midday11-19-99

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TheStreet.com's MIDDAY UPDATE

November 19, 1999

http://www.thestreet.com

Market Data as of 11/19/99, 1:16 PM ET:

o Dow Jones Industrial Average: 10,998.08 down 37.62, -0.34%

o Nasdaq Composite Index: 3,361.76 up 14.65, 0.44%

o S&P 500: 1,421.79 down 3.15, -0.22%

o TSC Internet: 955.25 down 0.72, -0.08%

o Russell 2000: 461.47 down 0.57, -0.12%

o 30-Year Treasury: 99 13/32 down 1/32, yield 6.159%

In Today's Bulletin:

o Midday Musings: Nasdaq on Pace for Another Record in Mixed Session
o Herb on TheStreet: What Investors Can Learn From the Demise of Leasing Solutions

TheStreet.com Community

TSC is the place for talk! Check out just some of the great conversation going on on our boards.

Jim Cramer's Smarter Money

http://www.thestreet.com/bbs/Forum4/HTML/000030.html

Herb on TheStreet

http://www.thestreet.com/bbs/Forum1/HTML/000050.html

TheStreet.com on Fox News Channel

This week on TheStreet.com: Are there still some screaming buys among the year's most sizzling tech stocks, or are price tags just too high? Get the "Word on TheStreet" from Jim Cramer, Herb Greenberg and guest Todd Eberhard of Eberhard Investment Associates. And, he's clobbering the S&P 500 with his two mutual funds. What does Transamerica's Christopher Bonavico like right now? Find out this weekend on "TheStreet.com."

"TheStreet.com" on Fox News Channel airs Saturdays at 10 a.m. and 6 p.m. ET and Sundays at 10 a.m. ET.

FNC is Fox's 24-hour cable news channel. To find Fox News Channel in your area, call your local cable operator or see our "TSC on Fox" page at www.thestreet.com/tv (look for the yellow box in the upper right handcorner).

Also on TheStreet.com:

Wrong! Rear Echelon Revelations: A Lot of Ways to Win

Cramer approaches this expiration with a whole different set of decisions to make.

http://www.thestreet.com/comment/wrongrear/823278.html

SiliconStreet.com: Dell Opts Out of FreeMarkets' IPO

Another firm bails from an IPO at the last minute. Is the SEC cracking down on these deals?

http://www.thestreet.com/comment/siliconstreet/823144.html

Banking: Why Bank One's Not in Play

It's hard to get a handle on the bank's prospects right now, but it's too early to talk buyout.

http://www.thestreet.com/stocks/banking/822350.html

Fixed-Income Forum: What's the Yield Curve, and How Does It Affect Stocks?

Plus, revisiting muni closed-end funds, with the names you asked for.

http://www.thestreet.com/funds/bondforum/823419.html

Midday Musings: Nasdaq on Pace for Another Record in Mixed Session

By

Thomas Lepri

Staff Reporter

11/19/99 1:14 PM ET

Heavily larded with gains from what's become a month-long rally, the market's major benchmarks were tottering around break-even at midsession.

The

Dow Jones Industrial Average

was down 45 to 10,991, while the

S&P 500

was off 4 to 1421. The

Nasdaq Composite Index

, shaking off its morning torpor, had moved 13 higher to 3360, in record territory.

Small-caps and Net shares were mixed. The

Russell 2000

was down half a point to 462, and

TheStreet.com Internet Sector

index had risen half a point to 956.

Market observers were generally pleased.

"We have a very positive focus at this point," said Jeffrey Warantz, equity strategist at

Salomon Smith Barney

. "The recent rate hike from the

Fed

is basically the last one we're going to have for the foreseeable future. That having been done, combined with some of the earnings numbers coming in, we're looking at clear sailing going out into the end of the year."

That perspective reflects the tenor right now on Wall Street, where much of the caution that pervaded the market back just over a month ago has dissipated. The

Chicago Board Options Exchange Market Volatility Index

, which quantifies the level of fear in the options market, has been dropping steadily since Oct. 15, when it closed at 31.48. The VIX was lately up 0.16 to 20.26, its lowest level since the middle of July. That, not coincidentally, was just before the market's sharp summer selloff.

"It's complacent," said Peter Green, director of technical research at

Gruntal

. "The market was due for a little bit of a pause, based on the Nasdaq Composite's mammoth move and the fact that some stocks in the technology sector had put in their first sell signals."

Witness

Qualcomm

(QCOM) - Get Report

, 1999's Momentum King, which has been frightening traders with the dizzying intraday swings it's been making in both directions since the stock hit an intraday high of 406 1/8 back on Monday. Qualcomm was lately trading up 6 3/16 to 362, having bounced up from an early low of 349. (For a look at the excessive weighting of Qualcomm and others in the

Nasdaq 100

, check out

Justin Lahart's

feature from yesterday.)

To Green, that volatility "suggests that we're seeing some distribution before it can go higher again," said Green. "Money has been going into stocks like

Compaq

(CPQ)

and

IBM

(NYSE)

, which haven't performed well in the S&P 500. That means money is being rotated, which is helpful."

Today, Compaq was up 7.2%, while IBM had picked up 5%.

"The overall picture is bullish," said Greg Nie, chief technical analyst at

First Union Securities

in Chicago. "But two things stand out: first, there's the extended condition of the Nasdaq Composite, which has moved 27% above its 200-day moving average. That's only the fourth time in history that it's gotten to that level. Also, the five-day trend in the Arms index has gotten significantly overbought."

The Arms index, otherwise known as trin, measures the ratio the volume of declining stocks to the volume of advancing stocks.

In sector news, oil and oil service stocks were mixed despite another sharp upward pop in crude prices. The

Philadelphia Stock Exchange Oil Service Index

was up 0.5%, while the

American Stock Exchange Oil & Gas Index

was off about 1%. December crude futures were up 65 cents to $26.45.

Transports were feeling the pinch from the spurt in oil. The

Dow Jones Transportation Average

was shedding 1.5%, and the

Philadelphia Stock Exchange Airline Index

was down 1.3%.

With no major economic news to react to, the bond market was flat. The 30-year Treasury was unchanged at 99 14/32, leaving the yield at 6.17%. (For more on the fixed-income market, see today's early

Bond Focus.)

Market Internals

Breadth was negative, while volume was strong amid the double-expiration of stock and stock index options.

New York Stock Exchange:

1,052 advancers, 1,834 decliners, 532 million shares. 54 new 52-week highs, 115 new lows.

Nasdaq Stock Market:

1,801 advancers, 1,985 decliners, 866 million shares. 174 new highs, 50 new lows.

Friday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

Vodafone AirTouch

(VOD) - Get Report

fell 1 1/4 to 44 13/16 after it said it will raise $37.2 billion in the syndicated loan market to fund its sweetened $128.5 billion offer for

Mannesmann

(MNNSY)

, making for the largest hostile takeover bid in history. According to bankers, the loan would set a record as the biggest ever, topping

AT&T's

(T) - Get Report

$30 billion loan in April.

Separately, according to

Reuters

, Vodafone CEO Chris Gent said during a news conference that the company has contacted the

European Commission

regarding its bid for Mannesmann and hopes to receive the EU's stamp of approval after the discussions.

Mergers, acquisitions and joint ventures

Calico

(CLIC)

fell 2 to 65 1/2 after it announced plans to buy

Connecting.com

(CNKT)

, in a deal valued at roughly $90 million. Connecting climbed 17/32 to 4 25/32.

In a $6 billion deal,

CBS Sports

, a unit of

CBS

(CBS) - Get Report

, extended its pact for broadcast rights to the

National Collegiate Athletic Association's

Division I men's college basketball tournament and other selected championship events. The extended deal will begin in 2003 after the conclusion of its existing eight-year pact with the NCAA and run until 2014. CBS Sports has been the exclusive broadcaster of the men's basketball championship since 1982. The deal between CBS and the NCAA, which CBS called "the most comprehensive sports agreement in history," provides CBS with the television rights, including over-the-air broadcasting, cable television, satellite, digital and home video. CBS also obtains the rights for all content relating to these events on the Internet. CBS was shedding 3/4 to 54 1/4, but

SportsLine USA

(SPLN)

, publisher of the

CBS SportsLine

Web site, was up 5 3/16, or 14.7%, to 45 3/8.

General Motors

(GM) - Get Report

slipped 1/8 to 69 11/16 after it said it has inked a deal to sell its financial share services division to

Arthur Andersen

. GM said the sale would involve 400 salaried employees at the company.

Global Marine

(GLM)

slipped 1/16 to 17 after saying it would supply working capital for

Harland & Wolff Shipbuilding

and

Heavy Industries

, enabling the Ireland-based shipyard to finish two ultra-deepwater drillships being built for Global Marine. According to Global Marine, the funding, which calls for two credit letters for a total of $40 million and an advanced $93 million above its $315 million contract price, is not expected to dent its future earnings, noting that the agreement would tack on no more than 11% to the forecast $660 million cost for the drillships.

Pitney Bowes

(PBI) - Get Report

inched up 3/16 to 49 1/16 and

ABN Amro

(ABN)

added 1/16 to 25 3/4 after the companies said they forged an agreement for Pitney Bowes to sell its mortgage servicing division to ABN Amro. According to Pitney Bowes, terms of the deal will not be released until it is completed later this year or in early 2000.

TheStreet.com/NYTimes.com

joint newsroom covered the news in a separate

story.

Ziff-Davis

(ZD)

rose 7/16 to17 3/16 after saying it is selling its 64% interest in

ZDTV

to Paul Allen's

Vulcan Ventures

for $204.8 million. Allen is a co-founder of

Microsoft

(MSFT) - Get Report

. For more on Vulcan's latest move, check out the

latest from

TheStreet.com/NYTimes.com

joint newsroom.

Earnings/revenue reports and previews

(

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

)

Valspar

(VAL) - Get Report

climbed 1/4 to 39 after posting fourth-quarter earnings of 55 cents a share, beating the six-analyst estimate by a penny and up from the year-ago 48 cents.

Caterpillar

(CAT) - Get Report

shed 5 7/16, or 9.7%, to 50 1/2 after it issued a downward revision for sales and revenue for the fourth quarter. Caterpillar expects sales, revenue and profit to be slightly above the third quarter. The company earned 61 cents a share in the third quarter. In the fourth quarter of 1998, it earned 83 cents a share. Analysts are calling for Caterpillar to earn 97 cents in the fourth quarter.

Newbridge Networks

(NN)

, fell 2 13/16, or 11.7%, to 21 3/15. In a presentation before its earnings release yesterday, Newbridge executives informed employees that the company is open to takeover offers, according to a source close to the firm. The company reviewed its plans for a 10% workforce reduction, which includes slicing 720 jobs and said it has not dismissed the option of a possible sale, although it has no current suitors. Regarding the company's earnings, Newbridge posted earnings of 8 cents a share, missing the 10-analyst estimate by a penny and down from the year-ago 18-cent profit.

TheStreet.com/NYTimes.com

joint newsroom covered the Newbridge news in a

story last night.

Pepsi Bottling Group

(PBG)

climbed 1/2 to 16 13/16 after saying its fourth-quarter earnings were better than expected and it is on track to meet its 2000 targets. The 14-analyst estimate forecasts Pepsi Bottling to post a fourth-quarter loss of 23 cents a share, while a 15-analyst estimate sees it reporting fiscal 2000 earnings of 88 cents a share.

Offerings and stock actions

China.com

(CHINA)

was soaring 23 1/8, or 24.8%, to 116 1/2 after it set a 2-for-1 stock split.

Emulex

(EMLX)

jumped 5 3/8 to 165 3/8 after it it set a 2-for-1 stock split.

First Merchants

(FRME) - Get Report

fell 1 1/16 to 27 5/16 after it said it started a self-tender offer to buy back up to 1.2 million shares of its common stock at $28 a share.

First Midwest Bancorp

(FMBI) - Get Report

added 1/8 to 43 15/16 after it set a 3-for-2 stock split.

Morgan Stanley Dean Witter

priced

ImClone Systems'

(IMCL)

2.75 million-share secondary offering at $32 a share. ImClone closed yesterday at 34 1/2.

Kinnard

(KINN)

slipped 1/16 to 5 3/4 after it said it would buy back up 1 million of it shares.

Whitman

(WH) - Get Report

, the country's second-largest

Pepsi

bottler, said it set a 15 million-share repurchasing program. Shares climbed 1/16 to 14

Analyst actions

Warburg Dillon Read

initiated coverage of

BMC Software

(BMCS)

with a buy rating and a price target of 88. BMC gained 4 1/2, or 6.5%, to 74 5/16.

Deutsche Banc Alex. Brown

initiated coverage of

Braun Consulting

(BRNC)

with a strong buy rating. Braun rose 4 7/16, or 14.3%, to 35 3/8.

Wachovia Securities

rolled out coverage of

Ciber

(CBR)

with a neutral rating. Ciber lost 9/16 to 23 3/8.

Warburg initiated coverage of

Computer Associates

(CA) - Get Report

and

Legato

(LGTO)

with buy ratings.Computer Associates climbed 3 1/16 to 64 15/16, while Legato lost 1 3/16 to 74 3/4.

Warburg initiated coverage of

C-Cor.net

(CCBL)

and

Westell

(WSTL) - Get Report

with buy ratings. C-Cor rose 1/16 to 51 1/8 while Westell gained 2 11/16, or 32.1%, to 11 1/8.

Prudential Securities

raise its price objective on

General Electric

(GE) - Get Report

to 185 from 150. General Electric shares were losing 1 3/8 to 138.

Goldman Sachs sliced its rating on

Keravision

(KERA)

to market performer from market outperform. Keravision shares were sliding 11/16, or 6.1%, to 10 1/2.

Goldman Sachs raised its rating on

Medquist

(MEDQ)

to its recommend list from market outperformer. Shares of Medquist were hopping 2 5/16, or 9.3%, to 27 1/4.

Deutsche Banc Alex. Brown downgraded shares of

Papa John's

(PZZA) - Get Report

to buy from strong buy. Shares of Papa John's were adding 1 9/16 to 35 1/4.

Morgan Stanley Dean Witter

initiated coverage of

Patterson Dental

(PDCO) - Get Report

with a strong but rating and a price target of 60. Shares of Patterson Dental popped 2 1/2, or 5.8%, to 45 3/16.

First Boston analyst Wendell Laidley upgraded shares of

Portal Software

(PRSF)

to strong buy from buy.

Merrill Lynch

raised its intermediate-term rating on the stock to buy from accumulate. Portal Software shares were jumping 4 1/8 to 97.

SCI Systems

(SCI) - Get Report

was flying 4 5/16, or 6.1%, to 74 1/2 on news that

Banc of America Securities

upped its price target to 105 from 75, saying the company should reveal an acquisition next week.

Morgan Stanley upped its rating on

Triad Hospitals

(TRIH)

to outperform from strong buy. Triad Hospitals shares were edging up 3/4, or 6 .3%, to 12 5/8.

Goldman Sachs initiated coverage of

United Parcel Service

(UPS) - Get Report

as a market performer. UPS was sliding 1 9/16 to 64 5/8.

Donaldson Lufkin & Jenrette

upped its 18-month price target on

Veritas

(VRTS) - Get Report

to 200 from 100. Veritas shares were leaping 7 7/16, or 5.3%, to 145 1/2.

Warburg rolled out coverage of

Watchguard

(WGRD)

with a buy rating and set a price target of 35 on the stock. Watchguard was climbing 7/8 to 25 3/4.

Miscellany

Rite Aid

(RAD) - Get Report

was advancing 7/16, or 6.3%, to 7 1/4 after it announced after yesterday's close that the

Securities and Exchange Commission

is launching a formal probe into the financially stressed drugstore chain, while revealing that its former auditors,

KPMG

, resigned saying they could no longer depend on Rite Aid management's representations.

Rite Aid said it has filed a report of unscheduled material events with the SEC called a Form 8-K, which explains the reasons behind KPMG's resignation. On Monday, Rite Aid said that KPMG was expected to examine its previous statements relating to its restated earnings, however KPMG backed out, saying it was unavailable. Earlier this month, Rite Aid cautioned investors to discount previously stated profit and cash flow reports and it has revised its earlier results.

For more on

Rite Aid's stock troubles, check out

TheStreet.com/NYTimes.com

joint newsroom's coverage.

Boeing

(BA) - Get Report

climbed 9/16 to 32 9/16 after saying it agreed to end a pay disparity affecting women and minorities and would pay a minimum of $4.5 million in back pay and salary adjustments. The company said the decision would resolve claims of pay disparities at various facilities.

Microsoft

(MSFT) - Get Report

and government lawyers convened briefly with Judge Thomas Penfield Jackson, the first such meeting since he declared that the company operated as a monopoly,

The Wall Street Journal

reported. Shares of Microsoft were adding 3/8 to 85 5/16.

Investors are scurrying for the few wireless companies they think are takeover candidates for the big telecommunications companies, the Heard on the Street column in the

Journal

reports. Listed as among the most likely acquisition cell-phone targets in the column:

VoiceStream Communications

(VSTR)

,

Powertel

(PTEL)

,

Nextel Communications

(NXTL)

and smaller companies such as

Rural Cellular

(RCCC)

. Shares of VoiceStream were gaining 1 13/16 to 93 13/16, while shares of Powertel were climbing 1/16 to 86 13/16.Nextel was losing 3/16 to 96 3/16, while Rural Cellular was plummeting 4 5/16, or 5.2%, to 78 3/4.

Herb on TheStreet: What Investors Can Learn From the Demise of Leasing Solutions

By

Herb Greenberg

Senior Columnist

11/19/99 6:30 AM ET

Thanks for the Memories

Another one bites the dust:

Sometimes when you write about a company that trades at just 6 -- already down from 26 -- you figure the bad news is out, so why bother?

Yet that's about where

Leasing Solutions

(LSN)

was (and came from) when it

first debuted here a year ago, with questions about its strategy of making three-year leases with unusually high residuals on PCs to businesses. The higher the residual, the lower the monthly lease payment and the greater the volume of business. Win-win for everybody in the short term.

But, in the long term, a high residual also means that coming off lease, the product will still have a high value -- not good in an industry where yesterday's technology darling is today's technology dog. In the case of PCs owned by Leasing Solutions, the residual was $750, which is way too high for a machine of

that

vintage. (You can pay that today for a much more powerful machine.)

The result: Late Wednesday, Leasing Solutions filed for Chapter 11, and its stock is being delisted by the

New York Stock Exchange

. Says one longtime Leasing Solutions short-seller: "Leasing Solutions' management bet the company that it could sell used PCs coming off three-year leases for $750 each. They lost. And shareholders lost. Also interesting to note: The debtholders lost. LSN issued $600 million of debt, and as the stupidity of their business plan has emerged, the debt has traded down as well. The debt is now trading hands at 4 cents on the dollar."

The winners, besides the shorts, are the investment banks, including

Prudential

, the lead underwriter of the same debt that now trades at pennies on the dollar. As recently as August 1998, when short-sellers had already started to focus on the company, a Pru analyst touted Leasing Solutions' "strong" balance sheet.

It's been downhill ever since.

Flashback: A short-seller was quoted in that original item saying that he expected returns by Leasing Solutions to result in potential charges of as much as $250 million in coming quarters -- not good for a company that has only $80 million in equity on its books. George Bragg, interim CFO at the time, responded that the short-seller was misinformed and that anyone who thinks the company will have to take $250 million in charges must be "smoking marijuana."

Herb's Latest: Join the discussion on

TSC

Message Boards.

Well, based on publicly filed documents, Leasing Solutions hasn't taken $250 million in charges. But then again, the company only filed its 10-K annual report from

last

year two months ago. And, so far, no quarterly reports from

this

year have been filed.

Looks like they never will be.

Unsafeskin:

Won't ever forget the time I appeared on

CNBC's

"Today's Business" with Bob Sellers and Liz Claman and we all donned rubber gloves as props for my report on how short-sellers were questioning whether

Safeskin

(SFSK)

had stuffed its distribution channel. (Liz, whose father was a Beverly Hills urologist to the stars, couldn't resist cracking some urologist joke. Such a card!) Safeskin subsequently proved an unsafe investment, and earlier this week, as you may have seen, it was put out of its misery when it agreed to be bought by

Kimberly-Clark

(KMB) - Get Report

.

Reader roundup:

John Denny

wonders what I meant by "contract manufacturer," as in

Celestica

(CLS) - Get Report

is a contract manufacturer. It means the company makes things for other companies, as in actually assembling the PCs for the PC manufacturers. ... And a number of readers blasted me for calling

Actrade International

(ACRT)

a "controversial" company without giving details. Right they were. This company was the target of a tug of war between shorts and longs a year and a half ago regarding such issues as revenue recognition and the backgrounds of the company's top executives. The stock fell, the shorts left and the stock subsequently rose. Guess I should've said "formerly controversial."

Have a personal finance question?

Early readers of

TheStreet.com

may recall my

MonEmailbag, the takeoff of a weekly "Money Mailbag" column that ran in the

San Francisco Chronicle

. I subsequently turned it over to that wild and crazy maven of the markets,

Tom Lepri

, who has since gone on to bigger and better things (though he still pens a short version in

TheStreet.com's

Weekend Edition.) Well, buckos, in coming weeks, look for the return of a daily MonEmailbag, this time co-penned by me and the incomparable

Mark Martinez

.

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