<THE LUNCHTIME NEWS>
Tuesday, January 12, 1999
THE MARKET MIDDAY
DJIA 9533.39 -86.50 (-0.90%) S&P 500 1248.79 -15.09 (-1.19%) Nasdaq 2336.84 -47.75 (-2.00%) Value Line Index 941.68 -8.05 (-0.85%) 30-Year Bond 100 1/32 +28/32 5.25% Yield

FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay

GO Disney

A mere eight weeks after closing the deal to launch GO.com with partner Infoseek (Nasdaq: SEEK), and less than a month after the beta version debuted, entertainment giant Disney (NYSE: DIS) got a $2 5/8 boost to $37 7/8 this morning on the news that the Internet portal is up and running. Unlike other entertainment behemoths that have given the Net short shrift or that have attempted to impose their will on the medium, Disney has carefully amassed and developed over 300 websites over the last couple of years -- attracting 23.7 million regular users. According to the company, today GO Network will have "more than 8 million registered users and a projected audience share of more than 36 percent, making it one of the top five sites on the Internet."

"Portal" is really an incorrect characterization of the site itself. The term gained currency after the search engine companies morphed into "destination sites," attempting to aggregate eyeballs in order to shunt them to content offerings owned by others. Back in the early days of America Online (NYSE: AOL), investors argued that a closed, proprietary network of content would necessarily be eclipsed by the Net. After all, what has the better content, a select system of offerings or the unlimited offerings of the Net? What was missed, of course, was the role of organization, ease of use, and the communication and community aspect of the medium. The semantics of the debate surrounding Internet service providers versus online service provider is not lost in the GO Network debate.

GO.com is a "next generation" offering that combines aspects of the online service provider with the reach of the Net. Disney's 18 "comprehensive content centers" feature material culled from all of its brands, including ABCNews, ESPN, and Disney proper. While Infoseek (roughly 40% owned by Disney) runs the sales force, it is working in concert with the sales forces at ABC and ESPN to provide advertisers with more complete marketing packages. (An article by Jon Katz at the Freedom Forum gives a nice glimpse into the shape of things not to come, but that have arrived.) Overall, Disney is making a giant putsch into a space dominated by a few major players; the thing is, Disney was really a player all along.

UPS

Online discount broker E*Trade Group (Nasdaq: EGRP) traded up $15 1/2 to $104 after announcing it will invest in an online full-service investment bank called E*Offering, which plans to start underwriting public offerings of securities later this year. Robertson Stephens founder Sandy Robertson will also invest in the venture, which will be run by former Cruttenden Roth CEO Walter Cruttenden. The new bank plans to provide E*Trade clients with "greater access" to public offerings while reducing the underwriting fees traditionally associated with the offerings.

Homebuilder Lennar Corp. (NYSE: LEN) hammered out a $1 5/8 gain to $26 1/2 after reporting fiscal Q4 EPS of $1.06, nearly doubling the $0.55 earned last year and whomping the First Call mean estimate of $0.87. Homebuilding revenues increased 37% in the quarter to $761.1 million, and gross margin on home sales rose to 22% from 20.8% a year ago.

Telecommunications headsets and teleconferencing products maker Hello Direct (Nasdaq: HELO) was greeted warmly by traders this morning, rising $6 1/2 to $16 7/8 after announcing it will buy privately held online telecom products buyers guide PhoneZone.com for undisclosed terms.

Perfume seller Perfumania (Nasdaq: PRFM) gained another $15/16 to $9 1/8, extending yesterday's 60% gain, after it said it will launch an e-commerce site on Feb. 1.

E-commerce payment technologies developer CyberCash (Nasdaq: CYCH) registered a $2 gain to $22 5/8 after promoting executive James Condon to president and COO. The company also said founder William Melton will become chairman of the board and remain the firm's CEO.

Online advertising firm DoubleClick (Nasdaq: DCLK) two-stepped it $4 3/16 higher to $82 3/4 after saying its DART advertising solution served more than 5 million ads across 6,400 websites last month, up from 4 million ads served in November.

Online content integrator and aggregator InfoSpace.com (Nasdaq: INSP) jumped $9 to $66 after saying it will provide local Web directories to the more than 85 websites of TV stations either owned by Paxson Communications Corp. (AMEX: PAX) or affiliated with Paxson's PAX TV nightly network.

Jim Beam bourbon and Moen faucets maker Fortune Brands (NYSE: FO) advanced $1 7/8 to $32 1/4 after saying it expects to report double-digit Q4 EPS growth and 13% fiscal 1998 EPS growth when it reports its full year results on Jan. 22. Moreover, the company said the consensus outlook for 10% to 11% growth in fiscal 1999 is "realistic."

Property and casualty reinsurer and specialty insurer Centris Group (NYSE: CGE) tacked on $2 9/16 to $13 9/16 after HCC Insurance Holdings (NYSE: HCC) submitted an unsolicited bid to acquire the 92.2% of the company's shares it does not already own for $143 million, or $13.25 per share in cash. Centris said its board will review the offer "promptly."

Personal computing products direct marketer PC Connection (Nasdaq: PCCC) gained $2 7/8 to $24 7/8 after saying net sales increased 32% year-on-year in Q4 to $220 million, thanks in part to a 205% jump in Internet sales during the period.

Drug distributor McKesson Corp. (NYSE: MCK) added $2 5/16 to $88 5/16 after Merrill Lynch started coverage of the company and added it to its Focus One List with a 12-month price target of $120 per share. Merrill said McKesson's goal of growing earnings by 30% to 35% over the next three years is "ambitious but achievable."

DOWNS

Shares of telecommunications equipment and software company Lucent Technologies (NYSE: LU) fell $3 5/8 to $109 5/16 following reports in The Wall Street Journal that the board of computer networking company Ascend Communications (Nasdaq: ASND) plans to meet today to consider a takeover offer from Lucent. Terms of the potential acquisition could be announced as early as Wednesday, and the price likely will top Ascend's market value of about $16 billion, according to the newspaper. Such a partnership could mean trouble for computer networking equipment company Cisco Systems (Nasdaq: CSCO), which lost $4 3/16 to $100 1/2 this morning.

Decadent restaurant chain Cheesecake Factory (Nasdaq: CAKE) got sliced $5 3/32 to $23 13/16 after it said it expects Q4 EPS of between of $0.14 and $0.16 a share, short of analysts' expectations of $0.21. Piper Jaffray reiterated a "strong buy" rating on the stock despite the warning.

Electronic components distributor Arrow Electronics (NYSE: ARW) splintered $3 1/16 to $18 1/4 on its announcement that it expects Q4 EPS of between $0.30 and $0.35, missing the Street's $0.42 estimate and last year's $0.53 mark. Lower-than-expected sales in Northern and Central Europe, combined with gross margin pressure in the company's North American components operations and certain Asian markets, were among reasons for the weakness.

Intel (Nasdaq: INTC) lost $2 3/4 to $137 this morning in advance of its Q4 earnings report expected later today. Wall Street currently expects EPS of $1.07, ahead of last year's $0.98 mark. Meanwhile, Yahoo! (Nasdaq: YHOO) fell $9 5/8 to $404 7/8 ahead of its quarterly update, pegged by the market at $0.16 per share compared with the year-ago $0.03 profit. Other portal companies fell as well: Lycos (Nasdaq: LCOS) slid $18 1/2 to $112 1/2, while Excite (Nasdaq: XCIT) calmed $7 1/4 to $76 1/2.

PC maker Compaq Computer (NYSE: CPQ) dropped $1 5/8 to $46 3/4 following yesterday's news that the company will buy online retailer Shopping.com (OTC: IBUY) for $19 per share. Compaq will attempt to lure users of its AltaVista search engine to Shopping.com.

Israeli medical device maker ESC Medical Systems (Nasdaq: ESCMF) lost $2 15/16 to $7 1/16 after Donaldson, Lufkin & Jenrette downgraded the stock to "market perform" from "buy," setting a 12-month price target of $10 per share.

Integrated circuits developer Broadcom Corp. (Nasdaq: BRCM) narrowed $22 1/4 to $135 as Morgan Stanley Dean Witter lowered its rating on the stock to "neutral" from "outperform."

Ski mecca Vail Resorts (NYSE: MTN) melted $1 to $19 after it said poor weather conditions are expected to pull fiscal Q2 results below the Street's $0.68 per share consensus estimate. Resort revenues are seen between $155 and $165 million for the quarter. As of the Christmas holiday, the company said, "the snowfall at Vail was the second worst in the last 40 years."

Web address registrar Network Solutions (Nasdaq: NSOL) dumped $26 1/16 to $197 despite announcing that it registered more than 1.9 million domain names last year, nearly double 1997's total. The U.S. leads the world in total domains registered, with California the most active state.

Specialty chemical products maker International Specialty Products (NYSE: ISP) fizzled $1 9/16 to $11 15/16 after it said last night it expects Q4 EPS before charges of between $0.13 and $0.15 per share, short of First Call's four-analyst $0.26 consensus estimate. The company blamed the shortfall on softer markets and "significantly lower" investment income during the quarter.

Aluminum producer and DJIA component Aluminum Co. of America (NYSE: AA) lost $3 1/16 to $85 1/8 after Morgan Stanley Dean Witter downgraded the stock to "underperform" from "outperform."

DRAM chip enhancement technologies developer Rambus (Nasdaq: RMBS) slowed $13 1/2 to $96 following a downgrade to "neutral" from "outperform" by Morgan Stanley Dean Witter.

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