<THE EVENING NEWS>
Monday, July 19, 1999
DJIA 11187.68 -22.16 (-0.20%) S&P 500 1407.65 -11.13 (-0.78%) Nasdaq 2830.29 -34.19 (-1.19%) Russell 2000 461.37 -3.89 (-0.84%) 30-Year Bond 91 -4/32 5.89 Yield
Customer relationship management (CRM) software company Firstwave Technologies (Nasdaq: FSTW) rocketed up $6 3/4, or 360%, to $8 5/8 on news that Microsoft Corp. (Nasdaq: MSFT) chose its Netgain Sales web-based CRM system for its embedded systems group. The move isn't entirely surprising, as the companies already are closely tied: Firstwave's Takecontrol client/server CRM offering is Windows-based and the company has developed interfaces with such popular Microsoft program offerings as Outlook, Word, and Access. Further, in March Firstwave released a new version of Takecontrol, Takecontrol Today, based on Microsoft's Visual Basic that is be integrated with Outlook 98. Today's jump in usually thinly traded Firstwave's shares, which peaked at $7 13/32 around lunchtime, set a new all-time trading high for the stock.
Elsewhere in Bill Gates's world -- it's all Bill Gates's world, after all -- reports that his company sold its Sidewalk city guide service in exchange for an equity stake in Ticketmaster Online-CitySearch (Nasdaq: TMCS) sent shares of the online ticketing and local city guide company up $6 1/16 to $40 1/16. Microsoft sent Sidewalk, once considered a force that might have trumped local newspapers by sniping advertising and classifieds revenue, to Ticketmaster in exchange for a 9% stake in the company and warrants to boost the stake to 13%. Ticketmaster will become the exclusive entertainment information provider on Microsoft's MSN. Microsoft, which is considering issuing a tracking stock for its Internet operations, didn't sell Sidewalk's online yellow pages or interactive buying guide. Shares of Ticketmaster investor USA Networks (Nasdaq: USAI) moved up $1 1/16 to $45 5/16 today. Shares of Microsoft, meanwhile, were relatively quiet today. After the bell, the company reported fiscal Q4 earnings of $0.40 per share. Wall Street's consensus estimate was $0.36 per share.
QUICK TAKES: E-commerce payment technologies developer CyberCash (Nasdaq: CYCH) moved up $1 3/8 to $11 13/16 after the company said it would offer its InstaBuy one-click shopping service as part of its CashRegister service. CyberCash is counting on InstaBuy to be a driver of new growth... Fasteners maker Chicago Rivet & Machine Co. (AMEX: CVR) attached $1 3/8 to close at $22 1/2 on news that it will record a $0.54 per share after-tax charge during Q2 in connection with a product recall... Cable-based online services provider Excite@Home Corp. (Nasdaq: ATHM) rose $1 1/8 to $46 3/4 today. The company unveiled a group of new features for its Enliven advertising service, including an ad campaign for Compaq (NYSE: CPQ) incorporating live chat.
Hewlett-Packard (NYSE: HWP), maker of PCs, printers, test and measurement instruments, and other electronic equipment, rose $2 1/4 to $116 1/4 after naming Lucent Technologies NYSE: LU) exec Carly Fiorina as its new president and CEO, succeeding Lewis Platt, who previously announced his intention to retire... Cruise and tour operator and marketer Intrav Inc. (Nasdaq: TRAV) journeyed up $3 5/16 to $19 13/16 after Swiss travel company Kuoni Reisen Holding AG made a $21.32 per share bid for the company. The approximately $115 million offer represents about a 29% premium to Friday's closing price for Intrav stock... National Lampoon franchise owner and recent Foolish Hero J2 Communications (Nasdaq: JTWO) laughed its way up $3 1/8 to $15 5/8 after setting in place a "poison pill" rights plan allowing shareholders to increase their holdings if a person or group obtains a 15% stake in the company.
Shares of online stamp purchasing and printing software company Stamps.com (Nasdaq: STMP) moved up $5 9/16 to $46 3/16 after the company said Office Depot (NYSE: ODP) named it the office superstore's preferred provider of postage over the Internet. Office Depot will offer Stamps.com's service from its website... Online airfare bidding service priceline.com (Nasdaq: PCLN) was bid up $1/4 to $97 21/32 after the company said Continental Airlines (NYSE: CAL) will join priceline.com, thus increasing priceline's domestic seat inventory by more than 20%. Priceline also reported a Q2 loss of $0.10 per share; analysts expected a loss of $0.11 per share. Continental, which said Q2 EPS was $1.80, $0.07 better than expected, was lifted $2 7/8 to $41 7/16... Internet commerce software developer Elcom International (Nasdaq: ELCO) ascended $1 3/8 to $6 3/8 after hiring Wit Capital (Nasdaq: WITC) to help it plan a strategy for its Internet subsidiary. The company may pursue an IPO of elcom.com.
Houston-based financial services firm Pinnacle Global Group (Nasdaq: PING) bounced up $1 1/2 to $6 after agreeing to buy Blackford Securities Corp. in a cash-and-stock transaction... Flat panel video displays maker Kopin Corp. (Nasdaq: KOPN) tuned in $8 1/16 to $35 15/16 on news that JVC shipped its new digital camcorder, which uses Kopin's CyberDisplay... Digital audio and video applications integrated circuit maker Zoran Corp. (Nasdaq: ZRAN) moved ahead $3 3/8 to $23 1/2 after SoundView Technology analyst started coverage of the company with a "buy" rating and a $30 per share price target.
Auto and renter's insurance provider Unistar Financial Service Corp. (AMEX: UAI) regained $5 1/2 to $32 1/2 today after shares of the stock were crushed last week. In a Friday interview with Reuters, the company's CEO blamed short-sellers for the drop... General construction firm Turner Corp. (NYSE: TUR) built on Friday's gain of $3 3/4, adding $3 9/16 to $24 13/16 on news that it received and was evaluating a buyout offer from an outside group. No further information became known today... Real-time e-commerce transaction services firm CyberSource Corp. (Nasdaq: CYBS) rose $4 7/8 to $34 7/8 as J.P. Morgan started coverage of the company with a "buy" rating and a share price target of $55. The shares rose $3 5/16 on Friday after Business Week's "Inside Wall Street" column said the company was a likely takeover target.
AdForce Inc. (Nasdaq: ADFC) up $1 1/4 to $30 1/4; Q2 EPS: loss of $0.40 vs. loss of $1.62 last year; estimate: loss of $0.58 (two analysts)
Citigroup (NYSE: C) up $3/16 to $49 3/16; Q2 EPS: $0.71 (before charges) vs. $0.57 last year; estimate: $0.65
CNF Transportation (NYSE: CNF) up $1/8 to $39 1/4; Q2 EPS: $0.86 vs. $0.73 last year; estimate: $0.72
Delta Air Lines (NYSE: DAL) up $3 1/8 to $62 3/16; fiscal Q4 EPS: $2.40 vs. $2.26 last year; estimate: $2.31
Loronix Information Systems (Nasdaq: LORX) up $15/16 to $8 13/16; Q2 EPS: $0.13 vs. loss of $0.19 last year; estimate: $0.17 (one analyst)
Oriental Financial Group (NYSE: OFG) up $2 5/16 to $27 3/4; fiscal Q4 EPS:
$0.55 vs. $0.43 last year; estimate: $0.53 (two analysts)
Pre-Paid Legal Services (NYSE: PPD) up $2 3/8 to $30 3/8; Q2 EPS: $0.42 vs. $0.27 last year; estimate: $0.39
Automated semiconductor wafer fabrication systems maker Novellus Systems (Nasdaq: NVLS) lost $9 7/32 to $65 5/8 after reporting Q2 EPS of $0.31, down from last year's $0.46 but in line with the First Call mean estimate. Sales dropped 8% to $131 million and operating profit margin dipped to 11% from 17% a year ago, but those figures were also pretty much in sync with what analysts had been expecting as the company recovers along with the rest of the chip equipment sector. To that end, Novellus expects brighter days ahead as the worldwide chip industry continues to show "significant signs of improvement." However, reportedly cautious comments about late-year revenue growth by management during today's conference call took some of the juice out of a stock that has doubled over the past year.
Kidney dialysis services provider Total Renal Care (NYSE: TRL) tumbled $4 1/4 to $8 5/8 after saying its Q2 operating EPS will be between $0.20 and $0.22 due to higher operating expenses and lower operating revenues from its Tacoma office, which is responsible for billing about 55% of its domestic dialysis business. The First Call mean estimate had called for EPS of $0.35. Additionally, the company said it will add a $20 million pre-tax charge to its patient accounts receivable reserves, which will likely boost the reserve to roughly 17% of receivables from the current range of about 13%. Both chairman and CEO Victor Chaltiel and CFO John King figured today was a good day to hand in their resignations, adding an extra layer of uncertainty regarding the firm's future direction.
QUICK CUTS: Several online brokers took it on the chin today as an article in this week's Barron's highlighted fears that the sector's growth is slowing. Charles Schwab (NYSE: SCH) lost $2 15/16 to $49 1/2, DLJdirect (NYSE: DIR) sank $1 1/4 to $24 7/8, E*Trade Group (Nasdaq: EGRP) fell $2 13/16 to $34 11/16, Ameritrade (Nasdaq: AMTD) slid $2 1/2 to $31 3/4, TD Waterhouse (NYSE: TWE) slipped $1 13/16 to $24 1/4, and National Discount Brokers (NYSE: NDB) slumped $4 3/16 to $44 1/4... Specialty chemicals and electronics equipment maker MacDermid Inc. (NYSE: MRD) dropped $3 3/4 to $39 1/4 after posting fiscal Q1 EPS of $0.39, a penny ahead of the Zacks mean estimate. However, the company said it has "cautious" expectations for the current quarter, based on weakness in European markets and softness in its printed circuit business.
Optical disk manufacturer and distributor Metatec International (Nasdaq: META) fell $1 13/32 to $3 31/32 after warning that it will report a Q2 loss between $0.08 and $0.12 per share due to greater-than-anticipated seasonality in its recently acquired CD-ROM services business. Last year, the company earned $0.05 per share in Q2... Information technology consultant Keane Corp. (AMEX: KEA) slid $1 7/16 to $25 3/8 after FAC/Equities First Albany reportedly cut its rating on the firm to "neutral" from "accumulate"... Personal communications services (PCS) provider Aerial Communications (Nasdaq: AERL) descended $1 1/8 to $15 7/8 following an ABN Amro downgrade to "hold" from "buy."
Residential heating and air conditioning servicer Service Experts (NYSE: SVE) dropped $7 5/8 to $12 7/8 after warning that margin erosion, adverse weather, and consolidation issues will lead to Q2 EPS between $0.23 and $0.28, missing the First Call mean estimate of $0.50... Specialty chemical company Rohm and Haas Co. (NYSE: ROH) leaked $2 7/8 to $39 after reporting Q2 EPS of $0.67 (excluding merger-related charges), which was $0.02 shy of analysts' expectations... Broadband access equipment firm Paradyne Networks (Nasdaq: PDYN) gave back $7 3/8 to $48 7/8 after rising 231% in its first day of trading on Friday. Online audio content provider and fellow Friday initial public offering Audible Inc. (Nasdaq: ADBL) lost $2 1/2 to $18 1/2 after its 133% first day run-up.
French integrated oil and gas company Elf Aquitaine (NYSE: ELF) lost $1 3/4 to $88 7/8 after the company unveiled a $51 billion takeover offer for compatriot Total Fina (NYSE: TOT), which comes on the heels of Total Fina's $49 billion offer for Elf two weeks ago... DVD programming licensee and distributor Image Entertainment (Nasdaq: DISK) fell $29/32 to $7 1/32 after saying operational inefficiencies and software implementation problems will lead to a fiscal Q1 loss between $0.04 and $0.05 per share... Information technology services giant Electronic Data Systems (NYSE: EDS) was knocked down $2 3/16 to $64 13/16 following a Legg Mason downgrade to "outperform" from "buy."
UnFortunately Defined Diversity
It's been just about a year since I first critiqued Fortune magazine's inaugural list of the "50 Best Companies for Asians, Blacks, and Hispanics." My commentary last July breathed new life into the Fool's otherwise dormant Rogue message board. Well, Fortune is at it again, and I simply can't pass up the opportunity to point out the idiocy of such a survey.
First, I must say that Fortune is moving in the right direction here: This year's July 19 cover story fills 13 pages compared with 18 pages last year. At this rate, perhaps we'll be lucky enough to see the silly survey shrink out of existence. I wouldn't hold my breath, though.
For those readers "fortunate" enough to miss Fortune's now annual exercise, the magazine has compiled a list of America's "best companies for minorities" by trying to assess corporate diversity efforts. It sent out a survey asking companies whether they do "sensitivity training" and minority recruiting, and for the racial make-up of their board of directors, management team, total work force, and new hires.
Fortune sent out surveys to the country's 1,000 largest public companies and the 200 biggest privately held ones. This year, the magazine got back 137 responses -- slightly more than last year's 128. Still, this is a mere 11.4% response rate (versus last year's 10.7%) -- not at all comprehensive or scientific. Considering Fortune didn't hear back from about 89% of the 1,200 companies surveyed, how reliable is this data?
Plus, the list is strictly based on information given voluntarily by the participating companies, so no independent reporting was done. Somehow I have to think that the companies would try to sugar coat whatever data they might provide to depict themselves in the best light -- it's not lying per se; it's just good PR.
Ironically, in the August 2 issue of Fortune, the editors offer the following correction: "Wal-Mart was incorrectly included on Fortune's list of the 50 Best Companies for Asians, Blacks, and Hispanics (July 19). The company submitted data that included white women as minorities in three categories, placing Wal-Mart No. 10 in our rankings. Based on corrected data, Wal-Mart does not qualify for the list...." I'm not surprised at Wal-Mart's confusion -- the biggest beneficiaries of affirmative-action programs have been white women.
Despite these shortcomings in methodology, Fortune boldly draws broad strokes in its main article. "Companies that pursue diversity outperform the S&P 500. Coincidence?" the magazine asks in bold, blue letters. Basically, Fortune all-too-casually concludes that so-called "minority-friendly" firms tend to be "superior performers."
Talk about making generalizations. I would argue that we could do other surveys on equally random characteristics and come to the same conclusion. For example, we could probably show that companies that use AT&T long-distance services and responded to our particular survey outperform the S&P 500. Does that mean that there's a correlation between using AT&T and a company's share price performance? I think not.
Fortune made a point of stating that technology companies have yet to address diversity issues. In an article titled "Valley of Denial," the magazine declares that "Silicon Valley is no happy valley for most minorities." But many of these companies that don't pursue diversity, in fact, do outperform the S&P 500. Using Fortune's form of "logic," this would mean that there's a correlation between indifference to diversity issues and outperformance. This is equally inane.
My biggest problem with Fortune's survey is that the magazine's editors and writers are essentially oversimplifying a very complex issue. This is really a qualitative issue that is very, very difficult to quantify. Diversity is more than counting heads and asking some pinheaded questions that don't really get at the real issues. True diversity is about diversity of ideas, which doesn't necessarily have anything to do with race or gender.
Once again, Fortune manages to offend within the text of its articles. Geoffrey Colvin writes: "So if I'm a tough, skeptical CEO in this value-obsessed age, why can't I just run my company in a fair, ethical way, focus on performance, and let other things take care of themselves?" The suggestion here is that acting in a "fair" and "ethical" fashion means that the CEO would hire only whites. What an utterly prejudiced and narrow-minded assumption.
I believe that if a company were to focus on performance, focus on diversity of ideas and thinking, it would end up with a work force far more stellar and diverse than the current common practice of nepotism and favoritism.
A Merrill Lynch ad in the July 19 Fortune actually sums up things rather nicely. Merrill reminds us that "the color of your skin is less important than the color of your imagination. And that yours is only one of six billion ways of carrying yourself through the world... that the only race that really matters is the human race."
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David Marino-Nachison (TMF Braden), a new Fool