<THE EVENING NEWS>
Monday, June 28, 1999
DJIA 10655.15 +102.59 (+0.97%) S&P 500 1331.35 +16.04 (+1.22%) Nasdaq 2602.44 +49.79 (+1.95%) Russell 2000 448.61 +5.50 (+1.24%) 30-Year Bond 88 16/32 +21/32 6.09 Yield
Online healthcare information company drkoop.com Inc. (Nasdaq: KOOP) flew $2 1/8 higher to $16 1/8 after setting up a Clinical Trials Information Center on its website with pharmaceutical contract research organization Quintiles Transnational (Nasdaq: QTRN), giving drkoop.com users access to information about ongoing clinical drug trials for various conditions. The joint effort will also act as a pre-screening service to recruit and enroll possible clinical trial volunteers. While the arrangement will certainly give those with serious illnesses and few treatment options better access to drugs in the clinical trial process and help number one trial operator Quintiles sign up volunteers, it's unclear how the deal will help drkoop.com's business, outside of maybe directing more eyeballs to its website. drkoop.com declined to comment on the announcement, directing interested investors to instead participate in a webcast on its site held at 5:00 p.m. EDT.
After months of back-and-forth with an American suitor, it took a Swedish company to finally cajole equipment rental firm Rental Service Corp. (NYSE: RSV) into a business combination. Atlas Copco AB announced an agreement today to acquire the company, which primarily serves the industrial, manufacturing, and construction markets, for about $730 million, or $29 per share in cash, excluding some $900 million in assumed debt. That's a 21% premium to Rental Service's closing price of $24 1/16 per share Friday and 27% higher than an April bid from United Rentals (NYSE: URI), which Rental Services dismissed as "inadequate" twice. Rental Service shareholders celebrated the emergence of the Scandinavian white knight by boosting the company's shares $4 7/16 to $28 1/2 today. United Rentals, which will not submit a higher bid, gained to $15/16 to $27 1/16.
QUICK TAKES: Industrial electronic components distributor Marshall Industries (NYSE: MI) leapt $15 11/16 to $35 13/16 after agreeing to be acquired by value-added components reseller Avnet Inc. (NYSE: AVT) for $39 per share in either cash or Avnet stock. The purchase price is nearly double Marshall's closing price of $20 1/8 per share Friday. Avnet fell $2 5/8 to $45 3/16... Drug store chain Walgreen Co. (NYSE: WAG) added $1 3/4 to $29 5/16 after posting fiscal Q3 EPS of $0.16, up from $0.13 a year ago and a penny ahead of the First Call mean estimate. The company also said it will launch its full-service Internet pharmacy in September... Electronic payment information processor First Data Corp. (NYSE: FDC) picked up $2 3/8 to $47 13/16 after Credit Suisse First Boston raised its rating on the firm to "strong buy" from "buy" and set a 12-month price target of $60 per share.
Package delivery company FDX Corp. (NYSE: FDX) rose $2 7/8 to $55 3/8 on expectations it will top analysts' EPS estimates of $0.71 when it reports its fiscal Q4 results on Wednesday... Biopharmaceutical company Enzon Inc. (Nasdaq: ENZN) climbed $1 11/16 to $18 1/2 after reworking a licensing agreement for its PEG-Intron product with Schering-Plough (NYSE: SGP), which will entitle Enzon to a higher effective royalty rate. PEG-Intron is a longer-lasting version of Schering-Plough's anticancer/anti-infective Intron A, which is being developed to treat hepatitis C and various cancers... Web-based customer support software provider Silknet Software (Nasdaq: SILK) slinked its way $3 15/16 higher to $35 7/16 after signing a sales and marketing agreement with enterprise interaction management products developer Genesys Telecommunications Laboratories (Nasdaq: GCTI).
Media company Viacom (NYSE: VIA) moved up $2 1/8 to $43 5/16. Over the weekend, The New York Times reported that the company is in talks to combine certain functions of its Simon & Schuster book publishing unit with Time Warner's (NYSE: TWX) Little, Brown and Warner Books business... Milwaukee-based natural gas and pumping equipment company Wicor Inc. (NYSE: WIC) moved up $1 9/16 to $28 1/8 after agreeing to be acquired by Wisconsin Energy Corp. (NYSE: WEC) for $1.5 billion in cash, stock, and assumed debt. Meanwhile, intimate apparel maker Warnaco Group (NYSE: WAC), which would round out a potential WIC-WEC-WAC combo, was little changed today... Water treatment company Nalco Chemical (NYSE: NLC) rose $9 to $51 1/2 after agreeing to be acquired by France's Suez Lyonnaise des Eaux for $53 per share in cash. Fellow water treatment chemicals firm Cytec Industries (NYSE: CYT) rose $3 3/16 to $29 1/2 in sympathy. For a closer look at the Nalco deal, see today's Fool Plate Special.
Specialty packaging and tissue company Chesapeake Corp. (NYSE: CSK) sailed $3 5/8 higher to $38 9/16 after saying it will combine its commercial tissue paper products unit with the similar business unit of paper and lumber company Georgia-Pacific (NYSE: GP). Georgia-Pacific will take a 90% stake in the venture for $730 million, which Chesapeake will use to buy back shares, pay down debt, and make acquisitions... Insurer Zenith National Insurance (NYSE: ZNT) gained $1 7/8 to $26 11/16 after financial services firm Fairfax Financial Holdings said it would acquire nearly 6.6 million Zenith shares from a unit of Reliance Group Holdings (NYSE: REL) for $28 per share... Rural digital broadcast satellite (DBS) services provider Pegasus Communications (Nasdaq: PGTV) added $5 13/16 to $41 5/8 after ING Baring Furman Selz started coverage of the firm with a "buy" rating.
Specialty pharmaceuticals company Jones Pharma (Nasdaq: JMED) tacked on $2 7/8 to $37 5/8 after BancBoston Robertson Stephens raised its rating to "strong buy" from "buy"... Casino operator Boyd Gaming Corp. (NYSE: BYD) rolled $13/16 higher to $6 5/16 after buying the Blue Chip Casino, a riverboat casino in Michigan City, Indiana, for $255 million... Assisted living residences operator Alterra Healthcare Corp. (NYSE: ALI) picked up $1 1/4 to $13 3/16 following a Jefferies & Co. upgrade to "buy" from "underperform"... Canadian wireless communications technology company Research In Motion (Nasdaq: RIMM) sprinted $1 9/16 higher to $19 9/16 after CIBC World Markets started coverage of the firm with a "strong buy" rating.
Investors frowned at shares of teeth whitening technologies developer BriteSmile (AMEX: BWT) today, sending the stock down $2 1/8 to $9 9/16. This week's issue of Barron's raised questions about the company's ability to turn a profit and the safety of its treatment. While the article was the likely catalyst for today's move, investors might have saved themselves some money had they read June 10th's Foolish Double, in which Louis Corrigan pointed out that despite some notable performance benchmarks -- notably and recently the June 3 news that orthodontic practice management firm Orthodontic Centers of America (NYSE: OCA) will offer the company's procedure -- BriteSmile's revenue stream and ability to execute are hardly in perfect health. Enthusiasm for BriteSmile's prospects has helped the company generate an interesting year so far, as the shares are up more than 150% in 1999 even after today's slide. But as with oral hygiene, for stockholders to neglect handling BriteSmile with care could prove a messy business.
"Ben, I just want to say two words to you. Just two words. Are you listening? Earnings warning." Shares of plastics and metals processing equipment company Milacron Inc. (NYSE: MZ) poured out $2 13/16 to $17 7/8 today following news that the company expects second-quarter earnings to come in 10% below last year's $0.45 per share mark. Wall Street was looking for EPS of $0.50. Some might remember back to late April, when the company told investors that despite soft industrial markets -- Milacron missed estimates in Q1 as well -- there were signs of a turnaround and it still expected to post year-over-year EPS growth of between 12% and 15%. That seems unlikely now: "While we have begun to see early signs of a pickup in the past few weeks," said CEO Dan Meyer, "it hasn't been enough to put our second quarter earnings back on track." The company does anticipate "gradual improvement" in EPS for the second half, but if Q2 results come in as now expected, Milacron will have to beat market estimates by an average of $0.03 per share in each of the next two quarters to make the 12% figure.
QUICK CUTS: International telecommunications and Internet services company Worldport Communications (Nasdaq: WRDP) unplugged $4 27/32 to $3 1/2 after saying it's under review by a Nasdaq panel and may be delisted... Online brokerage Ameritrade (Nasdaq: AMTD) slumped $2 to $83 1/2 after filing with the SEC to sell up to $250 million worth of common shares. The company's filing didn't mention the size of the offering. Certain stockholders may sell shares as well... Online health information company Healtheon (Nasdaq: HLTH) lost $7 15/16 to $72 3/8 after Barron's reported that Microsoft (Nasdaq: MSFT), an investor in Healtheon betrothed WebMD, wants to trim its stake in the combined company and is asking a price significantly below market value.
Financial software company SS&C Technologies (Nasdaq: SSNC) dropped $1 25/32 to $6 19/32 after saying Q2 EPS will be between break-even and $0.03. Two analysts surveyed by First Call were looking for a $0.19 per share profit... Bank holding company Associated Banc-Corp (Nasdaq: ASBC), which Friday night said it approved a 2.8 million-share stock buyback in connection with its planned acquisition of Riverside Bank of Minneapolis, lost $3 1/4 to $39 13/16... Small appliances company Salton Inc. (NYSE: SFP) gave away $3 3/8 to $45 1/4 after reporting that it filed to sell approximately 2.9 million shares of company stock to the public, about 2 million by the company and the balance by shareholders. Salton also approved a 3-for-2 stock split; the shares to be sold are counted on a pre-split basis.
Pharmaceutical contract research organization (CRO) Covance (NYSE: CVD), downgraded to "neutral" from "buy" at Dain Rauscher Wessels, lost $1 3/4 to $23 1/4. Friday, the company cancelled plans to merge with rival Parexel International (Nasdaq: PRXL)... Industrial Distribution Group (NYSE: IDG) misplaced $9/16 to $5 7/16 after the maintenance, repair, operating, and production products and services company said it expects Q2 EPS of between $0.06 and $0.08, well short of First Call's three-analyst $0.14 consensus... Free e-mail and paid Internet access provider Juno Online Services (Nasdaq: JWEB) returned $2 7/8 to $23 1/4 today after taking $3 15/16 Friday on rumors of a buyout by America Online (NYSE: AOL). Juno today released a new version of its Internet software.
Website publisher Internet.com Corp. (Nasdaq: INTM) gave up $1 7/8 to $12 1/8 in the stock's second trading session. Shares in the company, which sold 3.4 million stubs to the public for $14 each, finished Friday right where they began... Spanish-language Internet portal Quepasa.com (Nasdaq: PASA), which gave away $2 1/2 on Friday in its first trading session after selling 4 million shares for $12 each, lost another $1/2 to $14 1/8 today.
Discount retailer Consolidated Stores (NYSE: CNS) lost $1 13/16 to $27 3/16 today. The company said it closed its acquisition of BrainPlay.com Inc., a move aimed at expanding the presence of its kbtoys.com online toy division... E-mail direct marketing company MessageMedia (Nasdaq: MESG) slowed $2 3/16 to $16 today. The company said it will provide e-mail management services to interactive health website operator RealAge. Terms were not reported... Technology development company CVF Technologies (AMEX: CNV), which agreed to be bought by privately held USA Global Link, lost $1 1/8 to $4 7/8. The new company, Global Online, will be publicly traded with the symbol "GOL."
Irish pharmaceutical contract research organization Icon PLC's (Nasdaq: ICLR) American depository shares retreated $1 1/2 to $20 1/2 after J.C. Bradford rated the company "neutral" in new coverage... Osteotech Inc. (Nasdaq: OSTE), which provides human bone and bone connective tissue for transplantation, was hit for a loss of $4 1/8 to $31 7/16 despite winning a reiterated "buy" rating from BancBoston Robertson Stephens. "Certain uniformed investors have circulated comments that [a recent acquisition] will have a negative impact" on Q2 EPS, the analyst wrote... Electronic design automation tools maker Avant! (Nasdaq: AVNT), downgraded to "market perform" from "buy" at Hambrecht & Quist, closed down $1 9/16 to $11 7/16.
Black and White on Wall Street
During my jet-lagged hours on my recent vacation, I read Joseph Jett's Black and White on Wall Street. It's clear fairly early on that Jett never expected to write a book by that title. A general book on Wall Street or at least on bond trading perhaps, but one focused on race? Not likely, considering his father's influence on him and his unwavering opposition toward affirmative action.
If Joe Jett's name doesn't ring a bell, you probably remember news reports in early 1994, and intermittently since then, of a top Wall Street trader who allegedly "brought down" Kidder Peabody. I remember the media stressed the fact he was black. As Jett recalls, "The tenor of the stories conveyed the idea that you can take a black man out of the ghetto, but you can't take the ghetto out of the black man."
Judging from Jett's upbringing in the suburbs of Cleveland, there's little, if any, "ghetto" in this son of an accountant and a school teacher. His father, who served in the navy and the army, was a strict disciplinarian. Jett applied to and was accepted to Carnegie Mellon, Ohio State, and Harvard University. He applied to MIT on a bet from a white classmate who said the only reason he had been accepted was because he was black. Without putting race on his application, Jett was immediately accepted to MIT and ended up going there.
Several years later, while applying for a job during his second year at Harvard Business School, Jett prepared a color-blind resume that didn't mention his race. Inevitably, though, during the interview process, he would be sent to the affirmative-action office. This is a snippet of what he said to the affirmative-action manager at Shearson Lehman:
"[A]ffirmative action is not an opportunity. It is nothing more than an admission of your intellectual inferiority. It's an agreement that says hire me and I will never challenge you. It's an agreement that says the only reason I am here is that the great white father has let me in here. There used to be a saying that it's better to die on your feet than to live on your knees. Affirmative action is living on your knees."
Jett was 100% right, of course. Not surprisingly, he got no job offer from Shearson Lehman. Jett knew that race is such a pervasive issue in this country that he couldn't expect a fair shake in the workplace. He thought one exception would be on Wall Street, where his job performance could be measured by objective standards. This was where he went wrong. Yes, the numbers would show how successfully he invested the company's money, but that's no guarantee that he would be justly compensated for his hard work.
What Jett soon discovered at Kidder was that traders and salesmen weren't rewarded by the amount of business they brought in but rather their ability to master office politics and their buddy-buddy relationships with the boss. Perhaps just as important is a trader's athleticism, proven on the ski slopes or on the golf course.
The strangest and most offensive episodes were the lectures Jett said he got from his boss on "black male sexuality." According to Jett, anytime he was seen just talking to a white woman at the office -- and this didn't happen often because Jett went out of his way to avoid such situations -- he was warned not to date white women, warned that the Kidder culture was "particularly sensitive to issues involving black male sexuality and black male sexual aggressiveness."
With such overt threats of trumped-up charges of sexual harassment, it hardly comes as any surprise that Kidder would blame Jett for what was an orchestrated effort to deceive its parent company, General Electric (NYSE: GE), by juggling books and doctoring balance sheets. Kidder and GE blamed Jett for fictionalizing $350 million in profits. Now, even if you don't believe Jett's detailed and technical account of what actually went on at Kidder, it's much harder to believe that Jett's managers didn't know how he was investing the company's money -- we're talking $30 billion -- when they were keeping tabs on his brief contacts with white female employees.
What happened to Jett would not have happened had he been white. A whole group of people, especially his immediate bosses, would've gone down for the deceptive accounting practices instead of being allowed to retire on the bonuses they earned off of Jett's successful trading strategies.
In the end, in early 1997, a panel of arbitrators at the National Association of Securities Dealers (NASD) rejected Kidder's charge that Jett had engaged in "fraud, breach of duty and unjust enrichment," and determined that the money Jett had made was real. Still, Jett's recovery from the public lynching by the media has been slow. Investor confidence is crucial in the financial services industry, and Jett's name has been trashed so much that it has been hard to round up clients for his fledgling hedge fund.
Black and White on Wall Street is yet another step in helping to rehabilitate Jett's torn image. While the case was in litigation, his lawyers advised him against making comments, which in effect kept him from telling his side of the story. If you take the time to look, a similar albeit far less dramatic "black and white" story can be found in almost any company in America.
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