THE MARKET MIDDAY
DJIA 10951.49 +88.33 (+0.81%) S&P 500 1358.62 +10.86 (+0.81%) Nasdaq 2662.01 +42.82 (+1.63%) Russell 2000 444.95 +2.08 (+0.47%) 30-Year Bond 89 10/32 +3/32 6.03 Yield
Today, Dell (Nasdaq: DELL) takes yet another step into the consumer market. Straight from the pages of Gateway's (NYSE: GTW) playbook, Dell will now be bundling a sub-$1000 personal computer with its own branded Internet service and other online perks. Shares of Dell, which are off the $55 highs set back in February, are trading $1 7/16 higher at $41 7/16 this morning.
Now, Dell's $959 machines won't be all that much more powerful than the slew of "free" computers now being offered after signing up for three years with Internet service providers (ISPs) like Prodigy (Nasdaq: PRGY) and America Online's (NYSE: AOL) CompuServe 2000. Like cellular phones, computers are being marked down and subsidized by service providers. However, DellNet will be a freebie for the first year -- a $263.40 savings relative to the $21.95 a month charged by CompuServe. The Dell home PC, while pretty bare in software trimmings and Celeron-powered, will come with a monitor. Since this is pretty much the same low-end strategy employed by Gateway, one has to wonder if the Dell boxes will be cowpatched as well.
If anything it is a pretty strong shot at beefing up its consumer products division -- one of Dell's fastest growing markets yet still commanding only about 15% of total revenues. It might also be the proper tonic to blow past Compaq (NYSE: CPQ) and become the largest PC seller domestically.
Like Gateway, which announced last week that its non-PC business has grown to 10% of revenues, Dell is well suited to grow online. While its Gigabuys.com store stocks more than 30,000 computer-related items, it will now have a much more captive audience to bring on new sponsors. That is where Dell Zone comes into play. The company will now have a direct line to its customers to push partner advertisements and promotional offers. Teaming up with Snap.com and its own online mall, it now becomes an intriguing portal where a $959 computer system might become a lucrative lifeline of online residuals for years to come.
Biotechnology firm EntreMed (Nasdaq: ENMD) rose $2 5/16 to $23 after the FDA gave the company the go-ahead to begin clinical trials for its Endostatin protein, under development as a cancer treatment. The company said it was able to file its investigational new drug (IND) application with the government three months ahead of schedule in part because of the early completion of preclinical testing.
Standard Products Co. (NYSE: SPD), which makes sealing, trim, and vibration control systems for the automotive original equipment industry, accelerated $10 1/16 to $35 1/16 after Cooper Tire & Rubber Co. (NYSE: CTB) agreed to buy the company for $36.50 per share in either cash or stock. The deal represents a 46% premium to yesterday's closing price for Standard stock. Cooper stock gained $3/16 to $23 1/8.
Transportation and logistics management company Mark VII Inc. (Nasdaq: MVII) was marked up $5 1/16 to $22 11/16 after Ocean Group PLC agreed to buy the company for $23 per share in cash. The deal represents a 30% premium to yesterday's closing price for Mark VII stock.
Shares of media giant Gannett Co. (NYSE: GCI) ascended $1 7/16 to $75 15/16 following reports that cable TV company Cox Communications (NYSE: COX) plans to buy Gannett's cable TV assets for $2.7 billion in cash. Under the deal, Cox would pay $5,100 per subscriber for about 525,000 cable subscribers in Oklahoma, Kansas, and North Carolina. For more on the story, head back to this morning's Breakfast With the Fool.
Entercom Communications (NYSE: ETM), the nation's sixth-largest radio company, tuned in a gain of $1 11/16 to $38 13/16 after it signed a letter of intent to buy 43 radio stations from Sinclair Broadcast Group (Nasdaq: SBGI) for $821.5 million in cash, more than doubling its stations. Entercom also agreed to buy $5 million worth of advertising time on Sinclair's TV stations in the next five years.
Aluminum producer Century Aluminum Co. (Nasdaq: CENX) shone $1 3/4 to $10 1/2 on last night's news that Pechiney (NYSE: PY) agreed to buy Century's two fabricated aluminum businesses for $248 million. The companies have also agreed to a "long-term" metal supply agreement.
Wireless and satellite-based Internet access support systems company Adaptive Broadband (Nasdaq: ADAP) moved up $1 3/8 to $20 1/2 this morning. The company reported a fiscal Q4 loss of $0.25 per share from continuing operations, a dime worse than First Call's six-analyst consensus estimate. "However," said CFO Donna Birks, "our backlog of opportunities is substantially greater than we have ever experienced, and we believe our efforts will pay off handsomely." The company also reported a five-year, $100 million contract to sell broadband wireless service equipment to Texas high-speed data services provider I3S Inc.
Website developer and operator Telescan Inc. (Nasdaq: TSCN) advanced $1 9/16 to $20 13/16 following the news that General Electric (NYSE: GE) broadcasting division NBC boosted its stake in the company to 14.9% from about 10% with the purchase of 1.1 million shares company stock for $25 million, about an 18% premium to last night's closing price. NBC also extended the terms of a contract and licensing agreement for Telescan's technology, content, and hosting services to five years from three.
Argosy Gaming Co. (NYSE: AGY) up $1 9/16 to $11 5/8; Q2 EPS: $0.27 vs. $0.01 last year; estimate: $0.19
Cheap Tickets Inc. (Nasdaq: CTIX) up $6 7/16 to $46 1/2; Q2 EPS: $0.15 vs. $0.03 last year; estimate: $0.08
Hall, Kinion & Associates (Nasdaq: HAKI) up $7/8 to $8; Q2 EPS: $0.16 vs. $0.09 last year; estimate: $0.13
Hi/fn (Nasdaq: HIFN) up $12 1/4 to $90 7/8; fiscal Q3 EPS: $0.35 vs. $0.04 last year; estimate: $0.23
Monaco Coach Corp. (NYSE: MNC) up $1 7/16 to $26 15/16; Q2 EPS: $0.59 vs. $0.23 last year; estimate: $0.45
Qwest Communications (Nasdaq: QWST) up $7/8 to $29 7/16; Q2 EPS: $0.02 vs. loss of $0.04 last year; estimate: gain of $0.01
Waters Corp. (NYSE: WAT) up $3 1/8 to $56 1/4; Q2 EPS: $0.43 vs. $0.30 last year; estimate: $0.39
Computer animation studio Pixar (Nasdaq: PIXR) slid $6 3/8 to $41 3/4 after posting Q2 EPS of $0.13, up from last year's $0.04 and $0.02 ahead of the First Call mean estimate. However, the company said during a conference call that U.S. video sales and product licensing revenues for its movie A Bug's Life have been less than anticipated. Prudential Securities cut its rating on the firm to "hold" from "accumulate."
Online auction site eBay Inc. (Nasdaq: EBAY) slumped $4 25/32 to $99 19/32 after reporting Q2 EPS of $0.04 (excluding charges) compared with $0.05 a year ago, beating analysts' mean estimate of $0.03. The company generated revenues of $49.5 million, a 154% gain from $19.5 million last year, despite having to pay out $3.9 million in credits to users for the June 10th site outage. However, some investors are reportedly worried that spending by the firm to beef up its staff and computer systems will hurt profitability in future quarters.
Virtual private network (VPN) technology provider Information Resource Engineering (Nasdaq: IREG) lost $1 1/4 to $21 after reporting a Q2 loss of $0.19 per share, not quite as bad as last year's loss of $0.22 per share but below the First Call mean earnings estimate of $0.04 per share. The company said its European business slowed "dramatically" in the quarter and will continue to decline through the rest of the year.
Data storage software developer Veritas Software Corp. (Nasdaq: VRTS) dropped $2 3/4 to $54 1/2 after filing registration statements with the SEC to sell $575 million of convertible notes and resell 10.6 million common shares currently held by disk drive maker Seagate Technology (NYSE: SEG) and 1.4 million shares held by investment firm Warburg, Pincus.
Hospital operator Columbia/HCA Healthcare (NYSE: COL) sank $15/16 to $22 3/4 after reporting Q2 operating EPS of $0.31, up from $0.30 a year ago and a penny ahead of the First Call mean estimate. However, the EPS rise was due primarily to a 10% reduction in the firm's diluted share count as operating income fell 5% in the quarter to $182 million from $191 million.
E-business network services company Digital Island (Nasdaq: ISLD) lost another $3 1/16 to $22 1/2, adding to yesterday's 18% decline. According to Dow Jones, two of the underwriters for the company's initial public offering last month released research reports yesterday that projected lower revenues for this year compared to what the firm said it was expecting during its road show.
Insurer and reinsurer ACE Ltd. (NYSE: ACL) slid $1 5/16 to $23 7/8 after reporting fiscal Q3 EPS of $0.22 (excluding gains) compared to $0.55 a year ago. The company said hailstorms in Australia and tornadoes in the U.S. resulted in net losses of $55 million, or $0.28 per share.
Personal communications services (PCS) provider Aerial Communications (Nasdaq: AERL) fell $13/16 to $14 1/4 following a Lehman Brothers downgrade to "neutral" from "outperform," citing valuation concerns.
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