line was that I'd have to wait for some other DSL type of technology when and if it ever comes available.

Same old phone company, same old excuses.

No DSL? No cable Internet access? Northern California, here I come.

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

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

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