THE MARKET MIDDAY
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DuPont Plans Tracking Stock
In another attempt to boost shareholder value, chemical giant DuPont (NYSE: DD) announced plans today to issue tracking stock in its life sciences (pharmaceutical and biotechnology) businesses. The company also expects to announce at least one alliance with another pharmaceutical company by the end of the year to enhance DuPont Pharmaceutical's market positioning. On news of these developments, the stock moved up $3 1/8 to $56 11/16.
These moves should enhance Dupont's ability to move aggressively into the life sciences field. A life sciences tracking stock (which won't be issued until at least the early part of 2000), should receive a much higher multiple of earnings and cash flow than DuPont overall because of its better growth prospects. This security can then be used to more efficiently acquire companies that have promising technology. Prospects for strategic alliances with other pharmaceutical companies also bode well, as they would give DuPont Pharmaceutical a more significant business presence.
Over the past year, DuPont has taken several steps to try and unlock the value of its shares. Chief among these efforts were the decisions to make life sciences a focus of future growth, as well as the spin-off of oil subsidiary Conoco (NYSE: COC). Despite these efforts, the share price has gone nowhere because of weakness from the company's cyclical businesses.
Investors have reason to be leery of DuPont stock, as the company has already announced that it expects low volume growth and continued pricing pressure for several more quarters. That said, investors with a long-term perspective (that means you, Fool!) might benefit from watching this company's progress over the next couple of years. Turning around a $26 billion ship takes a while, but DuPont seems to be taking some pretty smart steps.
Online retailer Amazon.com (Nasdaq: AMZN) picked up $6 3/8 to $136 5/16 after announcing an agreement with direct PC marketer Dell Computer (Nasdaq: DELL) to launch new, co-branded websites with customized content for Amazon and Dell customers. New Merrill Lynch hire Henry Blodget reinstated coverage of Amazon this morning with a near-term "attractive" rating and a 12-month price target of $150 per share.
Women's apparel catalog retailer Brylane (NYSE: BYL) moved up $2 11/16 to $24 1/8 after agreeing to be acquired by its controlling shareholder, French retailer Pinault-Printemps-Redoute, in a deal valued at about $211 million, or $24.50 per share in cash. The final purchase price is 22% higher than the original bid PPR submitted late last year, which some observers had considered a bit on the cheap side.
Online and video lottery systems software and equipment maker Powerhouse Technologies (Nasdaq: PWRH) generated gains of $3 1/8 to $17 15/16 after agreeing to be acquired by slot machine maker Anchor Gaming (Nasdaq: SLOT) in a deal valued at $280 million in cash and assumed debt. The purchase price works out to $19.50 per share, which is a 32% premium to Powerhouse's closing price of $14 13/16 per share yesterday. Anchor gained $3 3/4 to $38 5/16 on the news.
Web portal Lycos (Nasdaq: LCOS) jumped $13 1/2 to $109 3/4 after The Wall Street Journal reported that Internet investment firm and Lycos shareholder CMGI Inc. (Nasdaq: CMGI) has hired Morgan Stanley Dean Witter to help thwart USA Networks' (Nasdaq: USAI) bid for Lycos, which CMGI considers "inadequate." For more details on today's developments, see this morning's Breakfast With the Fool.
Marketing firm Marketing Services Group (Nasdaq: MSGI) gained $1 to $9 1/4 after agreeing to acquire CMGI's CMG Direct Corp., including its PermissionPlus Internet marketing services unit. The terms of the deal were not disclosed, but CMGI will end up being a "significant minority stockholder" in Marketing Services Group.
Israeli-based software maker Oshap Technologies (Nasdaq: OSHSF) charged ahead $2 13/16 to $13 5/16 after agreeing to be acquired by computer service and application software firm SunGard Data Systems (NYSE: SDS) for $210 million, or roughly $15.50 per share in stock.
Several oil and gas services and contract drilling firms got a boost after the oil ministers of Saudi Arabia, Kuwait, Oman, and Qatar issued a statement saying they will take "all important means" to prop up oil prices, increasing hopes that more production cuts to offset the current oil glut will be implemented when the OPEC member countries meet later this month. Halliburton (NYSE: HAL) rose $2 3/4 to $35, Baker Hughes (NYSE: BHI) added $1 13/16 to $21 15/16, BJ Services (NYSE: BJS) gained $1 7/16 to $17 5/8, Transocean Offshore (NYSE: RIG) moved up $1 7/8 to $24 1/4, Noble Drilling (NYSE: NE) advanced $1 1/4 to $14 7/8, and Diamond Offshore (NYSE: DO) climbed $1 5/8 to $26 5/8.
Consumer financial services company Household International (NYSE: HI) tacked on $3 to $44 13/16 after announcing plans to repurchase up to $2 billion of its stock, or about 10% of its outstanding shares.
Rural phone services provider Century Telephone Enterprises (NYSE: CTL) rose $3 15/16 to $67 3/8 on news that it will replace Rubbermaid (NYSE: RBD) in the Standard & Poor's 500 Index after Rubbermaid completes its merger with fellow S&P 500 component Newell Co. (NYSE: NWL). Building materials maker USG Corp. (NYSE: USG), which will take Century Telephone's place in the S&P MidCap 400 Index, gained $1 7/8 to $47 7/8.
International telecommunications and Internet telephony services firm IDT Corp. (Nasdaq: IDTC) rang up a $1 9/16 gain to $17 after its Net2Phone subsidiary signed a multi-year agreement to have its PC-to-phone services bundled with Netscape's (Nasdaq: NSCP) Communicator browser and featured on Netscape's Netcenter portal.
Business Internet service provider (ISP) PSINet (Nasdaq: PSIX) climbed $3 to $38 1/8 following an ING Baring Furman Selz upgrade to "buy" from "hold."
Paging and wireless services company PageNet (Nasdaq: PAGE) gained $7/8 to $5 11/16 after Bloomberg News cited analysts who said the company would unveil a "strategic alliance" with BellSouth (NYSE: BLS) sometime today.
Global engineering and construction firm Fluor Corp. (NYSE: FLR) lost $2 15/16 to $31 3/8 after Goldman, Sachs & Co. downgraded the stock to "market performer" from "market outperformer." Yesterday, the shares fell $1 3/4 after the company said it will close 15 offices and fire 5,000 employees as part of a restructuring of its Fluor Daniel unit. Fluor also forecasted fiscal 1999 EPS of $2.65 (excluding restructuring charges), below the current First Call mean estimate of $2.99.
Nissan Automotive (Nasdaq: NSANY) slowed $3/4 to $7 on news that DaimlerChrysler (NYSE: DCX) won't pursue an equity stake in the Japanese automaker after three months of talks. DaimlerChrysler also ended discussions about acquiring a stake in the Nissan Diesel commercial vehicles business.
Enterprise software company Computer Associates (NYSE: CA) slipped $6 1/4 to $33 3/4 after Morgan Stanley analyst Chuck Phillips cut his rating on the stock to "neutral" from "outperform." The company's $28 per share tender offer for Computer Management Sciences (Nasdaq: CMSX) closed last night.
Medical supplies distributor PSS World Medical (Nasdaq: PSSI) dropped $2 7/8 to $9 1/8 after it said fiscal Q4 EPS (ending April 2) isn't expected to exceed a range of $0.19 to $0.21. Nursing home customers have altered historic purchasing patterns and the long-term care division has seen higher-than-expected expenses while reorganizing its distribution centers and operations. Wall Street was looking for a $0.24 per share profit.
Analog and mixed-signal chip maker Unitrode (NYSE: UTR) retreated $2 5/16 to $12 1/16 after turning in Q4 EPS OF $0.18, missing last year's $0.25 mark and a penny above estimates. Full-year sales fell 15% to $157.8 million, excluding $36.7 million in sales of a custom circuit the company no longer makes. Adams, Harkness & Hill reportedly downgraded the stock to "accumulate" from "strong buy" today.
Republic Group (NYSE: RGC) lost $1 3/4 to $13 3/16 after the maker of recycled paperboard products said fiscal Q3 EPS is seen coming in 35% to 40% below the December 1998 quarter's $0.32 mark, well below the $0.49 consensus estimate three analysts gave First Call. The company blamed slower-than-expected startup at its newly configured production lines at its Duke, Okla., gypsum wallboard plant.
Information technology consulting services company Ciber Inc. (NYSE: CBR) shed $1 5/16 to $20 3/16 today. Ciber announced a sales support agreement with enterprise application integration software company New Era of Networks (Nasdaq: NEON), a February Foolish Double. Yesterday, Ciber stock dropped $1 1/8 despite the company's releasing a statement saying the slide was not attributable to "any business conditions or developments of the company."
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