midday11-11-99

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TheStreet.com's MIDDAY UPDATE

November 11, 1999

http://www.thestreet.com

Market Data as of 11/11/99, 1:21 PM ET:

o Dow Jones Industrial Average: 10,547.89 down 49.85, -0.47%

o Nasdaq Composite Index: 3,173.98 up 18.02, 0.57%

o S&P 500: 1,373.02 down 0.44, -0.03%

o TSC Internet: 823.71 down 10.89, -1.30%

o Russell 2000: 447.45 down 1.27, -0.28%

o 30-Year Treasury: 100 15/32 unchanged , yield 6.090%

In Today's Bulletin:

o Midday Musings: Nasdaq Hasn't Had Enough of Records, While Other Indices Drift
o Herb on TheStreet: Can't Wait to See the Next Chapter in the Unfolding Mattel Saga

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We'll get the "Word on TheStreet" on taking profits in this bull market and having a little cash on the sidelines. Gary and Adam tackle Microsoft after the big ruling last week and consider which company they think could gain the most if Mister Softee is severely penalized. And don't miss predictions -- especially with next week's Fed meeting on interest rates looming.

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Also on TheStreet.com:

Wrong! Rear Echelon Revelations: Breaking Into the Business Part 4: Running Your Own Money

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http://www.thestreet.com/comment/wrongrear/813139.html

Networking: VocalTec's Lone Voice on the Street May Be Its Investment in ITXC

If ITXC were snapped up, VocalTec would finally reap the desserts of an investment that started with seed money in 1997.

http://www.thestreet.com/tech/networking/817430.html

Under the Hood: The Next AOL: Five Candidates

Technology portfolio managers take a stab at picking the next 100-bagger.

http://www.thestreet.com/funds/underthehood/817354.html

Dear Dagen: Dear Dagen: Is Your Fund a Pavarotti?

A lesson in new lingo.

http://www.thestreet.com/funds/deardagen/817698.html

Midday Musings: Nasdaq Hasn't Had Enough of Records, While Other Indices Drift

By

Tara Murphy

Staff Reporter

11/11/99 1:32 PM ET

Once again, the tech sector was leading the pack, pumping the

Nasdaq Composite Index

into a new record high during midday trading. With fading Y2K woes and some last-minute earnings rejuvenation from

Cisco

(CSCO) - Get Report

, the tech darlings continue to gain momentum, leaving the other sectors green with envy.

"Momentum in the tech sector should remain," said Tim Hayes, senior equity strategist at

Ned Davis Research

in Nokomis, Fla. "But our market position is underweight equities because we're not seeing beyond tech.

"We would need the breadth to break out, which would require us to see that a downtrend in interest rates has started, but that does not appear likely," added Hayes. "On the NYSE, we are seeing 120 new highs. We really need to see 150 new highs, which would be a good level to watch."

With e-commerce attracting more and more consumers to the Internet, tech stocks are "riding the wave of the future," as the popular

Ameritrade

(AMTD) - Get Report

commercial goes. Even stocks that are somehow related to e-commerce, such as IPO heavyweight

UPS

(UPS) - Get Report

, are benefiting from the trend.

"Certainly, technology rules," said Gary Campbell, chief investment officer of

The Commerce Funds

. "It is what is driving the market. Major corporations are using Internet and e-commerce to improve productivity and profit margins, and this effort is partly driven by pressures we see in the job market.

"This is why this group is doing well," added Campbell. "We're essentially rewiring the world. It's a whole new way of doing business -- it's revolutionary."

According to Campbell, Y2K is only a temporary glitch for tech. "I think the whole Y2K lockdown is overdone," he said. "After the beginning of the year and these concerns are behind us, the basic fundamental story remains in place."

The Nasdaq Composite Index was advancing 20, or 0.6%, to 3176. In Nasdaq trading, online drug research marketer

Chemdex

(CMDX)

, was soaring 15 1/16, or 26.8%, to 71 5/16 on news that it inked a deal with

IBM

(IBM) - Get Report

.

Positive comments form

Merrill Lynch

had the semiconductor stocks gaining ground. The

Philadelphia Stock Exchange Semiconductor Index

was up 1.3%, with

Applied Materials

(AMAT) - Get Report

and

Novellus Systems

(NVLS)

both faring well.

The

Dow Jones Industrial Average

was down 51, or 0.5%, to 10,547. Bucking the trend were

Alcoa

(AA) - Get Report

, up 1 1/4 to 60 13/16, and new addition

Microsoft

(MSFT) - Get Report

, up 1 9/16 to 88 5/8 despite the uncertainty surrounding its antitrust lawsuit.

On the

New York Stock Exchange

, UPS continued its gains after yesterday's trading debut, hopping 6 5/8, or 9.7%, to 73 7/8, while retailers were buoying up the Big Board with

Tandy

(TAN) - Get Report

, up 4 3/16, or 6.4%, to 69 3/8, and

Best Buy

(BBY) - Get Report

, popping 4, or 8.3%, to 52 1/2.

Other major indices were also lower, with the broad

S&P 500

down a fraction to 1373 while the small-cap

Russell 2000

was off 1 to 448.

TheStreet.com Internet Sector

index was falling 10, or 1.2%, to 825.

On the Big Board, decliners were leading advancers 1,654 to 1,198 on 566 million shares, while on the Nasdaq, laggards were edging out leaders 1,899 to 1,829 on 866 million shares. New 52-week lows were ahead of new highs on the NYSE, 100 to 67, while on the Nasdaq, highs were beating out lows 210 to 64.

Thursday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

Mergers, acquisitions and joint ventures

Grupo Mexico

said it was extending the expiration of its offer for

Asarco

(AR) - Get Report

through Friday, saying it now has an 89.5% stake in the company. Shares of Asarco fell 3/16 to 29 9/16.

CIT Group

(CIT) - Get Report

slipped 1/16 to 22 15/16 after saying it received regulatory approval for its $560 million acquisition of the commercial services unit of

Heller Financial

(HF) - Get Report

, lately up 1/16 to 24 3/8.

CNN News Group

, a unit of

Time Warner

(TWX)

, said it plans to buy a $20 million minority equity stake in

InterVu

(ITVU)

, a provider of software and services to broadcast over the Internet. Time Warner climbed 1 1/16 to 68 3/4, while InterVu popped 8 3/8, or 13.2%, to 71 7/8.

Kaufmann & Broad

(KBH) - Get Report

inched up 3/16 to 23 1/2 after saying it hired an advisor to explore the sale of its affordable housing unit.

Solutia

(SOI) - Get Report

slipped 3/8 to 16 5/8 after saying it would buy

Morgan Grenfell Private Equity's

stake in

Vianova Resins

for $640 million.

Tandy jumped 4 3/8, or 6.7%, to 69 9/16 after it said its

RadioShack

unit has a strategic pact with Microsoft. Microsoft will make a $100 million investment in the new

RadioShack.com

.

Earnings/revenue reports and previews

(

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

)

Bank One

(ONE) - Get Report

fell 1/8 to 34 1/2 after saying yesterday it is slicing its fiscal 1999 earnings outlook to $3.45-$3.55 a share from $3.60-$3.65 as a result of slowness at its

First USA

credit-card division. The company also announced the postponement of its Nov. 15 analyst meeting. Today,

Merrill Lynch

cut shares of Bank One to long-term accumulate from buy, while

Advest

maintained its rating of market perform.

Banc of America Securities

cut Bank One's earnings-per-share estimates and price target, while

PaineWebber

also cut its EPS estimates and said it continues to be cautious.

TheStreet.com/nytimes.com

joint newsroom covered the Bank One news in a

story last night, and

TSC

also analyzed the

postclose news.

Brady

(BRC) - Get Report

climbed 1/4 to 31 1/18 after it posted first-quarter earnings of 54 cents a share, well above the two-analyst estimate of 44 cents and the year-ago 38 cents a share.

Claire's Stores

(CLE)

fell 1 1/8, or 5.4%, to 19 7/8 after it posted third-quarter earnings of 25 cents a share, in line with the eight-analyst estimate and the year-ago 25 cents a share.

Gap's

(GPS) - Get Report

was unchanged at 34 3/16 after it reported third-quarter earnings of 35 cents a share, a penny better than the 22-analyst estimate and up from a year-ago 27 cents a share. Gap's CFO said the company was on track for a strong fourth quarter and is well positioned for a record year next year.

TheStreet.com/nytimes.com

joint newsroom wrote about the report in a

story today.

Lands' End

(LE) - Get Report

sank 27 5/16, or 32.7%, to 56 after it posted third-quarter earnings of 28 cents a share, beating the eight-analyst estimate of 25 cents a share and the year-ago 1 cent a share.

TheStreet.com/nytimes.com

joint newsroom covered Lands' End

earnings in a story today.

Xoma

(XOMA) - Get Report

rose 1/16 to 2 13/16 after it reported a third-quarter loss of 21 cents a share, narrower than the single-analyst estimate of 24 cents and the year-ago loss of 33 cents.

U.S. Industries

(USI) - Get Report

climbed 5/8 to 14 after it reported fourth-quarter earnings of 55 cents a share, beating the five-analyst estimate of 49 cents and the year-ago 46 cents a share.

Offerings and stock actions

Maytag

(MYG)

gained 7/8 to 45 5/8 after it said it added 10 million shares to its repurchase authorization.

SCPIE Holdings

(SKP)

fell 1 3/16 to 34 7/8 after it said 2.13 million shares were tendered in a Dutch auction.

UnitedGlobalCom

(UCOMA)

jumped 4 1/2 to 106 3/4 after it said its board set a 2-for-1 stock split.

Analyst actions

Merrill Lynch said a three- to five-year upturn in the semiconductor market is beginning now and upped the industry's 2000 estimated revenue growth to 21.5%, from 18.6%. Twelve-month price targets were increased for these companies:

  • Analog Devices (ADI) - Get Report was upped to 71 from 53. Shares were jumping 3, or 5.1%, to 62.
  • Applied Micro Circuits (AMCC) was upped to 102 from 83. The stock was rising 3 3/4 to 89 1/16.
  • Broadcom (BRCM) hopped 7 3/16, to 175 11/16, after its target was increased to 205 from 180.
  • Conexant (CNXT) - Get Report rose 3 5/8, or 6.2%, to 62 5/16 after its price target was lifted to 70 from 44.
  • Linear Technology (LLTC) lost 3/8 to 74 11/16 despite being bumped up to 90 from 70.
  • LSI Logic (LSI) - Get Report lifted 3 1/2, or 5.8%, to 64 1/16 after its target was upped to 73 from 62.
  • PMC-Sierra (PMCS) gained 13/16 to 107 1/4 after its price target was raised to 130 from 120.
  • Texas Instruments (TXN) - Get Report tacked on 3 7/16 to 100 13/16 after its goal was set at 125, up from 110.
  • Vitesse Semiconductor (VTSS) gained 3 7/8, or 8.1%, to 51 7/8 after its target was lifted to 58 from 45.

Credit Suisse First Boston

raised its price target on

BEA Systems

(BEAS)

to 107. BEA bounced up 7 3/4, or 11.7%, to 73 7/8.

Credit Suisse downgraded

Beyond.com

(BYND) - Get Report

to hold from buy, citing recent management turnover as well as Amazon.com's announcement it will enter the software market. Meanwhile

Goldman Sachs

started shares of Amazon.com at market outperform. Shares of Beyond fell 1 5/16, or 12.8%, to 8 15/16. Amazon was rising 1/2 to 72 7/16.

Salomon Smith Barney

reiterated a buy rating on

Dell

(DELL) - Get Report

and a price target of 60. Shares of Dell gained 1 1/8 to 42 9/16.

Salomon Smith Barney started coverage of

General Motors

(GM) - Get Report

with a neutral rating. General Motors slipped 9/16 to 70 3/8.

Warburg Dillon Read

started

Kroger

(KR) - Get Report

at buy and set a price target of 27. Kroger was unchanged at 22 1/2.

Schroder

upped its price target on

Liberty Media

(LMG.A)

to 50 from 45. Shares of Liberty were edging up 9/16 to 39 1/16.

ABN Amro

cut its rating on shares of

Micron Technology

(MU) - Get Report

to outperform from buy, saying the chipmaker was nearing a seasonal slowdown. Micron moved down 1 1/4 to 76 5/8.

Warburg Dillon Read started

Safeway

(SWY)

at strong buy and set a price target of 51. Safeway lost 3/16 to 37 1/16.

Morgan Stanley Dean Witter

started coverage of

United Illuminating

(UIL)

at neutral. Shares rose 1/8 to 52 1/8.

Morgan Stanley Dean Witter started coverage of

Women.com Networks

(WOMN) - Get Report

at outperform. Shares were jumping 1 13/16, or 9.7%, to 20 7/16.

Miscellany

The Heard on the Street column in

The Wall Street Journal

takes a look at Internet companies' fondness for press releases and the often-volatile effect it can have on a company's stock. For instance, the story points out Amazon.com shares jumped 20%, when the company

announced Monday it would make an announcement Tuesday. Shares then slid 9.2% on Tuesday when the less-than-stunning

news turned out to be its acquisition of a tool catalog company and entry into new markets.

Herb on TheStreet: Can't Wait to See the Next Chapter in the Unfolding Mattel Saga

By

Herb Greenberg

Senior Columnist

11/11/99 6:30 AM ET

Thursday Thwack

Mattel's mess:

About a

month ago

Mattel

(MAT) - Get Report

disclosed earnings trouble related to its

The Learning Company

sub. A few weeks later it said

everything was OK. Then, on Wednesday, it announced that the two guys who ran TLC, Michael Perik and Kevin O'Leary, had "left." Left! Nothing more, nothing less. What

really

happened? A company spokesman was mum, but this much is certain: It's generally

never

a good sign when top execs abruptly leave after bad news with no explanation. Suggests some skeletons popped out of some closet.

Or maybe a bunch of unsold software that nobody ever knew existed?

Expect this to be just the start of yet another chapter in this saga.

School daze:

Edison Schools

, which is scheduled to go public as early as this week, was the focus of a blistering (albeit entertaining)

column on

TheStreet.com

several months ago by

Chris Byron

, who focused on the company's IPO prospectus -- specifically, pay for CEO Chris Whittle and other execs.

But wait -- there's more: Here's a company supposedly in the biz of running public schools, but rather than relying on tried-and-true math to count the number of schools it operates, it has come up with a new math of its own. Rather than counting each facility as a school, as is common in education, Edison discloses that it counts each grouping of kindergarten through fifth grade, sixth grade through eighth grade and ninth grade through 12th grade as a separate school, even if those groupings are in the same building. Even if there's just one grade in each group, that counts as a separate school.

Herb's Latest: Join the discussion on

TSC

Message Boards.

The upshot: For public consumption, Edison claims it operates 79 schools. Sounds impressive until you do the

real

math and realize the company really operates only 38 schools. (That's confirmed in the fine print of the prospectus, where the company says it has 38 principals overseeing all of the Edison "schools" on each campus.) Thirty-eight schools, all of them losing money. The accumulated deficit since 1996 has jumped to $78.9 million, and the company pretty much confesses that it has no idea when and if it will ever make money.

And that doesn't even take into account a strike by teachers' unions, which the company lists as one of its lead risks.

For that, with just $133 million in revenue, Edison could wind up with a market value approaching $1 billion (including debt, convertible preferreds and warrants, etc.), and it's not even a dot-com. The gall!

One final point: Edison has five underwriters. You know this column's rule of thumb: More than three suggests the company needs as many bankers as possible to sell its stock, not to mention guaranteeing five buy ratings after the deal is done.

Edison officials didn't return my call.

Undisclosed disclosure:

Back in May,

Macromedia

(MACR)

unveiled its

Shockwave.com

Web site, which it set up as a new company that it planned to take public. On the same day, it also announced it hired Stephen Fields from

Disney

(DIS) - Get Report

to be the CEO of the new entity. Field's hiring was a big enough deal to warrant a story in the

San Francisco Chronicle

, as well as mentions in

The Wall Street Journal

,

Dow Jones

,

Daily Variety

and

Network Briefing

.

Yet, two months ago, when Fields was demoted to a new position in "strategic planning," the company didn't say a word. Why? According to Macromedia CEO Rob Burgess, it was "not material." Not material? You do an announcement when a guy is hired, especially as CEO, you should do the same when he loses that job. Makes you wonder what else the company's hiding. (Say this for Macromedia, though: When it realized Fields wasn't the right guy, it moved swiftly before any damage was done. Can't fault it for that.)

Ancor's away

: Boy, seen that

Ancor Communications

(ANCR)

lately? Up about 75% in the past two weeks. Guess who was selling during the rise? Try

Fidelity

, whose filing with the

SEC

Wednesday shows that its Ancor ownership dropped to 7.2% from 12.4% in August. No reason was given.

Reader revolt:

Regarding my swipe

Wednesday at

priceline.com's

(PCLN)

bidding for grocery service, reader

Bryan McCormick

writes that, based on his experience, I couldn't be more off the mark(et). "In exchange for filling out some relatively painless surveys, I can collect points into a house account that guarantees 50%-off pricing on items I select," he says. "I agree there isn't a lot to choose from, but using the service solely for high-ticket items (in NYC that appears to be meat and batteries, don't ask me what the correlation is) really does pay off." Thanks, Bryan.

On the other hand, no thanks to reader

Stephen Bloch

, who was agitated by yesterday's item regarding confusion in the investment community between

Integrated Device Technology

(IDTI) - Get Report

and

IDT

(IDTC)

. I had suggested Integrated Device change its name.

Enter Bloch: "I visit the

TSC

site daily and without fail I find your column to be of a 'holier-than-thou-nature,'" he writes. "Your most recent feedback to the woman who indicated that there was confusion about IDT Corp. and Integrated Device Technology was unfair. It is your responsibility as a journalist to clarify what needs to be clarified. Would you like to be confused with H. Greenberg the mass murderer? How about Herb Greenburg the embezzler? Step back and take a look at yourself."

It's Greenberg, with an "e."

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