Publish date:

TheStreet.com's MIDDAY UPDATE

November 24, 1999


Market Data as of 11/24/99, 12:54 PM ET:

o Dow Jones Industrial Average: 10,995.33 down 0.30, -0.00%

o Nasdaq Composite Index: 3,382.44 up 39.57, 1.18%

o S&P 500: 1,409.72 up 5.08, 0.36%

o TSC Internet: 962.70 up 13.41, 1.41%

o Russell 2000: 454.00 down 0.45, -0.10%

o 30-Year Treasury: 98 25/32 down 9/32, yield 6.203%

In Today's Bulletin:

o Midday Musings: Indices Mixed at Midday as Volume's a Real Turkey
o Herb on TheStreet: How CHS Has Gone From a Saga to a Downright Disaster

"TheStreet.com" on Fox News Channel

Robert Olstein, manager of the Olstein Financial Alert fund, returns for another round of "Stock Drill" this week. See how the picks from his last visit are faring and what he's got his eye on now. Plus, we'll offer up tax tips for year-end investment moves and much more.

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

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Also on TheStreet.com:

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Dear Dagen: Dear Dagen: Insider Trading -- Don't Pick Up the Tip

What to do if someone tells you more than they should about their company. Also, Merrill Lynch's new Biotech HOLDRs.


Midday Musings: Indices Mixed at Midday as Volume's a Real Turkey


Eileen Kinsella

Staff Reporter

11/24/99 1:00 PM ET

Stocks were fighting off inertia and trying to move higher on featherweight pre-turkey trading volume.

With the exception of the

Nasdaq Composite Index

, (what's new you ask?) already stuffed from a plump 37-point gain this morning, major proxies were narrowly mixed and bouncing near opening levels.


Dow Jones Industrial Average

was lately just lower, off 1.53 to 10,994.10 after a fitful up-and-down morning. The Dow wasn't feeling so thankful to


(IBM) - Get Report

today as news that its accounting methods have raised some eyebrows was putting pressure on the stock. Big Blue was feeling depressed, about 2.6%, to be precise.

"It's tough to really pick a direction today," said James Maguire, Jr. a

New York Stock Exchange

specialist at

Henderson Brothers

. Light trading, a little bit of profit taking, no heavy selling and continued strength in Internets summed up the session, said Maguire.

The recent tech-stock tear bears watching in the bigger picture to at least one strategist.

"I think the market is going to be very mixed in December. You've got a very overbought tech sector and a fairly oversold rest of the market," said Philip Roth, chief technical market analyst at

Morgan Stanley Dean Witter

"Tech is going to have to get in gear with the rest of the market. In the early part of the new year, market strength is likely to be rotational."

The ravenous tech-sector was reaching for a third helping, with

TheStreet.com Internet Sector

rising 11.97 to 961.26.



was yelling loudest in the DOT, lately jumping 11 3/16, or 5.1%, to 232 5/16.

In the Nasdaq Comp,






were feeling saucy thanks to analyst upgrades. Vignette was up 7.6%, while Sycamore was rising 4.5%.

NorthEast Optic Network


popped 15 13/16, or 26.3%, to 76 after it announced major network transport and carrier services agreements.

The January crude-oil futures contract was up 47 cents to $26.91 a barrel, off an intraday high of $27.10. The contract was up in part on weekly data from the

American Petroleum Institute

, which reported a 2.1 million-barrel decline in crude stocks. The

Philadelphia Stock Exchange Oil Service

was climbing 2.3%.

Oil supply worries were seeping into the transportation sector, where airlines in particular were taking it on the chin. The

American Stock Exchange Airline Index

was falling 2%.

American Airlines




was down 2.8%, while

US Airways

(U) - Get Report

was down 3.5%.


Dow Jones Transportation Average

was sliding 2%.



caused a slowdown after

Banc of America Securities

lowered its rating to buy from strong buy. USFreightways was slipping 4.2%.

On the Big Board laggards were beating leaders 1,657 to 1,223, on 426 shares, while on the

Nasdaq Stock Market

advancers and decliners were neck-and-neck 1,806 to 1,894 on 731 million shares. New lows trounced new highs 184 to 27 on the NYSE, while new highs topped new lows on the Nasdaq 104 to 53.


S&P 500

was up 4.76 to 1409.40, while the

Russell 2000

was down 0.31 to 454.14.

The benchmark 30-year Treasury was down 6/32 to 98 28/32, its yield at 6.205.

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


(KO) - Get Report

was up 1.1% to 67 7/16 after it said that it will not adjust its offer to purchase



soda brand, after a French government decision to stop the acquisition. The French government threw out the offer due to concerns that Coke was creating a monopoly in the French soft drink market.

General Electric

(GE) - Get Report


Time Warner


said GE hasn't offered to sell


to Time Warner. The denials came after Rupert Murdoch said on the

Fox News Channel

that GE offered to sell NBC to Time Warner for $25 billion. Murdoch is chairman and CEO of

News Corp.

(NWS) - Get Report

, which owns

Fox News Channel

. Shares of GE were at 137 3/4, while Time Warner was adding 2 7/8 to 62 9/16.

Goldman Sachs

(GS) - Get Report

is talking with some market players, including the

Chicago Stock Exchange

, about creating an electronic options exchange. Goldman shares were losing 11/16 to 77 1/16.



was down 1.8%, to 35 13/16 after it said it sold a 50% stake in


, which owns and operates a pulp mill in Prince George British Columbia, to


. The purchase price was $635 million, payable by cash of $480 million and the issuance to Mead subsidiary


, a total of $155 million of convertible subordinated debentures of Canfor.


(UN) - Get Report

is buying

Amora Maille

for about $744 million. Amora Maille is a French mustard maker. Unilever was gaining 1.3% to 57 9/16.

Earnings/revenue reports and previews

ING Groep

(ING) - Get Report

was slipping 5/8 to 60 5/8 after it said its nine-month operational net profit soared 51% to 2.42 billion euros. The Dutch financial services group said it expects operational net profit for the entire year to increase by 40% to 45% compared to 1998.

Offerings and stock actions

Electronic Boutique


was sliding 1 5/16, or 6.1%, to 20 1/16 after it said it was offering 3.5 million common shares at 21 3/8.


(HRL) - Get Report

was tacking on 1 9/16 to 42 after it said its board approved a 2-for-1 stock split.

Insurance titan

Metropolitan Life

filed with the

Securities and Exchange Commission

to raise up to $6.5 billion in an IPO. MetLife said it plans to sell 225 million shares, or 31% of the company, and expects to price the shares between $14 to $24 a share.

CIBC World Markets

priced 3.75 million shares of



at $17 a share, the top of the expected range. Shares of PVN were edging up 7/16 to 17 3/8.

Analyst actions

J.P. Morgan started coverage of

Annuity & Life Re


with a buy rating and a price target of 34. Annuity & Life Re was edging up 13/16 to 27 1/8.

Credit Suisse First Boston

raised its rating on shares of


(ADSK) - Get Report

to buy from hold. Shares of Autodesk were jumping 3 7/8, or 16.1%, to 27 7/8.

Deutsche Banc Alex. Brown

raised its rating on

Black & Decker

to strong buy from buy. Black & Decker was climbing 3% to 46.

First Boston started coverage of


(BSQR) - Get Report

with a buy rating. Bsquare was bouncing 1/4 to 47 7/16.

Robertson Stephens

initiated coverage of


(CELG) - Get Report

with a long-term attractive rating. Celgene was sliding 3 7/8, or 6.2%, to 58 11/16.

Deutsche Banc Alex. Brown said it rolled out coverage of

Digital Insight


with a buy rating. Shares of Digital Insight were falling 1 5/16 to 43 5/8.

Merrill Lynch

rolled out coverage on


(EPC) - Get Report

with a buy rating and a price target of 71. Epcos was jumping 3 9/16, or 6.2%, to 60 3/8.

Banc of America

raised its rating on


(INTC) - Get Report

to strong buy from buy. Intel shares were tacking on 2 1/4 to 81 1/4.

Robertson Stephens

reiterated a buy rating on


(INTU) - Get Report

. First Boston reiterated a strong buy rating and

Warburg Dillon Read

raised Intuit's price target to 70 from 37. Shares of Intuit were hopping 3 15/16, or 8.9%, to 47 7/8.

Merrill Lynch


Kent Electronics


to intermediate-term accumulate from neutral. Shares of Kent were tacking on 5/16 to 24 1/16.

Deutsche Banc raised its rating on

Martin Marietta Materials

(MLM) - Get Report

to strong buy from buy. Martin Marietta Materials was climbing 9/16 to 39 13/16.

Merrill Lynch reinstated coverage of


(MAS) - Get Report

with a buy rating and set a price target of 39. Shares of Masco was losing 5/8 to 26 1/16.

Merrill raised its price target on shares of

Methode Electronics


to the mid-40s from around 30. Shares of Methode popped 2 1/16, or 8%, to 27 3/4.

Morgan Stanley Dean Witter cut its rating on



to neutral from outperform. Novell shares were skidding 1 1/8, or 5.1%, to 20 15/16.

First Boston started coverage of



with a buy rating. Shares of SDL was leaping 9 1/8, or 5.4%, to 176 5/8.

First Boston started coverage on

Sycamore Networks


with a buy rating. Shares of Sycamore were soaring 10 3/8 to 242 3/8.

Salomon Smith Barney

upped its rating on

Sovereign Bancorp


to buy from outperform. Sovereign Bancorp was adding 5/16 to 8.

SG Cowen

upgraded shares of



to strong buy with a 250 price target. Shares of Vignette were leaping 14, or 7.6%, to 197.

Deutsche Banc cut its rating on shares of

Vulcan Materials

(VMC) - Get Report

to buy from strong buy. Shares of Vulcan were slipping 1 to 39 1/2.


Nextel Communications


was advancing 3 7/8 to 101 9/16 after it said Dan Akerson would remain the company's chairman through 2000, a year longer than expected.

The "Heard on the Street" column in the




(IBM) - Get Report

is facing scrutiny for its use of an accounting method which raised operating income by lowering reported costs.

IBM reported a 53% rise in operating income to $8.9 billion, on a mere revenue jump of only $63.4 billion, or 12%, in the nine months ended Sept. 30. At issue is the manner in which IBM booked one-time gains of $4 billion from the sale of its Global Network business to


(T) - Get Report

in the second and third quarters. Shares of IBM were stumbling 2 to 103 1/8.

Value America


was skidding 9/16 to 14 after it said Glenda Dorchak has been named CEO, replacing Tom Morgan who's leaving for personal reasons.

Herb on TheStreet: How CHS Has Gone From a Saga to a Downright Disaster


Herb Greenberg

Senior Columnist

11/24/99 6:30 AM ET

As ugly as it gets:

The third-quarter earnings release from

CHS Electronics


late Monday told only part of the story. On its own, the news in the release tells of nothing short of a disaster.

The rise and fall of highflying CHS, which distributes computer and electronics parts everywhere


the U.S., has been an unfolding

saga for more than a year. The company had rapidly grown by acquiring, or rolling up, distributors around the world.

A month ago, the story started to

unravel when CHS placed one of its three U.K. subsidiaries in receivership and its German and Austrian operations filed for bankruptcy reorg. Now, according to the company's latest news release, it's starting to sell off the very units it bought -- almost as fast as they were bought. So far in the current quarter, it transferred its interests in eight subsidiaries back to the original owners. It's negotiating to do the same with seven additional subs.

But wait -- there's more: Turn to the 10-Q filed Monday, and you learn that the

U.S. Department of Commerce

has launched "an investigation" into the export activities of one of the company's subs and its management regarding "alleged violations of certain federal exportation laws and other related violations, including money laundering." The company says Commerce has offered to settle for a $25 million fine and a guilty plea, but warns that its "ultimate exposure" could be "much higher" if the company is ultimately found to have violated any laws. (It further says it intends to fight the allegations.)

Herb's Latest: Join the discussion on


Message Boards.

But wait -- there's still more: According to the 10-Q,

DHL International

, the freight airline, is suing CHS for $3.1 million "for indemnification for assessments made by the Dutch government against DHL." The assessments are for certain shipments through DHL by several CHS European subs that the Dutch government alleges "understated the declared values in order to reduce payments for value-added tax and custom fees." CHS, whose stock yesterday closed at 63 cents, also plans to fight that one.

What a mess.

The moral? Whenever a company wages a public war against short-sellers, as CHS

did, watch out! There's usually a reason.

Net2Phone home:

A lollapalooza of a day for



, at least in the early going, as its stock rose more than 10 after the company disclosed in an offering prospectus several new deals with

America Online


, including branded prepaid phone-to-phone calling cards with America Online. No mention of what share of the revs from the deal will go to AOL. A company spokeswoman declined comment, citing the "quiet period" surrounding the company's secondary stock offering. (Unlike



, Net2Phone's majority owner, at least Net2Phone returns my calls!)

The only clear winner, based on the disclosure, appears to be AOL. It'll get $7.5 million from Net2Phone in payments (such a deal!), and AOL will get warrants to buy up to 3.5% of Net2Phone's outstanding stock if certain revenue thresholds are met for a variety of AOL-related deals, including the phone card. According to Net2Phone's prospectus -- which is confusing and, at times, very convoluted on this issue -- if the first of four revenue thresholds is met, AOL would be able to buy 661,666 shares of Net2Phone's stock at $7.36 per share. That's our math, based on interpreting what Net2Phone appears to be trying to say. (That's not only below Net2Phone's current market price -- it's also below its IPO price of 15 just four months ago.)

Put another way, says one of my money-management sources, Net2Phone is not only paying AOL to market prepaid calling cards and other services, but based on the spread between the purchase price of $7.36 and yesterday's close of 66 3/4, it's also giving AOL a crack at pocketing an initial $39 million. If the stock price stays the same, it could wind up with a total of more than $109 million.

Nice work if you can get it.

A prescription for problems?

Kevin Caliendo, the convertible securities analyst for

Forum Capital

markets who caused a stir

here recently when he put an "implied" value of $5 on

Rite Aid's

(RAD) - Get Report

stock, is back. This time he initiated coverage of the preferred shares of

Caremark Rx


, a prescription-management company, with a much-dreaded sell recommendation. (Can't say he doesn't call 'em like he sees 'em.)

Caliendo was particularly disturbed to learn from the company's recent 10-Q that nearly $77 million of the $88 million in cash flows last quarter came from an increase in accounts payable. (The company put off paying its own bills to make its cash flow look good.) If it hadn't done that, Caliendo says, the company wouldn't have had enough cash to cover its capital expenditures.

Nothing like robbing Peter's payables to pay for Paul's prescriptions.

Company officials didn't return this column's calls.

Gobble, gobble:

And I'm not talking about some of the stocks mentioned throughout the year in this column. Have a great holiday. See you in a few days.

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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