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Closing Market NumbersDJIA 0622.53 +227.64 (+2.19%) S&P 500 1342.44 +45.73 (+3.53%) Nasdaq 2875.22 +72.70 (+2.59%) Russell 2000 422.81 +6.04 (+1.45%) 30-Year Bond 98 11/32 +1 2/32 6.25 Yield
Today's Market Movers:
For an extended list of today's earnings results, click here.
UPSCredit card lender Capital One Financial (NYSE: COF) gained $4 1/4 to $50 1/2 after saying its earnings in calendar year 2000 will rise by an expected 30%, higher than the company's long-term annual growth rate objective of 20%.
Commodity clothing retailer Gap Inc. (NYSE: GPS) added $3 1/8 to $34 3/4 after Robert Fisher said he would step down as president of the company's core Gap division. Corporate President and CEO Millard Drexler will oversee the day-to-day operations of the division.
Medical devices maker Medtronic (NYSE: MDT) moved up $2 5/16 to $35 7/16 after signing a three-year agreement to supply coronary stents, coronary and dilation catheters, coronary guide wires, and diagnostic products from its Medtronic AVE division to the 1,800 U.S. member hospitals and healthcare organizations of umbrella medical group Premier Purchasing Partners, Inc.
Dram chip maker Micron Technology (NYSE: MU) advanced $5 7/8 to $67 5/8 after signing a five-year deal to supply memory chips to box maker Gateway (NYSE: GTW). The specific terms of the deal were not disclosed.
Internet hosting services firm Data Return Corp. (Nasdaq: DRTN) rose $3 7/8 to $16 3/8 in its first day of trading after selling 6.25 million shares in an initial public offering at a price of $13 per share. In other IPO news, AT&T Wireless Services network affiliate Triton PCS Holdings (Nasdaq: TPCS) picked up $17 3/4 to $35 3/4 after selling 10 million shares at a price of $18 per share.
DOWNSAmazon.com (Nasdaq: AMZN) fell $4 15/16 to $71 as at least five Wall Street brokerage firms cut their ratings on the online retailer today on concerns that planned spending increases in Q4 will further delay profits at the company. While reporting its Q3 results yesterday, the company said its book business should be profitable in the current quarter, but apparently that's not good enough. For some perspective on Amazon's results, see yesterday's Rule Breaker Portfolio report.
Health insurance and financial retirement services firm Aetna (NYSE: AET) dropped $2 11/16 to $48 1/2 after the company disclosed in its Q3 earnings report that the SEC is reviewing its accounting practices, including how it accounted for its merger with Prudential HealthCare. Salomon Smith Barney analyst James Lane cuts his rating on the firm to "neutral" from "outperform."
Consumer membership programs company MemberWorks Inc. (Nasdaq: MBRS) fell $8 to $28 despite posting fiscal Q1 EPS of $0.13, up from $0.07 last year (excluding an accounting change) and ahead of the Zacks mean estimate of $0.11. The company's press release stated that the SEC has reviewed its revenue recognition policies without raising any objections. The firm added that new guidelines by the SEC could potentially have a "material impact" on future results, which seems to be a no-brainer but was enough to spook some investors.
Health information systems supplier Shared Medical Systems (NYSE: SMS) slid $6 3/16 to $35 15/16 after warning that client spending will slow and some orders will be postponed in Q4 and into Q1 of 2000 due to Y2K concerns. As a result, the company sees full-year 1999 EPS between $2.80 and $2.90, shy of the previous Zacks mean estimate of $3.12.
Today's Top Stories:Keeping an Eye on MarketWatch
Brian Graney (TMF Panic)
This morning, online financial news and information provider MarketWatch (Nasdaq: MKTW) gave investors something to stare at by reporting its third quarter results. Among the meaningful numbers, revenues came in at $7 million, up 45% sequentially. The net loss for the period (excluding expenses for pesky non-cash items, such as amortization of goodwill and intangibles) was $0.50 per share, which the company was quick to point out was not quite as bad as the $0.64 per share mean loss forecasted by analysts surveyed by First Call.
Among the less meaningful numbers, the company said it averaged 4.6 million monthly unique visitors (UV) to its websites during the quarter, based on data from online advertising firm DoubleClick. Then again, Web bean counter Media Metrix recently put MarketWatch's UV count at 2.5 million for September, so it's hard to figure out which set of numbers to believe. In any event, it's safe to say that MarketWatch is succeeding in carving out a name for itself in the realm of online financial information, even though president and CEO Larry Kramer's statement that the site is a "must-have" for online financial info addicts may be stretching things a bit.
In its first nine months as a publicly traded company, MarketWatch has had one heck of a bumpy ride. After skyrocketing to $130 per share on its first day of trading, the stock was taken to the cleaners this summer and bottomed out at $26 1/8 per share in early September. Since that date, the stock has more than doubled, with the main catalyst being a new three-year deal to be the primary financial news provider to America Online (NYSE: AOL).
More than anything else, investors can expect agreements and acquisition announcements to drive share price movements for the company in the future. Time-tested concepts such as increasing cash flow generation or extending the competitive advantage period may drive share price gains at some point down the road. But for the time being, MarketWatch's internal deal-making crew and its press release machine are the closest things the company has in its arsenal resembling real value drivers.
This is not to say out-of-hand that MarketWatch is destined to be a terrible investment, but it must be emphasized that the company's business structure and market opportunity are still being defined and virtually no one can predict how things will eventually shake out. What can be said for certain is that the company is blowing through cash right now, with cash and equivalents on the balance sheet falling by 24% during Q3 alone. Meanwhile, expenses are ramping up as the company looks to acquire more and more eyeballs with new products. Product development expenses nearly doubled sequentially as the company rolled out its CBS MarketWatch Weekend TV program, among other initiatives.
Factoring in the issue of risk is a major consideration in any investment decision, although the concept assumes more weight with an early stage company such as MarketWatch, which is trying to do business in the Wild West of online financial news. Priced at 45 times trailing 12-month sales, compared to 19 and 26 times trailing sales for Internet heavyweights Amazon.com (Nasdaq: AMZN) and AOL, respectively, a lot is currently expected out of MarketWatch. Given its price volatility track record, this is an investment that should only be considered by the most aggressive financial news junkies out there.
Mew Who? More Pokemon Madness
Dave Marino-Nachison (TMF Braden)
Despite all the furor over the Japanese import multimedia phenomenon of Pok�mon, there's a Pok�mon so rare few in the world have ever seen it: its species and element are completely unknown (if this isn't making sense, stop and find a 10-year-old).
And at one foot and four inches tall, weighing in at just nine pounds, little Mew certainly wouldn't seem to present much of a threat to the likes of, say, the imposing Mewtwo, which sizes up at a neat 6' 7" and 269 lbs. courtesy of its creation through a series of horrific genetic experiments.
Or would it? That's what kids across this country will be itching to find out come Nov. 12, when Pok�mon: The First Movie -- billed as "the Pok�mon match of all time" -- hits American screens. Expect long, loud lines at the local multiplex.
In much the same manner that American kids have scurried to get their hands on Pok�mon merchandise of every kind, investors have been falling over themselves like desperate parents in Toys 'R' Us (NYSE: TOY) on Christmas Eve to get a piece of the action driven by the fast-selling Nintendo games. Just a few of the companies benefiting from Pok�madness to varying degrees have been 4Kids Entertainment (Nasdaq: KIDE), Topps (Nasdaq: TOPP), Grand Toys International (Nasdaq: GRIN), Toymax International (Nasdaq: TMAX), and the Wizards of the Coast game company recently purchased by Hasbro (NYSE: HAS).
(For a selection of Pok�mon-related Foolish stories, head down to the "Related Links" section at the bottom of this story.)
Today's beneficiary was San Francisco-based die-cast model, injection-molded collectible, quality book and specialty packaging maker Zindart (Nasdaq: ZNDT), shares of which jumped more than 35% today following the company's alert to the world that, hey, we make Pok�mon products! Zindart got its pop by announcing a reorder for a die-cast collectible item, total orders of which it expects to account for $7 million in fiscal third-quarter (ending Dec. 31) revenues; last year's Q3 figure totaled $25.8 million.
Zindart framed its statement by saying the order is a reflection of its manufacturing capabilities, but don't be fooled about the intent here.
Then again, is a little publicity necessarily a bad thing? Zindart appears a pretty solid company having increased revenues, gross profits, and operating income more than 20% per year (on a compounded basis) over the past five years. And although return on equity has declined in recent years, the company has generated significant free cash flow in two of the last three years -- in fiscal 1998 Zindart spent heavily to buy Hua Yang, a Chinese company that marked its entry into the book and specialty packaging businesses.
The company's most-recent full-year earnings numbers were something of a disappointment year-over-year, but investors should look for a pop from the July acquisition of Corgi Classics Ltd., a well-known maker of scale model car, truck, bus, and plane replicas that has seen strong sales of late amid a burgeoning collectibles market and was expected at the time to add significantly to earnings right away.
Other customers include Mattel (NYSE: MAT) and Hasbro (NYSE: HAS), Revell-Monogram and Hallmark, leaders in the toy, model, and collectibles businesses and it's their orders that make up the bulk of Zindart's revenues. Corgi, an established upscale marque, should add to the predictability of the company's business in coming years.
Pok�mon probably won't be around forever, although it must be said that thanks no doubt in large part to its video-game background it has managed considerable longevity given its faddish nature. Still, with the movie coming out soon to almost certain blockbuster success, there is probably more room for investors to profit and Zindart appears to be still another way to enjoy the ride.
More of Today's Best:BREAKFAST WITH THE FOOL
Harmonic to Scoop Up Divicom for $1.7 Billion
Richard McCaffery (TMF Gibson)
-- Fiber optic equipment company Harmonic (Nasdaq: HLIT) announced last night a plan to acquire the Divicom subsidiary of C-Cube Microsystems (Nasdaq: CUBE) in a deal that gives Harmonic a broader array of products to sell to communications companies worldwide. Under the $1.7 billion stock deal, C-Cube shareholders will receive 0.542 shares of Harmonic stock for each share of C-Cube. The deal is about a 6% premium to the full price of C-Cube, which has a market value around $1.61 billion. Excluding goodwill amortization, Divicom is expected to be accretive to Harmonic earnings in the first year.
FULL STORY >>
FOOL ON THE HILL An Investment Opinion
The Unbearable Silliness of Price Targets
Bill Barker (TMF Max)
-- I had the pleasure of speaking to an investors' group at the University of Maryland last week, and during the talk I discussed the advantages of reading analyst reports, while cautioning about the dangers of an investor paying any attention to analyst ratings ("buy," "strong buy," "accumulate," etc.) or "price targets." The audience was perhaps a little confused by this, as at least some may have thought that the rating and price target were sort of the "bottom lines" to the analysis. I don't really think that's the case. As we've said elsewhere, there's often a lot to learn from reading the analysis in a report, but the buy ratings, and especially the "price targets," are not really there to serve an investor.
FULL STORY >>
FOOL PLATE SPECIAL An Investment Opinion
Network Solutions Answering Questions
Dave Marino-Nachison (TMF Braden)
-- When the U.S. Government officially lifted Network Solutions' (Nasdaq: NSOL) monopoly on the Internet domain name registry and registrar businesses this spring, investors were tripping over each other getting out of the stock. The worry of many was that with competition would come the end of any advantage the company had built up while it had free reign from the feds. We dueled over the company's prospects in April, and the bears outnumbered the bulls two to one; the company's shares were more than halved by midsummer. Now Network Solutions (NSI) stock is clawing its way back, having passed pre-Duel levels following a steady rise that began in August.
FULL STORY >>
Jager Has Lit a Fire at Procter & Gamble
Richard McCaffery (TMF Gibson)
-- If consumer products manufacturer Procter & Gamble's (NYSE: PG) fiscal first quarter is any indication, the company's plan to reinvigorate its product line and spark sales growth is catching fire. The maker of brand name products such as Tide laundry detergent, Puffs tissues, and Scope mouthwash reported that net sales (excluding the impact of negative exchange rates) grew 5% to $9.92 billion for the quarter ended September 30. This is big news for a company whose average annual sales grew 2.6% over the last two years. P&G also reported net earnings (excluding costs related to new initiatives) of $1.2 billion, or $0.88 per diluted share, up 10% from last year's results and in line with analyst expectations.
FULL STORY >>