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Closing Market Numbers
DJIA 10729.86 +107.33 (+1.01%)
S&P 500 1362.93 +20.49 (+1.53%)
Nasdaq 2966.43 +91.21 (+3.17%)
Russell 2000 428.64 +5.83 (+1.38%)
30-Year Bond 99 14/32 +1 5/32 6.16 Yield
Today's Market Movers:
Computer chip manufacturing giant Intel (Nasdaq: INTC) surged $5 1/4 to $77 7/16 after assuring financial analysts that customers aren't delaying chip purchases because of year 2000 issues and that it has ample supply to meet the rising demand.
Soft drink market leader Coca-Cola (NYSE: KO) bubbled $3/16 to $59 after Chairman and Chief Executive Douglas Ivester promoted three executives to oversee the company's largest divisions, several overseas operations, finance, and global communications.
Systems integration services provider Electronic Data Systems (NYSE: EDS) strode $4 1/2 to $58 1/2 after reporting 47% growth in net earnings (excluding restructuring charges) and $5.1 billion in contract signings for the third quarter.
Customer management and billing software firm Daleen Technologies (Nasdaq: DALN) jumped $6 3/8 to $29 3/8 after reporting a 140% jump in Q3 sales, strong gross margins, and record contract awards.
Fibre channel hardware and software provider JNI (Nasdaq: JNIC) plowed $8 11/16 to $53 7/16 for its second strong close the day after an initial public offering. The company sold 4.9 million shares at $19.
Broadband communications services provider Allied Riser (Nasdaq: ARCC) rose $1/16 to $18 1/16 after selling 17.8 million shares of stock at $18. Proceeds from the initial public offering will be used for the build-out of networks and general corporate purposes.
Aerospace and defense contractor Lockheed Martin (NYSE: LMT) staggered $2 15/16 to $20 after the company cut earnings and free cash flow estimates for the year 2000 as a result of new business losses, market conditions, and poor program performance. Peter Teets, Lockheed's president and chief operating officer, is retiring and resigning from the board.
Semiconductor substrate manufacturer American Xtal (Nasdaq: AXTI) dove $9 1/2 to $12 15/16 after issuing disappointing Q3 results and warning that it will miss Q4 revenue and net income estimates because of the continued economic slowdown as well as quality problems related to a product line.
National physician practice management firm U.S. Oncology (Nasdaq: USON) dropped $3 15/32 to $4 15/32 after reporting lower Q3 net income (excluding merger-related costs) and warning investors about flat earnings growth in Q4 as the company works to integrate the operations of American Oncology Resources and Physician Reliance Network, the two firms that merged in June to form U.S. Oncology.
Information processing and networking equipment component manufacturer Methode Electronics (Nasdaq: METHA) slipped $1 11/16 to $16 after reporting that fiscal Q2 estimates will come in 10% to 20% below last year's levels as a result of flat automotive controls sales.
Civil contracting construction company Granite Construction (NYSE: GVA) dug down $1 11/16 to $20 11/16 after warning that Q3 revenue will come in lower than expected as the builder has become more selective with its bids. With good weather, however, the company expects to meet year-end estimates.
Today's Top Stories:
Go Ahead, Akamai... Make-a My Day!
Brian Graney (TMF Panic)
After months of discussion and speculation on Web message boards and in techie-related hangouts across the country, the general U.S. investing public was finally treated to the long-awaited initial public offering of Cambridge, Massachusetts-based Internet start-up non pareil Akamai (Nasdaq: AKAM) today.
Instead of boring old Tootsie Rolls or miniature Snickers bars, trick-or-treating investors who were able to obtain shares in the company at its initial public offering price of $26 per share were handed a unique goodie for their Halloween bags -- a big, fat, gold brick. Shortly after opening for trading in the triple digits at around 1:30 p.m. EDT, shares of Akamai (say AH-kuh-my) accelerated to as high as $166 per share before giving up some of that ground and finishing the day at $145 3/16 per share.
With the company selling 9 million shares, representing a roughly 10% stake, the market granted the IPO wunderkind a first day business valuation in the neighborhood of $13 billion, putting the $1.9 billion first day run-up of 1998 IPO star eBay (Nasdaq: EBAY) to shame. In fact, the market really hasn't seen such a rapid one-day price appreciation since eMeringue (Ticker: HAFD) went public on April 1, and we all know how that story ended.
To say that folks are expecting a lot from the year-old Akamai would qualify as the understatement of the information age. The company's main claim to fame is its FreeFlow Internet content delivery system, which uses a network of 1,745 servers across 55 telecommunications networks in 24 countries to speed up the flow of Web-based content. With FreeFlow, website owners can use Akamai's servers inside points of presence (POPs) close to the end user to serve varying amounts of content. For instance, the local Akamai server could take care of serving thousands of bytes of embedded information on a page -- such as banner ads, logos, and graphics images -- while allowing the site's own Web server to handle the text-based content that goes along with that embedded data to make up a typical Web page.
The end result is faster and more reliable delivery of Web-based content for Akamai customers, which include cyberspace bigshots like Yahoo! (NYSE: YHOO) and Disney's (NYSE: DIS) GO Network, and even Web small-fries such as a little site called the The Motley Fool. The list of the firm's technology partners is even more impressive, including the likes of Microsoft (Nasdaq: MSFT), Cisco Systems (Nasdaq: CSCO), RealNetworks (Nasdaq: RNWK), Network Appliance (Nasdaq: NTAP), and Vignette (Nasdaq: VIGN).
The company's main competitor in content delivery services is Sandpiper Networks, a firm initially backed by Web heavyweights America Online (NYSE: AOL) and Inktomi (Nasdaq: INKT) that was acquired earlier this week by Digital Island (Nasdaq: ISLD) for about $625 million in stock. Even with the benefit of only a few days' worth of hindsight, that seems like a bargain given Akamai's surge today. It also goes a long way in explaining why Digital Island's stock jumped another $9 5/16 to $67 1/2 today and has nearly tripled in the past five trading days.
Trying to figure out what a company like Akamai is worth is about as much fun as herding cats (and arguably about as popular). "When you think about it, buying a stock is essentially purchasing its future cash flows, discounted back to the present," fellow Fool Warren Gump suggested in the midst of last fall's share price explosion in eBay. "If you make relatively minor changes to your expectations for a company, a soaring stock price may be justified."
Right now, the expectations are sky-high for Akamai, but that doesn't necessarily preclude them from getting even higher.
Houston, We Have a Problem
Richard McCaffery (TMF Gibson)
The bouncing sound you heard this morning was Orbital Science's (NYSE: ORB) stock price, which dropped 25% when the company announced it would restate financial results from 1997 through Q2 1999, then rebounded sharply as cooler heads prevailed.
The restatement, which comes at the recommendation of its new auditing firm, PricewaterhouseCoopers, isn't expected to affect revenues, net income, or cash flows, but could increase losses related to affiliates and interest charges by $60 million. This figure is the company's estimate, and it hasn't been reviewed by its auditor.
For those who don't follow the commercial launch and satellite industry's every move, Orbital Sciences manufactures, operates, and markets launch vehicles (rockets), satellites, electronics, sensor systems, and satellite ground systems and software. Its Orbcomm subsidiary, for example, operates a fleet of 28 small satellites that relay messages to handheld terminals. Since 1982 the company has built and launched 74 satellites.
The restatement stems from OrbImage, an affiliate that operates satellites used to take color pictures of the Earth's surface. The images are used by fisherman to spot fishing beds, by farmers to improve crop yields, and by meteorologists to collect weather data.
Orbital owns 60% of the stock in OrbImage but doesn't control its operational or financial affairs and therefore doesn't consolidate the results in its earnings. But it recognizes all the revenue earned and costs incurred by the affiliate. At the end of last year, Orbital had invested $83 million in OrbImage.
The division has reported heavy losses for the last three years. Apparently, KPMG, Orbital's previous auditor, approved the accounting treatment of OrbImage but later changed its position, according to Orbital. Now PricewaterhouseCoopers is taking a fresh look.
To make matters worse, the new auditors have raised questions about the valuation of Magellan, an Orbital subsidiary that offers Global Positioning System (GPS) navigational equipment for hiking, driving, and other uses. The impact of this inquiry is unclear.
The entrepreneurial company has an impressive list of achievements: In 1990 Orbital unveiled the world's first privately developed space launch vehicle; in 1995 it launched the first operational low-Earth-orbit commercial communications satellite; in 1998 it shipped the world's first handheld satellite communications device.
Because it's blazing trails, however, Orbital has taken plenty of arrows. It's had to deal with launch failures, delayed projects, and, of course, rapidly changing technology. The high cost of building and launching satellites, along with the inherent risk of the space industry, has made ownership in the company a roller coaster ride.
The trip has been mostly down this year with shares falling from more than $40 to less than $20 since January.
Still, the company is expected to grow earnings nearly 42% over the long term as its services affiliates, namely Orbcomm and OrbImage, gather speed. Who knows if this will happen. After all, Orbital is creating many of the markets it's servicing, and that takes time.
The point is that today's accounting announcement shouldn't affect the company's growth rate or ability to execute, unless investors lose confidence and the company runs into financing problems -- which is always an issue in the satellite business.
While today's announcement raises questions, Orbcomm is the same company it was yesterday, the day before, and last year. Investors should wait for the fully audited restatement and go from there.
More of Today's Best:
BREAKFAST WITH THE FOOL
JDS Uniphase Rides Fiber Optic Wave
Richard McCaffery (TMF Gibson)
-- Investors whose eyes glaze over at the mention of fiber optic communications should check out JDS Uniphase's (Nasdaq: JDSU) latest annual report, which does a good job explaining this difficult but blazing-hot sector. Last night, the fiber optic component maker reported fiscal first quarter net income (pro forma, excluding merger-related and amortization charges) of $51 million, or $0.29 per diluted share, up 121% from $23 million, or $0.14, a year ago. The mark beat the First Call/Thomson mean estimate by $0.04 per share. Sales for the quarter reached $230 million, up 104% from pro forma sales of $113 million last year, and 20% higher than Q4 sales of $192 million. Growth in the San Jose, California company's component and module business whipped sales to higher levels, according to management, as its strategy of integrating components into modules pays off.
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FOOL ON THE HILL An Investment Opinion
The Day the Sky Fell
Bill Mann (TMF Otter)
-- Seventy years ago today the stock market crashed, serving as the catalyst for nearly a decade of economic woe unsurpassed in the modern history of the United States. The damage this event caused on the collective psyche of two generations of Americans is something that perhaps only the current long-term rise in stock prices has assuaged. This single bad day, this really, really bad day, served to bring about several sea-changes without which the United States would be a very different place today.
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FOOL PLATE SPECIAL An Investment Opinion
Steiner Leisure Sinks
Brian Graney (TMF Panic)
-- Steiner Leisure Ltd. (Nasdaq: STNR), which provides spa services and skin and hair care products aboard cruise ships, bought a one-way ticket to Stock Loser Island this morning after warning that it will hit choppy waters on the earnings growth front in the coming year. On the bright side, the company posted Q3 EPS of $0.35, up from 18% a year ago and $0.02 ahead of the First Call mean estimate. However, the earnings growth did not keep up with a revenue rise of 28% in the period, as gross margin slid to 26% from 27% a year ago. Unfortunately for the company, the margin erosion is expected to continue in 2000 and result in a 5% earnings growth rate next year instead of the 19% growth previously expected by analysts.
FULL STORY >>