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Closing Market NumbersDJIA 10302.13 -47.80 (-0.46%) S&P 500 1281.91 -11.72 (-0.91%) Nasdaq 2811.47 -4.48 (-0.16%) Russell 2000 415.79 -1.97 (-0.47%) 30-Year Bond 96 21/32 -11/32 6.38 Yield
Today's Market Movers:
For an extended list of today's earnings results, click here.
UPSBusiness-to-business electronic procurement software provider Clarus Corp. (Nasdaq: CLRS) rocketed $10 11/16 to $21 after the company was selected to provide the corporate purchasing software arm of a hosted business applications umbrella collaboration announced today by Microsoft (Nasdaq: MSFT) and Cisco Systems (Nasdaq: CSCO). Pivotal Corp. (Nasdaq: PVTL), which was selected as the collaboration's customer and e-business relationship management solution vendor, soared $13 5/8 to $34 3/4.
Business application software management solutions firm BMC Software (Nasdaq: BMCS) picked up $3 3/4 to $57 5/8 after posting fiscal Q2 EPS of $0.44 (excluding charges and unusual items), up from $0.35 a year ago and ahead of the recently lowered First Call mean estimate of $0.42. The settlement of a lawsuit bailed out the company late in the quarter, as the suit's costs were able to be accounted for as unusual costs. Without the settlement, BMC's EPS would have been in the $0.40 and $0.42 range the company told analysts to expect in a warning earlier this month.
Linux software and services company Red Hat (Nasdaq: RHAT) jumped $13 3/4 to $90 5/8 after chip giant Intel (Nasdaq: INTC) said it will bundle Red Hat Linux operating software with server platforms marketed through its recently created Internet Service Provider program.
E-business software platform developer Viador (Nasdaq: VIAD) charged ahead $2 1/8 to $11 1/8 in its first day of trading after selling 4 million shares in an initial public offering at a price of $9 per share.
Real estate 360-degree virtual tour technologies firm bamboo.com (Nasdaq: BAMB) climbed $3/4 to $17 after agreeing to acquire Internet 360-degree imaging firm Interactive Pictures (Nasdaq: IPIX) for about $410 million in stock. Interactive Pictures rose $1 1/8 to $22 1/2 on the news.
DOWNSInformation technology services provider Tanning Technology (Nasdaq: TANN) dropped $8 15/16 to $37 as Q3 net income fell almost 80% to $449,000 from $2 million a year ago. The company reported earnings of $0.02 per diluted share, down from $0.13 per share a year ago and in line with analyst estimates.
Internet search engine company Ask Jeeves (Nasdaq: ASKJ) bobbled $5/16 to $77 11/16 after reporting a net loss of $8.7 million (excluding amortization), or $0.35 per share, as a result of increased spending on sales, marketing, technology, and infrastructure. Analysts expected a loss of $0.36 per share, according to IBES International.
Express delivery carrier Airborne Freight (NYSE: ABF) slipped $2 5/8 to $20 after Q3 net earnings dropped to $21.6 million, or $0.44 per diluted share, from $32.8 million, or $0.65 per diluted share, a year ago. Analysts expected earnings of $0.60 per share according to IBES International. Slow domestic shipping growth caused the decline, management said.
Internet and electronic commerce services company AppNet (Nasdaq: APNT) dove $7 to $49 after announcing a plan to sell 4 million shares of additional stock, 1.5 million of which will be offered by the company.
Content management software company Interwoven (Nasdaq: IWOV) spun out $13 to $61 1/8 after its Q3 consolidated net loss increased to $4.8 million, or $0.27 per diluted share, from $2.1 million or $0.21 per share a year ago.
Today's Top Stories:FOOL PLATE SPECIAL An Investment Opinion
The New Dow Crowd
Brian Graney (TMF Panic)
For the second time in less than three years, the folks at Dow Jones & Co. are making changes to their biggest claim to fame and most cherished possession -- the Dow Jones Industrial Average.
Getting kicked out of what is undoubtedly the most recognized U.S. stock market barometer are lead-footed integrated oil and gas company Chevron (NYSE: CHV), tired tire maker Goodyear Tire & Rubber (NYSE: GT), fallen retailing star Sears, Roebuck & Co. (NYSE: S), and soon-to-be-bought-out chemical concern Union Carbide (NYSE: UK). The new kids on the block have a decidedly technological flavor and include Microsoft (Nasdaq: MSFT), Intel (Nasdaq: INTC), SBC Communications (NYSE: SBC), and Home Depot (NYSE: HD).
"The changes we are announcing today will make the Dow Jones Industrial Average even more representative of the evolving U.S. economy, as the Average -- and the nation -- enter a new century," Wall Street Journal managing editor Paul Steiger commented. Looking at the changes one-by-one, the adjustments make a ton of sense.
Although oil remains one of the largest global industries around, it will get more than enough representation in the index when current Dow component Exxon (NYSE: XON) completes its planned merger with Mobil (NYSE: MOB). From that point of view, Chevron is really being replaced by Mobil, not by one of the four newly added companies. Meanwhile, Union Carbide is set to be acquired by Dow Chemical (NYSE: DOW) later this year, which opens up another spot in the index. Lest you think chemicals will not be represented at all in the new-look Dow, it's important to keep in mind that Exxon's chemical business racked up sales last year that were nearly twice Union Carbide's total revenues.
Filling the Chevron and Union Carbide holes are Intel and Microsoft, two leaders of the technology industry that the bigwigs at Dow Jones somehow have always managed to seriously underweight in their prized index. Before Hewlett-Packard (NYSE: HWP) was added in 1997, the only technology-related component had been IBM (NYSE: IBM). That's pretty crazy under-representation for an industry that is often credited with creating more value in the marketplace for more people than any other industry since the Industrial Revolution. Intel and Microsoft also represent the first Nasdaq-traded stocks to be included in the Dow, another long overdue advancement.
The other two moves are more trend-related, making them more interesting and possibly somewhat surprising to some observers. The inclusion of Home Depot can be interpreted as the Appomattox in the victory of the "category killers" over the jack-of-all-trades merchandisers, which ran the retailing show for most of this century. Today, the only thing that Sears and its remaining broadline brethren run are lame TV commercials and a never-ending stream of holiday sales promotions. In the other change, the keepers of the Dow have opted for the wonderful and exciting information superhighway of tomorrow over the formerly wonderful and exciting (but now pot-holed and cursed) four-lane interstate highway of yesteryear by dumping Goodyear in favor of SBC.
For the most part, today's changes to the Dow will have little effect on individual stock investors outside of giving everyone a more accurate picture of what the U.S. business environment is all about on the cusp of the 21st century. Fools using the Foolish Four or other investing strategies based on the Dow, however, will need to make some adjustments. Check in with the Foolish Four Portfolio tonight and throughout the rest of the week for details on how the changes will affect the current holdings of the different variations of the main Dow Investing strategies.
Lucent Wired For Growth
Richard McCaffery (TMF Gibson)
Robust sales of optical, wireless, and data networking products powered telecommunications equipment maker Lucent Technologies (NYSE: LU) to earnings of $972 million, or $0.31 per share (excluding one-time events), for its fiscal fourth quarter. The 50% hop was good enough to beat IBES International estimates of $0.28 per share. Revenue increased 23% to $10.6 billion.
The Murray Hill, New Jersey company's full year looked just as good. Net income jumped 46% to $3.8 billion (excluding one-time events), or $1.22 per share, compared to $0.86 per share last year and ahead of analyst estimates by $0.02. Revenue grew 20% -- in line with management's goal of increasing top-line growth by at least 19% -- to $38 billion, up from $31.8 billion a year ago.
High demand from local exchange carriers, wireless service providers, and long distance carriers drove sales. "This was the strongest quarter and the strongest year in Lucent's history," said Richard McGinn, Lucent's chairman and chief executive officer.
The company, which is capitalizing on explosive growth in a telecom industry expected to reach $650 billion by 2001, has been a marvelous investment since being spun off from AT&T (NYSE: T). Its stock debuted on the New York Stock Exchange April 4, 1996 at around $9 per share (adjusted for splits and dividends reinvested), and is now trading at around $65. That's almost 650% growth in a little over three years.
From a commercial standpoint, Lucent is as strong as a horse. It's the market leader in optical networking, U.S. switching systems, and U.S. wireless infrastructure equipment, as well as numerous other industry segments. Its research and development division, Bell Labs, is world-famous. Eleven Nobel Prize winners worked at Bell Labs, which created the transistor, the laser, and the communications satellite.
Still, the company's stock has languished since July after hitting a 52-week high of $79 3/4 on fears about the strength of its balance sheet. At issue were accounts receivable and inventory, two items every company must keep under tight control since both represent a serious drag on cash. Investors should look for these items to grow no faster than sales, and, ideally, they would grow slower.
A look at Lucent's income statements and balance sheets from June 30, 1999 and June 30, 1998 shows that Lucent's sales grew about 18.6% over that period, while accounts receivable and inventory grew 63% and 74%, respectively. Investors realized the discrepancy and Lucent's stock suffered after the July high -- once everyone got a look at the Q3 balance sheet.
The company made solid progress in this area over the last two quarters. Days sales outstanding, a measure of how long it takes the company to collect accounts receivable, shrank 10 days in the last six months and now stands at about 85. In addition, the company sold off more than $130 million in inventory over the last three months.
This said, the levels are still higher than Fools like to see. Sales for the year grew 20% while accounts receivable and inventory grew 41% and 54%, respectively. Now, Lucent encourages investors to compare balance sheet accounts from quarter to quarter rather than year to year, and the growth is much more in line with expectations using this method. But whether you look at the numbers quarterly or annually, the accounts still represent a cash drag -- money that has to be collected and inventories that must be sold, or written off, at some point.
Investors aren't out of line looking at things on a year-over-year basis, especially from a company like Lucent, which carries a price-to-earnings ratio of around 53.
At the same time, investors should understand that Lucent's market is changing fast, and that requires tough adjustments by management. A few years ago, the company sold to a handful of services providers while today its sells to more than 1,000. Also, international sales have grown from 23% of revenue to 32% over the last three years. Management has to react to these changes in its customer base virtually overnight, and that makes asset management a constant challenge.
The company has an excellent track record as far as rewarding shareholders. Take it as a positive sign that the company is paying close attention to its balance sheet and expects additional improvement. Investors should probably wait for this to happen before moving forward.
More of Today's Best:BREAKFAST WITH THE FOOL
Microsoft Looking At Video Games
Dave Marino-Nachison (TMF Braden)
-- Reports that software giant Microsoft (Nasdaq: MSFT) is preparing for a move into the home video game console business continue to make their way into the mainstream press, as The Wall Street Journal today cited "industry executives" as saying the company could launch a new system, known as the "X-Box," next fall. The company is said not only to envy the success that consumer electronics company Sony (NYSE: SNE) has had with its PlayStation console (more than 60 million units shipped), but also worries that the upcoming iteration of the Japanese company's machine -- the PlayStation 2, slated for a U.S. launch next autumn -- may present a considerable threat as multi-use non-PC products for entertainment, communication, and Internet access seep into consumer households.
FULL STORY >>
FOOL ON THE HILL An Investment Opinion
Warren Gump (TMF Gump)
-- One strategy I use to find interesting value-oriented stocks is reviewing "fallen angels," one-time stock market leaders that have fallen out of bed with investors, a month or two after their stocks were knocked for a major loss. Basically, I'm digging through the market's garbage dumpster to see if anything has been unjustifiably thrown away by investors... One stock that I would classify in that category is Quintiles Transnational Corp. (NYSE: QTRN).
FULL STORY >>
Acxiom Hopes ADN, AbiliTec Prove Worth
Dave Marino-Nachison (TMF Braden)
-- Shares of computer-based marketing information services company Acxiom Corp. (Nasdaq: ACXM) lost nearly 30% of their market value this morning despite the company's reporting fiscal second-quarter (ended Sept. 30) earnings of $0.24 per share, up from the year ago $0.18 pre-charge profit and a penny better than estimates. What bummed investors out was the company's projection of earnings growth for upcoming fiscal years as it works to ramp up its Acxiom Data Network (ADN) consumer, business, property and telephone Internet database and its AbiliTec high-speed data interpretation system -- the two accounted for most of the company's new business in Q2 -- as quickly as possible.
FULL STORY >>