BREAKFAST WITH THE FOOL
Wednesday, November 10, 1999
"Half the agony of living is waiting."
-- Alexander Rose
UPS Delivers on IPO
Richard McCaffery (TMF Gibson)
Package delivery company United Parcel Service (NYSE: UPS) may be 92 years old, but it's off to a fast start.
The company with the brown trucks that delivers more than 12 million packages and documents daily became the largest initial public offering in history, raising $5.47 billion by selling 109.4 million shares. This represents 9% of the company.
UPS stock was priced at $50 yesterday, $1 above the $47 to $49 expected range. That was up from an earlier estimate of $36 to $42. The stock was priced after the market closed and will begin trading on the New York Stock Exchange today.
The money raised in the offering will be used to repurchase some of the outstanding Class A Common Stock, to investment in new technology, and to expand in the United States and abroad.
Internationally, UPS plans to build its European network, obtain additional airline authority to operate in Asia, and build its market presence in Latin America. UPS delivered more than 3 billion packages and documents in the United States and in over 200 countries and territories last year.
Traditionally, the company's stronghold has been the United States, where its brand name is well established. As competition from players like FDX (NYSE: FDX), the owner of Federal Express and RPS, increases, growing U.S. market share has become more difficult and international markets become that much more important. Success in this area will be key for the company's growth. (For more on FDX, check out Warren Gump's commentary in yesterday's Fool on the Hill.)
A few other items to keep in mind: Unions are part of doing business in much of the package industry, and certainly at UPS, where 202,000, or 62%, of the company's workforce is represented by the International Brotherhood of Teamsters. This isn't necessarily a bad thing, but investors should go in with their eyes open. Details of its arrangements with the unions are spelled out in the company's prospectus.
Also, voting power in the company is concentrated in the Class A stock, not the Class B Common Stock priced yesterday. Each Class A share entitles the holder to 10 votes, which means that 99% of the voting power is held by Class A shareholders. Class B shareholders get one vote per share.
Oh, and if you see a UPS driver today, be nice. Each driver delivers up to 500 packages a day.
News to Go
U.S. officials are weighing four options regarding Microsoft (Nasdaq: MSFT), two of which require splitting up the company, The New York Times reported today.
Online retailer Amazon.com (Nasdaq: AMZN) and online credit approval company NextCard (Nasdaq: NXCD) have teamed up to offer a line of Internet-focused credit cards expected to generate $150 million in fees for Amazon over the next five years.
Computer hardware, software, and services company Sun Microsystems (Nasdaq: SUNW) and electronics giant Sony (NYSE: SNE) announced plans to work together to connect a wide range of electronic appliances to the Internet.
Broadband technology systems provider Next Level Communications (Proposed ticker: NXTV) plans to sell 8.5 million shares at $20 apiece in an initial public offering expected to raise around $170 million.
David Gardner says Microsoft is no monopoly... Zeke Ashton keeps it simple in the Rule Maker Portfolio... Yi-Hsin Chang visits barnesandnoble.com.