Friday, June 25, 1999
DJIA           10552.56  +17.73  (+0.17%)
S&P 500         1315.31   -0.47  (-0.04%)
Nasdaq          2552.65   -1.34  (-0.05%)
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30-Year Bond   87 26/32   +6/32  6.15 Yield


Internet networking equipment company Juniper Networks (Nasdaq: JNPR) raced ahead $64 7/8, or 190% to $98 7/8 -- rising as high as $106 per share just before lunchtime -- in the stock's first day of trading. Enthusiasm about shares of Juniper, which is taking aim at Rule Maker Cisco (Nasdaq: CSCO), was heavy this week, as the company offering was repriced twice from its original $21 to $23 per share range. Juniper will be playing in a field dominated by the $200 billion market cap Cisco -- which has, it was reported today, been making significant inroads into the burgeoning Chinese Internet protocol market -- but has picked up some high-profile customers in the likes of MCI WorldCom's (Nasdaq: WCOM) UUnet service and Web-hosting company Verio Inc. (Nasdaq: VRIO), backing from IBM (NYSE: IBM), and partnerships with 3Com (Nasdaq: COMS) and others. Today, Juniper's 4.8 million shares went for $34 each, raising $163 million for the company and selling shareholders. Juniper plans to use its proceeds for working capital and, possibly, acquisitions.

Free e-mail and paid Internet access provider Juno Online Services (Nasdaq: JWEB) moved ahead $3 15/16 to $26 1/8 following rumors that online services company America Online (NYSE: AOL) was looking to buy the company. President Charles Ardai didn't quell speculation in a Marketwatch.com interview, saying "everybody is putting out feelers left and right" and saying even if such activity doesn't lead to a merger, "sometimes it leads to new business relationships." Juno plans to continue making itself feeler-worthy: Ardai told Bloomberg this week the company plans to spend heavily on customer attraction. As of March 31, according to the company's prospectus, Juno had 6.8 million customer accounts, most using its free e-mail service but some 207,000 paying for Internet access or premium e-mail functions. Juno would like not only to add to its registration base, but also to convert more of its accounts to paying customers who are more reliable sources of clicks and revenue. AOL, meanwhile, may see Juno as a bridge to customers not yet ready to pay for full Internet access.

QUICK TAKES: Housewares retailer Williams-Sonoma (NYSE: WSM) bottled $5 to $34 today as the San Francisco Chronicle reported that the company refused a buyout offer in an emergency board meeting earlier this month... China Airlines is about to buy 13 B747-400 cargo jets from Boeing (NYSE: BA) and seven passenger jets from either Boeing or rival Airbus Industrie in orders worth $2.8 billion, Taiwan's Commercial Times reported. Boeing stock rose $3/4 to $43 9/16... Transaction processing software company Persistence Software (Nasdaq: PRSW) rose $2 13/16 to $13 13/16 in its first day of trading. The company sold 3 million shares to the public for $11 each.

Microelectronic devices maker HEI Inc. (Nasdaq: HEII) jumped $2 5/16 to $6 15/16 after saying it won an exclusive license to make and market a new high-frequency chip carrier for applications in local multipoint distribution services, high-speed Internet routing and satellite communications... Cement and structural steel supplier TXI (NYSE: TXI) hardened $4 9/16 to $37 3/8 after saying it expects to report fiscal Q4 EPS of $1.20 to $1.25, beating Wall Street's $0.87 earnings estimate... Online health information website drkoop.com Inc. (Nasdaq: KOOP) added $1 7/8 to $14 on reports that it will make an announcement with pharmaceutical contract research organization (CRO) Quintiles Transnational Corp. (Nasdaq: QTRN) on Monday.

Defense contractor Lockheed Martin (NYSE: LMT) ascended $11/16 to $35 7/8. The company wants to shed at least $1 billion in assets as part of a restructuring aimed at restoring profits and investor confidence, The Wall Street Journal reported... Metal-castings maker Citation Corp. (Nasdaq: CAST) rose $2 1/16 to $16 3/16 after agreeing to be acquired by closely held Kelso & Co. for about $643.8 million, including assumed debt. The $18.10 per share deal represents a 28% premium to yesterday's closing price... Online stamp purchasing and printing company Stamps.com (Nasdaq: STMP) delivered gains of $2 11/16 to $13 11/16 after the company sold 5 million shares for $11 apiece in an IPO.

Specialty water treatment chemicals provider Nalco Chemical Co. (NYSE: NLC) added to its $3 1/2 gain of yesterday, rising $1 5/8 to $42 1/2, after yesterday afternoon confirming that it was in merger talks... Aluminum sheet manufacturer Commonwealth Industries (Nasdaq: CMIN) was burnished for a gain of $3 3/8 to $13 3/8 after saying it expects to report Q2 EPS between $0.35 and $0.45. Six analysts surveyed by First Call were looking for EPS of $0.23... Small business Internet services firm Netopia (Nasdaq: NTPA) moved up $3 1/2 to $21 1/2 after high-speed Internet access company Jato Communications chose Netopia as its preferred provider of digital subscriber line customer premises equipment.

Medical device maker and marketer ArthroCare (Nasdaq: ARTC) rose $2 7/8 to $20 7/8 after settling a patent infringement claim against Ethicon, which will now distribute ArthroCare's U.S. patents in the arthroscopy and gynecology markets... Closed-end investment company Corporate Renaissance Group (Nasdaq: CREN), which said a management group has recommended liquidation, finished up $1 9/32 to $10 1/2... Industrial and consumer packaging products company Sonoco (NYSE: SON) improved $1 1/16 to $27 1/8 after Morgan Stanley Dean Witter raised its full-year 1999 EPS estimate to $1.76 from $1.74. First Call's 10-analyst consensus estimate is $1.78. The brokerage kept its price target at $35 per share... Online city guide and event ticketing company Ticketmaster Online-CitySearch (Nasdaq: TMCS) bagged $2 11/16 to $25 11/16 after Thomas Weisel Partners rated the stock a new "buy."

Aluminum producer Alcoa (NYSE: AA) added $2 1/4 to $62 5/8 after Merrill Lynch reiterated near- and long-term "buy" ratings on the stock... Broadband communications integrated circuits maker Broadcom Corp. (Nasdaq: BRCM), started at "buy" at CE Unterberg Towbin, closed up $5 7/16 to $113 1/8. The brokerage also upgraded digital and mixed signal chip maker TranSwitch Corp. (Nasdaq: TXCC) to "strong buy" from "buy," sending the shares up $2 1/2 to $38 3/4... Healthcare IT consultant Superior Consultant (Nasdaq: SUPC) got $1 3/4 to end at $24 1/4 after S.G. Cowen & Co. reiterated a "strong buy" rating on the stock.


Pharmaceutical contract research organization (CRO) Parexel International (Nasdaq: PRXL) tumbled another $3 15/16 to $13 after dropping 21% yesterday on fears that rival Covance (NYSE: CVD) would call off its planned merger with the company. Today, Covance confirmed those fears and cut loose Parexel, saying both companies agreed that the decision is "in the best interests of their respective shareholders." From a short-term perspective, it certainly was good for Covance shareholders, who watched their shares rise $3 7/16 to $25 today. Covance's CEO told Reuters that the company's 28% share price decline since the merger was announced played no factor in the decision to part ways. Playing a bigger role was the strain Parexel would have put on Covance's earnings growth, a concern that was validated today when Parexel warned that its fiscal Q4 EPS (before charges) would fall $0.05 to $0.07 short of the $0.25 First Call mean estimate.

Global energy provider American Electric Power Co. (NYSE: AEP) was zapped by a $2 3/4 loss to $38 7/8 after saying it will spend $574 million to restart the Unit 1 and Unit 2 reactors of its Cook Nuclear Plant in Michigan by the end of next year instead of this year. The costs are expected to trim the company's earnings per share by $0.27 in the first half of 1999, $0.37 in the second half of 1999, and $1.15 in 2000. After reviewing its options, AEP said forking over the dough for a restart outweighed the option of shutting down the plant entirely and writing off the investment, which would have resulted in the loss of "significant sales opportunities" down the road. Selling the plant was probably not an economically attractive option for the company either, considering the Unit 1 reactor of GPU's (NYSE: GPU) Three Mile Island nuclear plant only fetched $100 million in cash last summer, compared to its book value of nearly $600 million.

QUICK CUTS: Computing products retailer CompUSA (NYSE: CPU) dropped $3/8 to $7 5/16, adding to yesterday's 6% loss, which followed the company's decision to close up to 14 stores and eliminate up to 1,500 of its workers. The restructuring is part of a plan by the firm to rely less on PC sales in favor of sales of other electronics products, such as DVD players and personal digital assistants (PDA)... Web advertising firm DoubleClick (Nasdaq: DCLK) shed $5 3/4 to $75 15/16 on worries that the company will lose its biggest client, Compaq's (NYSE: CPQ) Web directory AltaVista, if Compaq's preliminary talks to sell AltaVista to Internet investment firm CMGI (Nasdaq: CMGI) lead to a deal and a decision by CMGI to bring its ad business in-house... Online individual public records investigator US Search.com (Nasdaq: SRCH) fell $2 1/16 to $6 15/16 in its first day of trading after selling 6 million shares at an IPO price of $9 per share.

Pegasus Communications (Nasdaq: PGTV) had its wings clipped and fell $2 11/16 to $35 13/16 after Merrill Lynch cuts its near-term rating on the marketer of digital broadcast satellite (DBS) systems to rural areas to "accumulate" from "buy"... Textile company Delta Woodside Industries (NYSE: DLW) unraveled for a $1 3/16 loss to $5 15/16 after a plan to sell its Delta Mills Marketing Co. operating business came apart at the seams due to a lack of satisfactory offers. Instead, Delta Woodside is considering the sale of its Delta Apparel and Duck Head units to its Delta Mills Inc. khaki making subsidiary, or spinning off the two units to its shareholders as separate publicly traded companies in an effort to recapitalize the company.

Oilfield drilling fluids management services firm Newpark Resources (NYSE: NR) slid $2 3/16 to $8 9/16, giving back yesterday's 15% merger rumor-induced gain. After the bell, the company agreed to merge with oilfield tubular coating and inspection services firm Tuboscope (NYSE: TBI) in a $1.3 billion stock swap. Tuboscope lost $7/16 to $13 13/16 today... Business technology integration consultant AnswerThink Consulting Group (Nasdaq: ANSR) went brain-dead for a $4 1/16 loss to $23 11/16 after deciding it is of like minds with corporate e-business tools and applications developer THINK New Ideas (Nasdaq: THNK), which it will acquire for about $231.2 million in stock. THINK New Ideas fell $5/8 to $15 7/8... Spanish-language Internet portal Quepasa.com (Nasdaq: PASA) retreated $2 1/2 to $14 5/8 after rising 43% yesterday following its initial public offering of 4 million shares at a price of $12 per share.

Electrical and maintenance products company Katy Industries (NYSE: KT) slipped $1 1/4 to $13 after saying weak sales and lower margins will lead to Q2 EPS (before charges) roughly equal to one-third of last year's $0.32. The company has hired Donaldson, Lufkin & Jenrette to explore strategic alternatives for its electrical business... Computerized online lottery products supplier GTECH Holdings (NYSE: GTK) was wrecked for a $1 1/2 loss to $23 after TransAct Technologies (Nasdaq: TACT) sued the company for misappropriating trade secrets. GTECH said the allegations are "wholly without merit"... Cardiovascular pharmaceutical company Medco Research (NYSE: MRE) slid $1 5/16 to $23 9/16 after its president and CEO, Roger Blevins, resigned. Blevins will continue with the company as a consultant.

An Investment Opinion
by Dale Wettlaufer

Business Week Profiles Buffett

Berkshire Hathaway (NYSE: BRK.A) followers, heads-up. There's a great article in this week's Business Week that deserves your attention and the $3.95 cover price if you're not an AOL subscriber. If you are, membership has its rewards -- head to keyword: BW.

Written by Anthony Bianco, the piece is a very fair-minded, pretty nicely detailed look at the way things work at Berkshire Hathaway in 1999. Refreshingly absent from the piece are the usual spins on Chairman Warren Buffett having lost his touch, how Berkshire is just a closed-end mutual fund, and whatever else you see in tons of other articles published in mainstream magazines.

If you've been paying attention or have been a shareholder of the company for a while, you will likely be stunned by one piece of information in the article. Not to steal Business Week's thunder on this one, but here it is:

"Behind the scenes, though, his influence has waned. 'Charlie and I don't talk a lot anymore,' acknowledges Buffett, who says he did not even bother to consult his vice-chairman before making the epochal Gen Re acquisition."

Congratulations to reporter Bianco for getting that scoop, because it's a real revelation. Not that Berkshire Vice-Chairman Charles T. Munger and Chairman Warren Buffett have been hiding it, but no one seems to have asked the question "Hey, how's it going with you two these days?" Buffett and Munger have known each other and have been confidants and basically business soulmates for decades now. Though they've never kept their offices in the same city, the two had in past years talked on the phone almost every day, sometimes several times per day. That this change has taken place wasn't perceived by anyone, as far as I know, and at first I thought Buffett was having some ironic funning at the expense of the reporter. But it's kind of hard to imagine Warren Buffett sending a reporter away with that information. He's a humorous guy but not a sadist, and I would think he wouldn't pull this sort of joke on someone.

One cannot downplay the influence Charlie Munger has had on the thinking of Warren Buffett. If you think Buffett is one of this century's best business leaders and that is undeniably the result of the intellectual evolution Buffett went through in going from being a Ben Graham-influenced capital allocator to being a franchise-oriented investor, then you'd be acknowledging the giant intellect of the less-well known Munger, as he has had an acknowledged impact on Buffett over the years.

Earlier this year, my colleague Yi-Hsin Chang and I interviewed Robert Hagstrom, portfolio manager of the Legg Mason Focus Trust and author of two books on Warren Buffett, The Warren Buffett Way and The Warren Buffett Portfolio. At the end of the interview, I put in my request for Mr. Hagstrom to do a book on Munger, as I think the story on the two and Buffett's intellectual journey needs more depth. Hopefully, Buffett will find the time to put pen to paper and go through this himself, though his writings already stand as a landmark in the written body of work on business.

At this year's annual meeting, Munger expressed his appreciation for Hagstrom's recently published The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy, saying in effect that the work makes an original contribution to investment thinking. No wonder, though, that such a multifaceted and interdisciplinary guy would appreciate this interdisciplinary look at investing. To conclude the matter, it's really not worrisome that Munger and Buffett don't talk as much or that the GenRe deal was not done in consultation with Munger. In fact, it's one of those things about Warren Buffett that is most interesting. You can't pin the guy down. In fact, the same could be said for Ben Graham on a lot of issues, too, but that's another story entirely.

In talking with reporter Anthony Bianco today, I asked if he had any personal observations about the trip he took with Buffett, Executive Jet Aviation (the Berkshire subsidiary that offers fractional jet ownership and related services) chief Richard Santulli, and others to market Executive Jet in Europe. Bianco relayed what many have said, commenting that he was amazed at the lack of CEO/super-rich "attitude" that you get elsewhere. Bianco commented on Buffett's ego, which to some would carry negative connotational baggage, but which he agreed is the result of Buffett's surety of thought and confidence in carrying out his analyses. Bianco added that Buffett is very talkative but does not dominate the conversation. We also talked about the amount and quality of writing Warren Buffett has done over the years, which Bianco thinks really sets him apart from other CEOs and Chairmen and is the result of Buffett's clarity and surety of thought.

Overall, the article is a very good status report on where Buffett is these days. There is original material in the piece beyond what I've mentioned, but I want to leave that to the reader to find out. And while I disagree with the conclusion of the piece, as I think Buffett has and will exercise as much care in the issue of CEO succession at Berkshire as he has in building the company, overall it's an excellent piece and well worth the cover price.

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