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Publish date:

midday11-08-99

TheStreet.com's MIDDAY UPDATE

November 8, 1999

http://www.thestreet.com

Market Data as of 11/8/99, 1:15 PM ET:

o Dow Jones Industrial Average: 10,685.52 down 18.96, -0.18%

o Nasdaq Composite Index: 3,112.91 up 10.62, 0.34%

o S&P 500: 1,373.39 up 3.16, 0.23%

o TSC Internet: 836.02 up 21.15, 2.60%

o Russell 2000: 443.59 up 1.18, 0.27%

o 30-Year Treasury: 100 30/32 down 2/32, yield 6.049%

In Today's Bulletin:

o Midday Musings: Resilient Wall Street Stays on Upward Course Despite Microsoft
o Herb on TheStreet: What IDT Didn't Tell Investors When It Reported Earnings

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Midday Musings: Resilient Wall Street Stays on Upward Course Despite Microsoft

By

Justin Lahart

Senior Writer

11/8/99 1:26 PM ET

Wall Street hailed

Microsoft's

(MSFT) - Get Microsoft Corporation (MSFT) Report

addition to the

Dow Jones Industrial Average

a week ago. With the addition of the world's largest company, the stodgy old index would finally reflect what was going on in the broader market with at least some semblance of accuracy.

So it's ironic (at least in the

Alanis Morisette sense of the word) that today's action in Soft has made the index a less-than-precise reflection of what's going on in stocks.

Join the discussion on

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Message Boards.

Microsoft was down 3 1/8, or 3.4%, to 88 7/16, hurt by Friday's

court ruling that the company engaged in monopolist business practices. That sucked 15.29 points out of the venerable Dow. The index was lately down 18 to 10,687.

"We're just watching Microsoft bounce around, which causes the Dow to bounce around," said Doug Myers, vice president of equity trading at

IJL Wachovia

in Atlanta, of the action. "We've got a little bit of the tail wagging the dog. Outside of that, it looks OK."

Maybe even better than OK -- all of the other major indices were higher. Despite their heavy Microsoft weightings, the

S&P 500

was up 3 to 1373 while the tech-heavy

Nasdaq Composite Index

was 11 higher at 3113. Nor were the gains limited to non-Soft, four-letter issues: The

New York Stock Exchange Composite

was up 2 to 629.

TheStreet.com Internet Sector

Index was on pace to clock another new high. It was up 22, or 2.7%, to 837.

The bond market was holding in fairly flat -- impressive, considering the moves it's put on lately. The 30-year Treasury was up 1/32 to 100 31/32, its yield at 6.05%. (For more on the fixed-income market, see today's early

Bond Focus.)

Yet not everyone is entirely happy with the market these days. They worry that investors have gotten a little too sanguine about the market's prospects. Bearing this out, the

Chicago Board Options Exchange Volatility Index

is sitting at 21.97. That suggests that short-term sentiment has got a little too rosy -- this year, whenever the VIX has dropped down toward 20 has been a pretty good time to sell.

"Three weeks ago, pessimism reigned," said Doug Cliggott, equity strategist at

J.P. Morgan

. "Today, optimism reigns. Inflation isn't a problem; interest rates don't need to go up -- it's a wonderful world. Unfortunately, I think the extreme pessimism was closer to being accurate than the profound optimism now. If sentiment was a pendulum, we've swung over as far to the optimistic side as we've got room to swing."

Cliggott, who has recommended underweighting stocks since early in the year and who reckons stocks will end 1999 basically flat, thinks that a cautious stance on the market remains appropriate. "With global growth really strengthening, the risk is all on the side of higher inflation and higher interest rates," he said.

Figuring out how much money to put into stocks these days isn't what's really important these days, according to Cliggott. "The more important call is, what do you want to own?" he said. While he believes the market, as defined by the S&P 500, may not do so hot, stocks outside of the handful of large-cap growth issues that have dominated the upside in recent years should do all right.

Market Internals

Breadth was slightly negative on moderate volume.

New York Stock Exchange:

1,231 advancers, 1,668 decliners, 465 million shares. 58 new 52-week highs, 66 new lows.

Nasdaq Stock Market:

1,888 advancers, 1,901 decliners, 782 million shares. 176 new highs, 63 new lows.

Monday's Midday Watchlist

By Tara Murphy
Staff Reporter

District Court Judge Thomas Penfield Jackson released his findings of fact in the Microsoft case Friday night, stating in part that the software titan enjoys monopoly power in the personal computer market. Four firms kept left Microsoft's stock ratings unchanged. Banc of America Securities maintained a buy rating on the stock, while Credit Suisse First Boston maintained a strong buy rating on the stock.

PaineWebber

kept a buy rating on the stock. Warburg Dillon Read's buy rating and price target of 110 were unchanged, with the firm saying it saw no major surprises in the findings of fact. Shares were lately down 3 9/16 to 88 1/16. For more information, check out

TheStreet.com's

coverage of the Microsoft

decision.

Mergers, acquisitions and joint ventures

Arch Communications

(APGR)

and

Paging Network

(PAGE)

agreed to a merger to combine PageNet's wireless network and products with Arch's accounts and sales presence nationwide. Arch shareholders will retain one share of common stock in the combined company for each share currently owned, while PageNet shareholders will receive 0.1247 share of common stock for each share of PageNet currently owned. Shares of Arch were falling 1/2, or 7.4%, to 6 1/4, while Paging Network was up 3/32, or 10%, to 1 1/32.

First Charter

(FCTR) - Get First Trust Lunt U.S. Factor Rotation ETF Report

agreed to buy

Carolina First BancShares

(CFBI) - Get Community First Bancshares, Inc. (Georgia) Report

for $260 million in stock, in an effort to strengthen its presence in the North Carolina region's growing metropolitan areas. Each Carolina First shareholder will receive 2.267 shares of First Charter common stock for every share of Carolina First. Carolina was soaring 11, or 44.9%, to 38, while First Charter was slipping 1 5/8, or 8.6%, to 17 1/8.

Autocam

(ACAM) - Get Acamar Partners Acquisition Corp. Class A Report

has agreed to be bought by

Tital Acquisition

, a company formed by

Aurora Capital Group

of Los Angeles, for $18.75 a share. Autocam was hopping 4 7/16, or 34.8%, to 17 3/16.

Enron

(ENE)

said it would sell its

Portland General Electric

utility unit to

Sierra Pacific

(SRP)

for $2.1 billion in cash. Enron was adding 1/4 to 38 3/16, while Sierra Pacific was falling 11/16 to 20 15/16.

Globix

(GBIX)

said

Hicks Muse Tate & Furst

would invest $80 million in the company. Shares of Globix were popping 3 7/16, or 9.5%, to 39 9/16.

HSBC Holdings

(HBC)

,

Republic New York

(RNB)

and

Safra Republic Holdings

have reached a deal to allow HSBC to close its planned acquisition of the two banks. HSBC Holdings was sliding 1/16 to 61 15/16, while Republic New York was climbing 4 7/16, or 6.7%, to 70 5/8.

TheStreet.com/nytimes.com

joint newsroom covered the situation in a

story today.

Prodigy Communications

(PRGY)

fell 1 to 23 11/16 after it said its buying

FlashNet Communications

(FLAS)

. Prodigy will issue 0.35 shares of Prodigy stock for each FlashNet share. Shares of FlashNet fell 1 15/32, or 14.7%, to 8 1/2.

Rural Cellular

(RCCC)

slipped 3/8 to 59 5/8 after saying it would acquire the cellular telephone licenses, operations and related assets of

Triton Cellular Partners

for $1.24 billion.

Siebel Systems

(SEBL)

jumped 6 7/8, or 5.4%, to 135 5/16 and

Ariba

(ARBA)

ascended 9 1/4, or 5.4%, to 181 5/8 after the companies announced an e-commerce software alliance.

Williams

(WMB) - Get Williams Companies, Inc. Report

gained 5/8 to 35 5/8 after it inked a deal to sell

Thermogas

to

Ferrellgas

(FGP) - Get Ferrellgas Partners, L.P. Report

for $432.5 million. Ferrellgas lost 1/16 to 14 11/16.

Earnings/revenue reports and previews

(

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

.)

BP Amoco

(BPA)

gained 2 1/2 to 54 13/16 after it said its third-quarter replacement cost profit was $1.955 billion, a 72% increase over the year-ago period, thanks in part to higher oil prices. Meanwhile, BP Amoco and

Atlantic Richfield

(ARC) - Get ARC Document Solutions, Inc. Report

said Friday they reached a provisional agreement with Alaska in an effort to help it move ahead with its planned takeover of Arco. Arco was rising 5, or 6.1%, to 86 7/8.

Complete Business Solutions

(CBSI)

rose 1 13/16, or 13.2%, to 15 5/8 after it posted third-quarter earnings of 22 cents a share, in line with the seven-analyst estimate, and down from a year-ago 24 cents before charges.

May Department Stores

(MAY)

rose 1/16 to 33 1/2 after it posted third-quarter earnings of 38 cents a share, in line with the 19-analyst estimate and up from the year-ago 35 cents.

Primark

(PMK)

gained 3/8 to 25 3/8 after it reported third-quarter earnings of 23 cents a share, a penny better than the three-analyst estimate, but down from a year-ago 26 cents a share before charges. Primark said it plans to make an initial public offering of about 40% of the equity in

Yankee Group

.

Prime Retail

(PRT) - Get PermRock Royalty Trust Report

lost 1/8 to 7 3/16 after reporting third-quarter funds from operations of 38 cents a share, in line with the five-analyst estimate and a penny better than a year ago.

Rayovac

(ROV)

fell 3/16 to 25 1/4 despite reporting fourth-quarter pro forma earnings of 33 cents a share, a penny better than the six-analyst estimate and up from a year-ago 20 cents a share.

Wyndham International

(WYN)

was unchanged at 3 1/16 after it posted a third-quarter loss of 41 cents a share including charges, compared with a year-ago loss of $1.02 a share, also on charges. The single-analyst estimate was for a loss of 1 cent a share.

Offerings and stock actions

Actuate

(ACTU)

was popping 9 7/8, or 22%, to 55 3/4 after it set a 2-for-1 stock split.

Brocade Communications

(BRCD)

was climbing 1 1/8 to 292 1/8 after it set a 2-for-1 stock split.

Detroit Diesel

(DDC)

was gaining 13/16 to 18 13/16 after it said it will buy back up to 10% of its shares.

Seagate

(SEG)

was mounting 1 3/4, or 5.4%, to 33 13/16 after it set an additional 50 million-share buyback.

Analyst actions

PaineWebber

said it raised its price target on

Bank of New York

(BK) - Get Bank of New York Mellon Corporation Report

to 52 from 48. Bank of New York gained 1 1/16 to 41 15/16.

ING Barings

initiated coverage of

Columbia/HCA Healthcare

(COL)

with a buy rating. Columbia inched up 3 1/16 to 25 3/16.

Banc of America Securities

upped its price target on

Corning

(GLW) - Get Corning Inc Report

to 105 from 85. Corning climbed 2 1/4 to 83.

Lehman Brothers

raised its rating on

Lucent Technologies

(LU)

to buy from neutral and set a one-year price target of 90. Shares of Lucent lifted 2 1/2 to 69 7/8.

Warburg Dillon Read

started coverage on

Medarex

(MEDX)

with a buy rating. Medarex moved up 1 or 12.1%, to 9 5/16.

Credit Suisse First Boston analyst Wendell Laidley upgraded shares of

New Era of Networks

(NEON) - Get Neonode Inc. Report

to a buy from a hold and upped his price target to 58 from 32. New Era jumped 5 5/16, or 12.3%, to 48 1/2.

Credit Suisse First Boston started coverage of

Netcentives

(NCNT)

with a buy rating and a price target of 35. Netcentives fell 1 3/4, or 8.2%, to 22.

Credit Suisse First Boston

added

Nortel Networks

(NT)

to its focus list. Nortel edged up 11/16 to 69 1/4.

Deutsche Banc Alex. Brown

recommended

Staples

(SPLS)

as a growth stock at a reasonable price. Staples fell 1/4 to 17 5/8 despite the news.

Merrill Lynch

started coverage of

StarMedia Network

(STRM) - Get Streamline Health Solutions, Inc. Report

with a near-term accumulate rating. StarMedia was rising 1 11/16, or 5.4%, to 33 1/8.

TheStreet.com Inc.

(TSCM)

, the publisher of this Web site, was down 1 15/16, or 11.7%, to 14 1/2 after

Hambrecht & Quist

downgraded it to market perform from buy. H&Q was an underwriter of the company's May IPO. TheStreet.com on Friday

announced the immediate resignation of Chairman and CEO Kevin English.

Morgan Stanley Dean Witter

said it re-initiated coverage of

Weyerhaeuser

(WY) - Get Weyerhaeuser Company Report

at outperform and set a price target of 72. Weyerhaeuser lost 2 3/16 to 62 1/16.

Miscellany

CompuCom

(CMPC)

said it named Edward Coleman as CEO, effective Dec. 1. Coleman, who was previously an executive at

Computer Sciences

(CSC)

, replaces Ed Anderson, who resigned in July. Shares were rising 1/8 to 3.

Online grocer

Peapod

(PPOD)

said it has more than $15 million in cash and marketable securities, in response to rumors it is out of cash. The company said it is in talks with parties interested in investing in the company. Peapod fell 1 1/16, or 9.1%, to 10 1/2.

TheStreet.com/nytimes.com

joint newsroom delved into the matter in a

story today.

priceline.com

(PCLN)

said it would offer name-your-own-price long-distance service. priceline popped 5 1/8, or 9.7%, to 57 3/4.

Providian Financial

(PVN)

said it has received an inquiry from the Connecticut attorney general requesting information in connection with a civil investigation into credit card company's card-issuing and billing practices. Shares were lately plummeting 28 3/4, or 24.8%, to 86 3/4.

Raytheon

(RTN.A)

plans a vast revamp of its defense-electronics business,

The Wall Street Journal

reported, citing people familiar with the situation. Shares were rising 1/4 to 28 1/16.

The Heard on the Street column in the

Journal

said a number of software companies whose business is based around Linux, the operating-system software seen as a growing threat to Microsoft, have taken to pitching themselves as dot-coms to tiptoe around the fact that the operating software can be downloaded free from the Internet. The column cites the recent IPO of

Red Hat

(RHAT)

, whose overall success has other Linux-based firms

lining up behind it. Shares of Red Hat were rising 15 15/16, or 18.6%, to 102 1/4 .

Herb on TheStreet: What IDT Didn't Tell Investors When It Reported Earnings

By

Herb Greenberg

Senior Columnist

11/8/99 6:30 AM ET

When

IDT

(IDTC)

reported its earnings three weeks ago, an

item here pointed out how screwy they were and how IDT was trying to get investors to look here when they should really be looking there. Then, a week ago, the company delayed filing its 10-K annual report with the

SEC

, suggesting that something was amiss.

The company, which wound up filing its 10-K late last Thursday in conjunction with a secondary offering by

Net2Phone

(NTOP)

, had blamed the delay on its rapid growth (IDT controls Net2Phone). Now, with the filing late last Thursday of the 10-K, it appears that "rapid growth" was a euphemism for "we're having talks with our auditors."

Turns out that what the company reported in its earnings release to Wall Street just three weeks ago was quite different from what it reported in its 10-K. And that's

before

taking into account some questionable balance-sheet items, which weren't included in the earnings release. (That's why it's wise to

always

compare the quarterly and annual numbers a company reports in its earnings release, which usually aren't audited, with the audited numbers in its 10-K. That's especially true for a company like IDT, which has a history of

questionable related party transactions.)

Herb's Latest: Join the discussion on

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While revenues for the quarter were the same, quite a few line items in the 10-K income statements had been changed. For the fourth quarter, for example, total costs and expenses were almost $1.2 million higher in the 10-K than the company had originally reported in its earnings release. And the provision for income taxes for the quarter was $2 million higher in the 10-K than it was in the earnings release last month. For some reason, the company also reduced by about $2 million the amount of debt it originally claimed to have paid off.

Bottom line: Instead of losing 15 cents per share for the quarter, as the original earnings release stated, the company lost 18 cents, per the 10-K. And that's

before

an extraordinary item that hadn't been disclosed in the earnings release, which brought the actual loss per share for the quarter to 96 cents.

In the case of the year, rather than reporting a profit of 11 cents, it would have been more like 9 cents. And that's before adding in that extraordinary item.

But that's also

before

taking into account how the allowance for doubtful accounts as a percentage of receivables fell to 6.7% from 14%, despite a 178% rise in receivables. That's important because this allowance is a discretionary item that is a direct hit to income. Had the allowance stayed at 14%, the company would have reported around $8.2 million less in pretax income, which would have translated into a 15 cent per share loss for the year, rather than the 11 cent gain it reported.

One other thing for Net2Phone fans: Don't miss the new risk in the risk factor section of Net2Phone's secondary offering. It says that some countries in Asia and the Mideast are blocking its PC2Phone services. "These blockages have caused service interruptions that may cause us to earn as much as $250,000 less (admittedly a drop in the bucket) in PC2Phone revenue in the first quarter," the company said. "There can be no assurance that there will not be future interruptions in these and other foreign countries or that we will be able to return to the level of service we had in each of these countries prior to any interruptions."

The company also notes that one of its competitors,

iBasis

, recently disclosed that it had received a letter from the Israeli Minister of Communications requesting that it cease and desist terminating international calls over the Internet in Israel. "These actions and other similar actions in foreign countries may adversely affect our continuing ability to offer services in these and other countries, causing us to lose customers and revenue."

Such a brutal world.

And speaking of brutal: Comments?

Send it to the boards.

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