THE MARKET MIDDAY
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Today, Engage (Nasdaq: ENGA) becomes engaged to the stock market with its initial public offering. While Internet nuptials are destined to live out rocky up and down marriages, this should prove to be one honey of a honeymoon.
Engage is in the online "cookie" business. Its high-tech bakery includes a database chock full of online user profiles from more than 30 million anonymous cybersurfers. As you enter an Engage-enabled website, it tracks your browsing habits and updates your preferences. By knowing where you've been, and probably where you're going, it becomes an invaluable tool for advertisers to effectively target their marketing messages.
Today's IPO is yet another feather in the cap for Internet incubator specialist CMGI (Nasdaq: CMGI). While CMGI has been successful in taking stakes in Lycos (Nasdaq: LCOS) and GeoCities when they were young and profiting greatly when they went public, and in making back its venture capital investments several times over by selling subsidiaries to America Online (NYSE: AOL), Amazon.com (Nasdaq: AMZN) and Microsoft (Nasdaq: MSFT), Engage is CMGI's first wholly owned subsidiary to go public.
Rather, it was wholly owned until today's six million share offering. CMGI will still retain an 82% stake in the company. It has been a hot entity in its pre-market days, with pricing set at $15 per share after initially being targeted in the $9-11 range. The heat is understandable. Even at $15 a share, this values Engage at just $700 million. That's a far cry from the $3.5 billion that competitor DoubleClick (Nasdaq: DCLK) is commanding.
With CMGI announcing its purchase of AltaVista from Compaq (NYSE: CPQ) last month in a deal valued at $2.3 billion, it poses an interesting scenario where Engage may eventually inherit the juicy AltaVista portal cookie deal that accounts for 40% of DoubleClick's sales. While DoubleClick has gone on its own buying spree (NetGravity, Abacus Direct) to help absorb the possible lost business, the Engage offering today has not helped matters much. At midday DoubleClick is off $6 15/16 to $87 7/8, while CMGI is down $1 1/4 at $100 1/4.
Granted, DoubleClick reported less than stellar earnings yesterday, but the negative sentiment tied to the relative value of Engage seems daunting. Engage's client list is already filled with big names like Dell (Nasdaq: DELL), CNET (Nasdaq: CNET) and SportslineUSA (Nasdaq: SPLN) as well as CMGI-connected companies like Lycos and Microsoft (Nasdaq: MSFT).
In a battle of cookie monsters, Engage appears to be the one to watch. So, do you like Engage's chances? If you do, odds are Engage knew it all along as well.
Online health information services firm Healtheon (Nasdaq: HLTH) advanced $5 5/16 to $64 3/8 after agreeing to develop an online prescription services pilot program for physicians with a high concentration of patients served by Merck's (NYSE: MRK) Merck-Medco pharmacy benefit management unit. Under the deal, Healtheon will provide the software to physicians while Merck-Medco will provide the prescription application and physician sponsorships.
Oil and natural gas exploration and production firm Enron Oil & Gas Co. (NYSE: EOG) moved up $1 to $20 3/4 after major shareholder Enron (NYSE: ENE) said it will exchange 62.27 million of its 82.27 million EOG shares for EOG's China and India operations and $600 million in cash. EOG expects the transaction will add to its cash flow per share "immediately" and will reduce international uncertainties by focusing its business on North America.
Online job recruiting services firm Webhire Inc. (Nasdaq: HIRE) gained $3/8 to $7 after Japanese Internet investment company SOFTBANK agreed to take a 40% stake in the company through a $20 million direct investment and the purchase of 1.67 million Webhire shares currently held by online retailer Amazon.com (Nasdaq: AMZN). The company also reported a fiscal Q3 loss of $0.49 per share, worse than the $0.19 per share loss expected by the two analysts surveyed by Zacks.
Telephone network and call management systems supplier Cognitronics Corp. (AMEX: CGN) rang up $1 1/4 to $18 1/4 after setting a three-for-two stock split payable on Aug. 20.
Freight transportation company CNF Transportation (NYSE: CNF) rolled $2 7/8 higher to $42 1/8 after a Morgan Stanley Dean Witter upgrade to "strong buy" from "outperform."
Air carrier Continental Airlines (NYSE: CAL) climbed $1 1/2 to $42 15/16 after Donaldson, Lufkin & Jenrette raised its rating on the company to "buy" from "market perform." Yesterday, Continental reported Q2 EPS of $1.80, topping the First Call mean estimate by $0.07.
Enterprise application development management products firm Merant (Nasdaq: MRNT) rose $1 7/8 to $22 1/4 after agreeing to buy privately held Internet services firm The Marathon Group for $15 million in cash.
Online professional bookstore Fatbrain.com (Nasdaq: FATB) beefed up $7/8 to $16 7/8 after announcing a multi-year agreement to provide technical and business books to Lucent Technologies' (NYSE: LU) 140,000 worldwide employees.
Industrial pulsed power technologies firm Maxwell Technologies (Nasdaq: MXWL) gained $3 5/8 to $28 3/4 after saying independent tests paid for by a subsidiary indicated that the company's PureBright pulsed light system inactivates HIV and other viruses in medical and pharmaceutical applications. The company said it is in discussions with unidentified health-related companies to incorporate the technology into their manufacturing and quality assurance processes.
Analytical Surveys (Nasdaq: ANLT) up $2 1/8 to $26; fiscal Q3 EPS: $0.42 vs. $0.28 last year; estimate: $0.39
DLJdirect (NYSE: DIR) up $15/16 to $25 13/16; pro forma Q2 EPS: $0.05 vs. $0.01 last year; estimate: $0.05
Entrust Technologies (Nasdaq: ENTU) up $1 3/4 to $30 1/2; Q2 EPS: $0.02 vs. loss of $0.04 last year; estimate: $0.01
National R.V. Holdings (NYSE: NVH) up $5/8 to $24 1/16; Q2 EPS: $0.74 vs. $0.51 last year; estimate: $0.63
OneSource Information Services (Nasdaq: ONES) up $1 1/4 to $9 3/4; Q2 EPS: loss of $0.13 vs. loss of $0.20 last year; estimate: loss of $0.22
Cracker Barrel chain parent CBRL Group (Nasdaq: CBRL) crumbled $2 to $16 after announcing that it expects earnings for fiscal Q4 ending July 30 to be between $0.21 and $0.25 per share. That's significantly short of last year's EPS of $0.56 as well as the analysts' mean estimate of $0.37. The company said same-store sales have not met expectations, and expenses have risen as the company increased store management staffing levels.
Software giant Microsoft (Nasdaq: MSFT) softened $4 3/8 to $94 this morning. The company posted a 39% gain in fiscal fourth-quarter revenues from the year before, but warned that it expects revenue growth rates to fall in fiscal 2000. The company anticipates the decline will result from slowing PC demand, uncertainty surrounding the Year 2000 problem, and volatile global economic conditions. Margins are not expected to improve further. For more on the news, head back to this morning's Breakfast With the Fool.
Customer relationship management (CRM) software company Firstwave Technologies (Nasdaq: FSTW) gave back $2 25/32 to $5 27/32 after rocketing up $6 3/4, or 360%, yesterday on news that Microsoft chose its Netgain Sales Web-based CRM system for its embedded systems group.
Glass products maker Apogee Enterprises (Nasdaq: APOG) was shattered for a loss of $1 15/16 to $12 1/16 on news that it expects to turn in Q2 EPS of between $0.18 and $0.20, down from last year's $0.33 and well off First Call's three-analyst mean estimate of $0.38. Returns at the company's auto glass division, hurt by price pressure and sagging demand, have been disappointing and have in turn hurt glass services revenue.
Personal care products network marketer Nu Skin Enterprises (NYSE: NUS) molted $2 5/8 to $16 5/8 after reporting Q2 EPS of $0.25, flat with last year's results and $0.06 below the First Call estimate. Operating margins fell because of higher distributor incentives in the U.S. and increased overhead related to recurring amortization charges and the impact of consolidating its private affiliates. The company also closed its $37 million purchase of privately held e-commerce technologies firm Big Planet.
Seismic data acquisition and oilfield services company Petroleum Geo-Services (NYSE: PGO) leaked $1 1/4 to $20 on news that the company plans to sell 10 million American depositary shares and and $200 million in senior notes. Proceeds from the sale are expected to be used to pay off bank debt.
Semiconductor fabrication equipment company PRI Automation (Nasdaq: PRIA), which reported a fiscal Q3 loss of $0.17 per share, retreated $5 13/16 to $32 5/16. "We are very encouraged by the increase in bookings activity and business outlook," said CEO Mitch Tyson. "Our book-to-bill ratio was again above the industry average. We believe we are finally in the upturn.'' Merrill Lynch nevertheless cut its near-term rating on the stock to "neutral" from "accumulate."
Software developer Cognizant Technology Solutions (Nasdaq: CTSH) fell $1 15/16 to $27 1/2 despite reporting Q2 EPS of $0.27, better than last year's $0.15 and First Call's three-analyst consensus estimate of $0.25. Year 2000-related revenue fell to 20% of total sales from 26% in Q1. "Despite some evidence that the growth of IT spending has slowed down due to the Y2K lockdown," said CFO Gordon Coburn, "we are confident that we will continue to meet expectations for the rest of 1999."
Bank One (NYSE: ONE) down $1 3/8 to $59 1/16; Q2 EPS: $0.93 (before charges) vs. $0.86 last year; estimate: $0.93
Corning (NYSE: GLW) down $1 1/8 to $70 1/2; Q2 EPS: $0.49 (before items) vs. $0.39 last year; estimate: $0.46
DoubleClick (Nasdaq: DCLK) down $6 15/16 to $87 7/8; Q2 EPS: $0.13 loss (before charges) vs. $0.14 loss last year; estimate: $0.13 loss
IBM (NYSE: IBM) down $6 5/8 to $128; Q2 EPS: $0.91 (before gain) vs. $0.75 last year; estimate: $0.88
ISS Group (Nasdaq: ISSX) down $11 3/4 to $26 9/16; Q2 EPS: $0.03 vs. loss of $0.03 last year; estimate: $0.03
Lucent Technologies (NYSE: LU) down $5 7/16 to $71 3/8; fiscal Q3 EPS: $0.26 (before charges) vs. $0.17 last year; estimate: $0.23
Osteotech (Nasdaq: OSTE) down $1 1/8 to $24 1/8; Q2 EPS: $0.23 vs. $0.17 last year; estimate: $0.23
Parametric Technology (Nasdaq: PMTC) down $1 3/16 to $14 5/8; fiscal Q3 EPS: $0.16 (before charges) vs. $0.16 last year; estimate: $0.15
Reliability Inc. (Nasdaq: REAL) down $1 1/4 to $5; Q2 EPS: $0.03 vs. $0.30 last year; no estimate
Southwest Airlines (NYSE: LUV) down $3/8 to $21 9/16; Q2 EPS: $0.29 (split-adjusted) vs. $0.25 last year; estimate: $0.30
Texas Instruments (NYSE: TXN) down $4 1/4 to $145 11/16; Q2 EPS: $0.92 vs. $0.35 last year; estimate: $0.86
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