Publish date:

TheStreet.com's MIDDAY UPDATE

December 1, 1999


Market Data as of 12/1/99, 12:56 PM ET:

o Dow Jones Industrial Average: 10,947.92 up 70.11, 0.64%

o Nasdaq Composite Index: 3,343.20 up 7.04, 0.21%

o S&P 500: 1,393.30 up 4.23, 0.30%

o TSC Internet: 931.16 up 0.95, 0.10%

o Russell 2000: 453.34 down 0.74, -0.16%

o 30-Year Treasury: 97 17/32 down 7/32, yield 6.292%

In Today's Bulletin:

o Midday Musings: Market Retains Health at Midsession but Comes Off Highs
o Herb on TheStreet: Why Investors Buying Into V-One Should Look Beyond Yesterday's Hype

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Midday Musings: Market Retains Health at Midsession but Comes Off Highs


Eileen Kinsella

Staff Reporter

12/1/99 1:06 PM ET

What could have been the onset of a winter cold looked more like a mild case of the sniffles today as stocks shrugged off yesterday's weakness for a robust rally. A friendly economic report was like an extra shot of vitamin C -- no one knows how much it really helped, but it certainly didn't hurt.


Dow Jones Industrial Average

was up 73 to 10,951, while the broader

S&P 500

was up 5 to 1394. The unstoppable

Nasdaq Composite Index

was back in the saddle, trotting 10 to 3346 (down from an intraday high of 3375.80), after enduring an 85-point drop

yesterday. Not that anyone has much to grumble about, as the tech-infused index has delivered a rise of more than 11% in the past month alone.



was leading the tech charge higher on news that it will be added to the S&P 500 Tuesday. Yahoo!, rising 7.3%, was helping lift

TheStreet.com Internet Sector

index 2 to 932.


National Association of Purchasing Management Index

for November came in at 56.2, on target with the expected 56.3, and down from 56.6 in October. The chairman of the NAPM's survey committee, Norbert Ore, said the November number showed the manufacturing sector remains robust but is not gaining momentum. In this overly optimistic market environment, the news was more than enough to jump start a by-now familiar and ever-faster recuperation pattern. Investors jumped back into the market today, snapping up shares that look like buying opportunities. After all, they must be when the market has had a down day or two.

"It just looks like business as usual, the pattern is so well programmed," said Bill Fleckenstein, president of

Fleckenstein Capital

in Seattle. Fleckenstein described investors recent behavior as "Pavlovian," saying investors seem to think that not only should stocks never go down, but that there should be at least some stocks with upward of 20% gains every day.

And it's not just the short-sellers who are worried about the recent run-up in the Nasdaq and elsewhere. "I'm a little bit more cautious right now. I don't like the action of the Nasdaq," said Gary Kaltbaum, chief technical analyst at

GSG Securities

in Orlando, Fla. Kaltbaum called the Nasdaq "overextended", and said we need some pullback, adding that how it closes today will be important as the big money, or institutional capital is usually selling at the close.

As for today's NAPM numbers, Kaltbaum deemed the market's reaction more important than the news itself, saying he liked the way the bond market went down and then came back. Lately, the benchmark 30-year Treasury was down 5/32 to 97 21/32, its yield at 6.30%. (For more on the fixed-income market, see today's early

Bond Focus.)

Kaltbaum added he is keeping an eye on the utility sector, which he calls a "notoriously great predictor of interest rates" in the near term. Indeed, the

Dow Jones Utility Average

was a rare red spot today, lately dipping 1.76, or 0.6%, to 279.77.

Breadth was slightly negative on the major markets with laggards beating leaders 1,684 to 1,237 on the

New York Stock Exchange

on 495 million shares, while on the

Nasdaq Stock Market

, decliners were leading advancers 1,981 to 1,786 on 817 million shares. New 52-week lows were beating new highs 170 to 22 on the Big Board, while new highs were topping new lows 105 to 42 on the Nasdaq.

Wednesday's Midday Watchlist

By Tara Murphy
Staff Reporter

Mergers, acquisitions and joint ventures

The staff of the

Federal Trade Commission

has concluded that the proposed $29 billion merger between

BP Amoco




(ARC) - Get Report

violates antitrust law and has recommended that the full commission block the deal,

The New York Times

reported, citing two people who have been briefed about the decision. Shares BP Amoco were sliding 1/4 to 60 11/16, while Arco was sinking 5 3/16, or 5.4%, 90 3/4.

Meanwhile, yesterday the FTC gave the green light to


acquisition of


. Shares of the newly merged

Exxon Mobil

(XOM) - Get Report

were mounting 1 1/2 to 80 13/16.

BP Amoco said that terms in the FTC's decision to authorize Exxon's takeover of Mobil support its own plans to buy Arco.



said that it has inked a research license agreement with


(CHIR) - Get Report

involving antibody products. Shares of Abgenix were adding 3/4 to 51 7/8, while Chiron was gaining 11/16 to 33 1/2.

Separately, Abgenix also agreed to a deal with

Human Genome Sciences


to develop antibody therapeutics. Human Genome was jumping 6 5/16, or 5.6%, to 118.





(HON) - Get Report

said it would assume a charge of roughly $850 million to $950 million as a result of their planned merger. The companies, which said that definitive restructuring figures and layoffs would be announced in the future, expects the merger to add 20% to EPS next year due to cost savings. AlliedSignal shares were climbing 1 3/16 to 61 3/16, while Honeywell was jumping 2 7/8 to 114 13/16.

The companies received clearance from the

European Commission

to complete their merger, which will be completed after the close of trading today. The merged company will operate under the Honeywell name and trade under the symbol HON on the Big Board starting tomorrow.

America Online


is acquiring

Tegic Communications

. Shares of America Online were bouncing 3 1/16 to 75 15/16.



said it agreed to buy instant messaging system

Tribal Voice

. Shares CMGI were advancing 2 7/16 to 149 7/8.



is buying

Opt-In Email.com

, an Internet email marketing, publishing and list-management firm based in Boulder, Colo., for an undisclosed amount. DoubleClick shares were hopping 6 5/8 to 167.

Hilton Hotels

(HLT) - Get Report


Promus Hotel

said yesterday that their shareholders favored Hilton's $2.7 billion acquisition of Promus. Shares of Hilton were gaining 7/16 to 10 7/16.



, a database software concern, is acquiring

Ardent Software


in a deal valued at $880 million. Informix was falling 1 5/16, or 12%, to 9, while Ardent Software was leaping 5, or 19%, to 31 1/4.

Insmed Pharmaceuticals

, a privately held biopharmaceutical company, is acquiring

Celtrix Pharmaceuticals


, with the total deal valued at about $140 million. Shares of Celtrix were up 22% to 1 15/16.

Lockheed Martin

(LMT) - Get Report

said it would sell its


subsidiary, an

Energy Department

environmental management contractor, to


. Terms were not disclosed, though Lockheed said today's sale is the first in a series of possible divestitures aimed at sharpening its focus on its core business. Shares of Lockheed Martin were adding 1/4 to 20 1/8.

Medco Research


was climbing 3/8 to 27 after it said its board favored selling the company to

King Pharmaceuticals


. Shares of King were popping 1/8 to 46.

Scudder Kemper Investments

, a unit of

Zurich Group

, a Swiss insurance company, is expected to announce that it is folding its brokerage business into that of




The Wall Street Journal

reported. DLJdirect is majority owned by

Donaldson Lufkin & Jenrette


, the investment bank. Shares of DLJdirect were moving up 1/2 to 17 1/16.

Sprint PCS Group




(IBM) - Get Report

said that have enter a pact to create products that would enable employees to access their email and other business information through Sprint PCS Internet-ready phones. Sprint PCS was losing 7/16 to 91 5/16, while IBM was mounting 13/16 to 103 7/8.

Earnings/revenue reports and previews


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


Analog Devices

(ADI) - Get Report

was advancing 4 5/8, or 8%, to 62 1/8 after it posted fourth-quarter earnings of 40 cents a share, beating the 20-analyst estimate of 35 cents and the year-ago 16 cents.

Bausch & Lomb


was bouncing 5 5/8, or 10%, to 60 7/16 after it said it plans to cut 850 jobs globally, in an attempt to consolidate its contact lens manufacturing division. Bausch & Lomb said the restructuring would result in a fourth-quarter pretax charge of $56 million, or 61 cents a share. Separately, the company said it plans to buy back 5 million shares of stock.


(DOV) - Get Report

was edging up 1 13/16 to 45 5/16 after it said it sees its fourth-quarter earnings beating the 12-analyst estimate of 48 cents a share, as a result of an increase in October and November orders.

Intimate Brands


was climbing 3/8 to 43 1/16 after it reported November same-store sales rose 9%.

Litton Industries

(LIT) - Get Report

was gaining 1 11/16 to 46 1/2 after it reported first-quarter earnings of $1.07 a share, in line with the seven-analyst estimate and up from the year-ago $1.01.

Tech Data

(TECD) - Get Report

was losing 1 9/16, or 6.3%, to 22 15/16 after it posted third-quarter earnings of 60 cents a share, beating the 14-analyst estimate of 59 cents but down from the year-ago 63 cents a share.

Offerings and stock actions

Fidelity Holdings


was declining 3/16 to 16 after it set a 3-for-2 stock split.

Analyst actions

Goldman Sachs

initiated coverage of

Adelphia Business


adding it to its recommended list. Shares of Adelphia were slipping 1/2 to 30 7/8.

Deutsche Banc Alex. Brown

said it upped its rating on

Bottomline Technologies

(EPAY) - Get Report

to buy from market perform. Bottomline was climbing 3 5/8, or 16.8%, to 25 5/16.


rolled out coverage of



with a buy rating and set a price target of 63. Shares of Careinsite were hopping 3 3/4, or 7.1%, to 56.

U.S. Bancorp Piper Jaffray

upped its price target on



to 125 from 96 and raised its fiscal 1999 earnings estimate to $2.11 a share from $1.98. Shares of Comverse were skidding 2 5/8 to 118 3/8.

Goldman Sachs sliced its rating on

Delphi Financial


to market outperformer from trading buy. Shares of Delphi Financial were losing 1 1/2 to 29 1/2.

Merrill Lynch

raised its long-term rating on

Liz Claiborne


to buy from accumulate. Shares of Liz Claiborne were up 5/16 to 37 3/4.

Credit Suisse First Boston

raised its price target on


(NOK) - Get Report

to 160 and rated the stock a buy. Nokia shares were lifting 1 3/4 to 141 3/4.

Warburg Dillon Read

upped its fiscal 2000 EPS on

Novellus Systems


to $3.10 a share from $3.01. Shares of Novellus Systems were climbing 1 1/8 to 83 1/4.

Merrill upgraded its intermediate-term rating on shares of



to buy from accumulate. Solectron shares were adding on 3 3/8 to 85 7/8.

Merrill Lynch sliced its rating on

Sylvan Learning


to intermediate accumulate from buy. Shares of Sylvan Learning were sliding 1 3/4, or 13.2%, to 11 7/16.

Standard & Poor's

said after yesterday's close that it will add Yahoo! to the S&P 500 index at the close of trading Tuesday, reflecting the growing influence of Internet companies. Yahoo!, with a weighty market capitalization of $56 billion, will bump Canadian school bus company



from the index. Yahoo! was soaring 15 5/8, or 7.3%, to 228 9/16. Laidlaw was down 11/16, or 11.2%, to 5 7/16.


Reebok International


was stumbling 1/16 to 8 15/16 after it said

Reebok Brand

President and CEO Carl Yankowski has resigned to accept a CEO position at another company. Reebok International's chairman and CEO Paul Fireman will take over as Reebok Brand's president.

Ryder System

(R) - Get Report

was losing 9/16 to 22 after it said it will realign and refocus its organization on customer solutions. The company said it will combine its transport and logistics units and create a finance subsidiary. Ryder also said it would cut 200 of 30,000 jobs over six months due to the reorganization.

Herb on TheStreet: Why Investors Buying Into V-One Should Look Beyond Yesterday's Hype


Herb Greenberg

Senior Columnist

12/1/99 6:30 AM ET

All a company has to do these days, to become one of


Red Hots, is to somehow align itself with

Red Hat


, which makes software for the Linux operating system. Which is just what


(VONE) - Get Report

did yesterday when it announced the "availability" of new Internet security software that it says has "compatibility with Red Hat."

The news caused V-One's stock to leap 279%, giving it a total market cap of $230 million. That's 279%, or an additional $169 million in market value, for a company that did little more than issue a news release!

If that doesn't underscore the insanity of how far this momentum mania has gone, maybe a peek at V-One's fundamentals will. (Like fundamentals mean anything, right?!) This, after all, is a company whose revenue last quarter fell by roughly half from a year earlier.

But wait, there's more: This is the same V-One that hasn't made a dime since going public in 1996, and as of last quarter had a deficit of $36 million. This is also the same V-One whose independent auditors,


, last December issued a "going concern" opinion because it didn't meet the


$4 million tangible net asset requirement to stay on the

Nasdaq National Market

. The company was then relegated to the

Nasdaq SmallCap Market

, but was warned its listing there was contingent on showing net tangible assets of $6.3 million. (Sorry, can't explain why SmallCap requires more than the big-cap.)

Herb's Latest: Join the discussion on


Message Boards.

That "going concern" opinion apparently didn't go over too well because at the end of last quarter V-One fired PricewaterhouseCoopers and hired

Ernst & Young

. No reason was given, but such changes often occur after a company gets an unfavorable opinion from an auditor -- and they're not generally considered a good omen.

But wait, there's more: To get its net tangible assets up to snuff, so it could remain listed on


Nasdaq market (and to help it stay in business), the company issued 3.3 million warrants to several undisclosed investors, via a private placement, to buy V-One stock. The warrants can be converted at any time once the price rises above 2 5/8.

Such a deal: Not only did the stock rise high enough yesterday for those warrant holders to cash it all in for a tidy profit, it did the same thing after a similar Red Hat-related announcement two months ago, only to lose




gain. Any bets on history repeating itself?

V-One's appointed spokesman didn't return my call.

Calling all Questions

Have a personal finance question? Don't hesitate to send it our way to

mailbag@thestreet.com. Our only request: Include your name. Because of volume, we can't guarantee personal replies to questions that aren't answered in the column. And please, no questions regarding brokerage disputes, or seeking advice or opinions regarding individual stocks.

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