midday10-20-99 - TheStreet

midday10-20-99

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TheStreet.com's MIDDAY UPDATE

October 20, 1999

http://www.thestreet.com

Market Data as of 10/20/99, 1:03 PM ET:

o Dow Jones Industrial Average: 10,293.58 up 88.65, 0.87%

o Nasdaq Composite Index: 2,751.52 up 63.34, 2.36%

o S&P 500: 1,276.21 up 14.89, 1.18%

o TSC Internet: 694.21 up 14.77, 2.17%

o Russell 2000: 411.30 up 0.37, 0.09%

o 30-Year Treasury: 96 31/32 unchanged , yield 6.342%

In Today's Bulletin:

o Midday Musings: Even a Rally Can Be Scary During Halloween Month
o Herb on TheStreet: Why Shareholders of One Mortgage REIT Are Crying Foul

TheStreet.com Community

You know TheStreet.com's the place for great market commentary, but did you know it's also the place for intelligent investing discussion? Whether it's Jim Seymour's commentary or market news, we bring the conversation straight to you. Check out all the great talk going on today in the Community section:

Jim Seymour: Microsoft Is Up, Dell Is Down and IBM Pulls Its Aptivas

http://www.thestreet.com/bbs/Forum1/HTML/000045.html

Today's Market

http://www.thestreet.com/bbs/Forum6/HTML/000006.html

Cracking the Books, Part II

http://www.thestreet.com/bbs/Forum2/HTML/000018.html

And more from Cramer, Greenberg and Gary B. Smith!

Also on TheStreet.com:

Wrong! Dispatches from the Front: Too Many Smart Investors

Everyone is playing the same game out there today, and Cramer finds it tough to make money on some things unless you jump on them really early.

http://www.thestreet.com/comment/wrong/798499.html

SiliconStreet.com: The Israeli Technology Industry's Secret Weapon

Venture capitalist Nir Barkat exudes confidence in a way only a former paratrooper can. And he knows the value of Israel's strategic alliance with the U.S.

http://www.thestreet.com/comment/siliconstreet/798135.html

Cracking the Books: Cracking the Books II: Taking a Magnifier to Conseco's Loan-Loss Treatment

Credit-provision methodology at the financial-services firm has some observers scratching their heads.

http://www.thestreet.com/stocks/accounting/789355.html

TSC

Tax Forum: Global Tax Forum: More on Investing in Mutual Funds Across Borders

Also, a look at the rules for closed-end funds and exchange-traded unit investment trusts.

http://www.thestreet.com/funds/taxforum/798167.html

Midday Musings: Even a Rally Can Be Scary During Halloween Month

By

Eileen Kinsella

Staff Reporter

10/20/99 1:13 PM ET

Stocks bounced higher this morning after

Microsoft

(MSFT) - Get Report

handed out a tech earnings treat

last night. Spooked investors, though, know there are still plenty of other economic tricks to worry about, namely that scary inflation monster lurking in the closet.

Amid a somewhat subdued rally across major proxies, the tech-laden

Nasdaq Composite Index

was up 60 to 2749. Smiling alongside Mister Softee, were tech-bedfellows

Intel

(INTC) - Get Report

up 5.6%, and

BroadVision

(BVSN) - Get Report

also up 5.5%. BroadVision had some good news of its own last night, reporting that its third-quarter profits had more than doubled.

TheStreet.com Internet Sector

index was also on the rise, up 13 to 692, with a little help from friends,

America Online

(AOL)

up 2.8% and

Yahoo!

(YHOO)

up 1.1%.

The optimism was spreading to the oft-battered financial sector, where

Chase Manhattan Bank

(CMB)

was climbing 4%, and

Citigroup

(C) - Get Report

up 2.8%. The

Philadelphia Stock Exchange/KBW Bank Index

was climbing 1.6%.

The upside is a nice remedy for those worrisome falls last week, but some market watchers say this short-term amity is merely masking, not erasing, some viable underlying concerns.

Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, called the recent comeback a "too much, too fast emotional rally." Belski described the recently manic market moves as a "classic tug-of-war between the buy on the dip

investors and the fundamental underpinnings that were bringing the market to a corrective state."

Indeed, as much as most people would like to dismiss last Friday's

Producer Price Index

report, it still lends weight to the idea that the

Fed

will raise rates when it meets again in November, which tends to put a damper on earnings news, however cheery they may be.

Belski points out that market internals are turning "sloppy" again and notes that the bond market is not cooperating with stocks as a selloff continues to test last week's high yields. The benchmark 30-year Treasury bond was lately unchanged, its yield at 6.35%.

As for internals, advancers and decliners were slugging it out on the

New York Stock Exchange

with 1,341 issues on the rise and 1,451 heading south on 482 million shares. On the

Nasdaq Stock Market

leaders were beating laggards 1,901 to 1,575 on 568 million shares. New lows were trouncing new highs 228 to 12, on the Big Board, while on the Nasdaq, new lows were 89 to 49 new highs.

The

Dow Jones Industrial Average

was up 80 to 10,285, while the broader

S&P 500

was up 14 to 1275. The

Russell 2000

was up 0.13 to 411.

Wednesday's Midday Watchlist

By Tara Murphy
Staff Reporter

Earnings/revenue reports and previews

(Earnings estimates are from First Call/Thomson Financial.)

Microsoft

(MSFT) - Get Report

after the close posted better-than-expected earnings. Mister Softee reported fiscal first-quarter operating earnings of 38 cents a share, 4 cents ahead of the 27-analyst

First Call/Thomson Financial

consensus estimate. Shares of Microsoft were jumping 4 11/16, or 5.4%, to 90 15/16.

TheStreet.com

wrote about Microsoft's earnings in a story

last night.

America Online

(AOL)

is expected to report earnings today. The First Call 32-analyst estimate calls for AOL to earn 13 cents a share. Shares of AOL were bouncing 2 7/8 to 118 1/8.

Bausch & Lomb

(BOL)

was advancing 2 1/4 to 57 1/4 after it said it doesn't know the reason for its stock's swoon since posting earnings last week. The company said it's comfortable with the consensus estimate for earnings in 2000. The 11-analyst estimate calls for the company to earn $3.08 a share in 2000.

Bell Atlantic

(BEL)

was falling 13/16 to 63 1/8 after it posted third-quarter earnings of 76 cents a share, in line with the 17-analyst estimate and up from the year-ago 69 cents.

BellSouth

(BLS)

was stumbling 7/16 to 42 3/16 after it reported third-quarter earnings of 51 cents a share, beating both the 16-analyst estimate of 50 cents and the year-ago 41 cents a share, which included a depreciation and amortization charge.

Burlington Resources

(BR) - Get Report

was mounting 1/8 to 36 15/16 after it posted third-quarter earnings of 23 cents a share, a penny shy of the 27-analyst estimate. The company posted earnings of 8 cents a share in the year-ago period.

Chase

(CMB)

was jumping 3 1/16 to 74 3/16 after it reported third-quarter earnings of $1.37 a share, a nickel ahead of the 20-analyst First Call consensus estimate and up from the year-ago 82 cents.

Covad Communications

(COVD)

was gaining 1 1/4 to 41 1/8 after it posted a third-quarter loss of 70 cents a share, narrower than the eight-analyst estimate of a 79-cent loss and the year-ago $1.84 loss.

Dime Bancorp

(DME)

was advancing 3/16 to 16 1/2 after it posted third-quarter earnings of 55 cents a share, in line with the 13-analyst estimate but down from the year-ago 56 cents.

EMC

(EMC)

was sliding 2 3/8 to 67 1/16 after it reported third-quarter earnings of 29 cents a share, 2 cents ahead of the 20-analyst estimate and up from the year-ago 19 cents.

Fleet Boston

(FLT) - Get Report

was unchanged at 37 9/16 after it reported third-quarter earnings of 74 cents a share, a penny ahead of the 11-analyst estimate and up from the year-ago 52 cents.

Fort James

(FJ)

was unchanged at 24 9/16 after it posted third-quarter earnings of 50 cents a share, 1 cent ahead of the 10-analyst estimate but down from the year-ago 66 cents.

General Dynamics

(GD) - Get Report

was climbing 13/16 to 53 1/16 after it posted third-quarter earnings of 90 cents a share, a penny higher than the 12-analyst estimate and up from the year-ago 78 cents.

Harrah's Entertainment

(HET)

was adding 13/16 to 27 1/2 after it reported third-quarter earnings of 58 cents a share, better than the 20-analyst estimate of 50 cents and the year-ago 44 cents.

Jostens

(JOS)

was slipping 1/16 to 19 after it reported a third-quarter loss of 21 cents a share, narrower than the two-analyst estimate of a 22-cent loss but down from the year-ago loss of 20 cents.

Eli Lilly

(LLY) - Get Report

was falling 4 5/8, or 6.8%, to 65 3/16 after it posted third-quarter earnings of 62 cents a share, in line with the 23-analyst estimate and up from the year-ago 46 cents.

Liz Claiborne

(LIZ)

was climbing 1 to 36 13/16 after it posted third-quarter earnings of $1.08 per share, beating both the 13-analyst estimate of $1.03 and the year-ago 96 cents.

MindSpring

(MSPG)

was skidding 9/16 to 26 1/8 after it posted third-quarter earnings of 5 cents a share, 2 cents ahead of the nine-analyst estimate, but down from the year-ago 9 cents.

Nabors Industries

(NBR) - Get Report

was losing 3/16 to 22 1/8 after it posted third-quarter earnings of 4 cents a share, below the 17-analyst estimate of 5 cents and the year-ago 27 cents.

Republic New York

(RNB)

was tumbling 1/8 to 61 13/16 after it posted third-quarter earnings of $1.15 per share, beating both the five-analyst estimate of 99 cents and the year-ago loss of 96 cents, which included a loss on a Russian investment.

Schering-Plough

(SGP)

was slipping 1/16 to 45 15/16 after it reported third-quarter earnings of 35 cents a share, in line with the 22-analyst estimate and up from the year-ago 29 cents.

J.P. Morgan

initiated coverage of the stock with a buy rating.

Southdown

(SDW)

was retreating 2 5/8 to 49 15/16 after it posted third-quarter earnings of $1.78 per share, missing the six-analyst estimate of $1.84 but up from the year-ago $1.70 a share.

Tellabs

(TLAB)

was mounting 2 1/2 to 58 after it reported third-quarter earnings of 34 cents a share, a penny better than the 29-analyst estimate and up from the year-ago 23 cents.

Offerings and stock actions

Sycamore Networks

(SCMR)

is betting it can push the current vogue for networking IPOs to new heights. The company just boosted its projected price range to $35 to $37 a share from $18 to $20, according to a filing with the

Securities and Exchange Commission

.

The Chelmsford, Mass., company continues to plan an offering size of 6.5 million shares, through lead underwriter

Morgan Stanley Dean Witter

. The IPO is set to start trading Friday.

TheStreet.com's

IPO columnist,

Ben Holmes

, says the boost in range is the largest he can recall seeing.

Viacom

(VIA) - Get Report

is scuttling -- at least for now -- its plan to split off its

Blockbuster

(BBI) - Get Report

video-rental chain because of the poor performance of Blockbuster's stock and Viacom's proposed acquisition of

CBS

(CBS) - Get Report

,

The Wall Street Journal

reported. Shares of Viacom were up 1/16 to 40 3/4, while Blockbuster was sliding 5/8 to 14.

Separately, Blockbuster posted third-quarter earnings of 14 cents a share, a penny better than the eight-analyst estimate and matching the year-ago report.

Bsquare

(BSQR) - Get Report

was climbing 8 7/8, or 59%, to 23 3/4 after making its trading debut.

Credit Suisse First Boston

priced the 4-million share IPO above-range at $15.

Crossroads

(CRDS)

was unchanged at 16 1/4 in first day of trading.

SG Cowen

priced the 3.75 million-share IPO at $18.

Analyst actions

SG Cowen upped its fiscal 1999 estimates on BroadVision to 56 cents a share from 51 cents and its fiscal 2000 estimates to 67 cents a share from 62 cents. Shares of BroadVision were leaping 9 1/2, or 6%, to 167 1/2.

Robertson Stephens

initiated coverage of

AES

(AES) - Get Report

with a buy rating. AES was climbing 13/16 to 53 9/16.

Merrill Lynch

sliced its intermediate-term rating on

Bristol-Myers Squibb

(BMY) - Get Report

to accumulate from buy. Bristol Myers was falling 2 5/16 to 73 13/16.

First Albany

upped its rating on

Computer Associates

(CA) - Get Report

to accumulate from neutral. Computer Associates was leaping 3 5/8, or 6.6%, to 58 1/8.

Robertson Stephens rolled out coverage of

Dynegy

(DYN)

with a buy rating. Dynegy shares were mounting 1/4 to 21 9/16.

Credit Suisse First Boston cut its rating on

Hormel Foods

(HRL) - Get Report

to hold from buy. Hormel was slipping 7/16 to 44 5/8.

Morgan Stanley Dean Witter

cut its rating on

PG&E

(PCG) - Get Report

to outperform from strong buy. Shares of PG&E were sliding 1 to 22 1/8.

Lehman raised its price target on

RealNetworks

(RNWK) - Get Report

to 130 from 120. RealNetworks was stumbling 3 7/16 to 99 7/8.

Warburg Dillon Read

raised its rating on

Telemex

(TMX)

to strong buy from hold. Telemex was climbing 13/16 to 77 5/16.

Merrill added

Tyco International

(TYC)

to its Focus One list as the top pick in its multi-industry category.

TSC

wrote about the recent controversy swirling around Tyco in a

story last week. Tyco was adding 4 5/16, or 5.1%, to 88 13/16.

Merrill upgraded

United Technologies

to long-term buy. United Technology shares were adding 1 3/4 to 55 3/8.

Herb on TheStreet: Why Shareholders of One Mortgage REIT Are Crying Foul

By

Herb Greenberg

Senior Columnist

10/20/99 6:30 AM ET

Normally, you wouldn't read about mortgage real-estate investment trusts in this column. Too darn arcane. But, then again, normally you don't see stories like the one involving the bizarre battle over

Impac Commercial Holdings

(ICH)

.

The bizarreness started last May when New York-based

Fortress Partners

bought a controlling interest in Newport Beach, Calif.-based Impac, a mortgage REIT. Then, in August, Fortress engineered a deal for Impac to merge with another REIT,

Amresco Capital Trust

(AMCT)

.

The following month

Apex Mortgage Capital

(AXM)

-- yep, another REIT -- filed that it owned more than 5% of ICH and offered to buy ICH in a stock swap valued at a hefty 22% premium to what Amresco was offering at the time. Since then, the premium offered by Apex has swelled a bit to 25%, or $7.65 per share for the Apex offer, and $6.11 for the Amresco offer.

That set off a series of events that culminated Monday with the kind of letter you almost

never

see from one company to another. (Talk about airing dirty laundry in public!) This letter, in an amended 13-D filing by Apex, discussed Apex's displeasure in the way it was rebuffed by ICH without ICH so much as creating a special committee to review its offer. "We are concerned that the ICH Board of Directors has not considered our offer in good faith," wrote Apex's execs, in a letter to ICH Chairman Wesley Edens.

If that sounds like sour grapes, it's perhaps the mildest commentary in Apex's five-page ranting that questioned, among other things, why ICH issued Fortress shares of preferred convertible stock at a conversion price of 7.13 -- $5 below book value. The deal diluted existing ICH holders, Apex charged, and didn't include a fairness opinion from

Banc of America Securities

, which was paid $500,000 in connection with the transaction. However, Banc of America was also retained as an adviser to ICH's board in the Amresco merger, where it

did

issue a fairness opinion. What perplexes Apex is how Banc of America could issue a fairness opinion when (as was disclosed in the proxy) it's an investor and lender to Fortress. "How can Banc of America Securities effectively represent ICH shareholders when they hold an interest in Fortress?" Apex asked.

Banc of America Securities declined to comment for this story.

That pretty much set the tone of the letter, which included questions of conflict of interest and other detailed questions on how the company conducts its biz.

But that's not all that's amiss: Something that wasn't included by Apex, but was picked up by a numbers-crunching ICH shareholder who also is one of this column's valued sources, was a sudden reduction by ICH in the value of its securities portfolio. The very same portfolio had a value, net of related debt, of around $65 million on June 30, in a 10-Q that was signed off by an ICH exec that also works for Fortress. But get this: After the merger, the value apparently will be reduced by around 60% to $25 million, according to a preliminary ICH/Amresco proxy filed in September. (Folks, don't try finding this writedown at home, unless you're a

forensic accountant.)

Can a company just arbitrarily write down its portfolio? Better yet,

why

did they do it? Did the value of the securities in that kind of portfolio fall by

that

much in such a short period of time? Not according to this column's source, who makes a living trafficking in the arcane.

A Fortress spokeswoman declined comment, saying that the company was in registration and therefore couldn't talk.

All this must sound pretty complicated, but maybe this explains it: According to the ICH/Amresco proxy, Fortress stands to pocket as much as 25% of any profits that might be realized from selling ICH/Amresco's portfolio at some point in the future. Not a bad deal, which leads one miffed shareholder to say, "I'm astonished and appalled someone can come in, bless the financial statements, and when it's in their interest say, oops, we were wrong and we were wrong by 60%."

(Maybe it's complicated for a reason.)

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.

Copyright 1999, TheStreet.com