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Closing Market Numbers
DJIA 10617.32 -101.53 (-0.95%)
S&P 500 1365.40 -11.61 (-0.84%)
Nasdaq 3124.95 -19.02 (-0.60%)
Russell 2000 446.28 +1.21 (+0.27%)
30-Year Bond 100 23/32 -8/32 6.07 Yield
Today's Market Movers:
Cable television operating company Charter Communications (Nasdaq: CHTR) dialed $7 3/4 to $22 3/4 in its first day of trading. The company, founded by Microsoft cofounder Paul Allen, is the country's fourth largest cable television operator, serving about 6.2 million customers. Charter raised $3.23 billion selling 170 million shares at $19.
High-speed wireless networking company Aironet Wireless (Nasdaq: AIRO) elevated $2 1/8 to $45 3/8 as networking equipment heavyweight Cisco Systems (Nasdaq: CSCO) agreed to acquire it for about $800 million in stock. The deal, which will pay the equivalent of $47.97 for each share of Aironet, is an 11% premium to Aironet's closing price yesterday.
Internet software and services company SilverStream (Nasdaq: SSSW) swam $15 5/16 to $83 1/16 a day after announcing that Shell Ireland, the Emerald Isle's largest oil company, has launched a new intranet system based on SilverStream's Application Server.
Network transmission products specialist C-Cor.net (Nasdaq: CCBL) traveled up $8 7/8 to $53 after announcing plans to sell 2.8 million shares of common stock at $44 per share to repay debt, pay for capital expenditures, and use for general corporate purposes.
Customer relationship management (CRM) company Exchange Applications (Nasdaq: EXAP) zipped $5 5/16 to $39 1/2 after introducing a new software and services suite that it has already licensed to Citigroup (NYSE: C). The software, which alerts sales representatives to important customer inquiries, is being tooled so that it can work with CRM products made by Siebel Systems (Nasdaq: SEBL), Broadvision (Nasdaq: BVSN), and others.
Solid waste disposal company Allied Waste (NYSE: AW) wilted $1 to $9 1/4 after announcing third-quarter adjusted net income of $44.4 million, or $0.23 per diluted share, below First Call analyst estimates of $0.28 per share. The company expects difficulties to continue for the next few quarters as it integrates Browning-Ferris Industries.
Colorful computer maker Apple (Nasdaq: AAPL) sagged $6 3/4 to $89 5/8 after analyst Richard Gardner at Salomon Smith Barney downgraded it to "outperform" from "buy" based on its recent run-up, which means Gardner believes much of the company's future growth is already factored into the stock price.
PC software king Microsoft (Nasdaq: MSFT) slipped $1 1/16 to $88 7/8 today, about the same as yesterday, on speculation regarding its future following Judge Thomas Penfield Jackson's statement that the company misused its monopoly power.
Insurance and financial services company Fremont General Corp. (NYSE: FMT) sank $1 9/16 to $7 after posting a Q3 loss from continuing operations of $0.92 per share compared to earnings of $0.49 per share last year, which was worse than the IBES mean estimate of a loss of $0.44 per share.
Information technology (IT) consultant and outsourcing firm Modis Professional Services (NYSE: MPS) slid $1 15/16 to $11 9/16 after warning that a Y2K-induced slowdown in IT spending will lead to Q4 EPS between $0.15 and $0.18, short of the First Call mean estimate of $0.33. The company also said it is exploring a spin-off of its Modis Inc. IT services division and the possible initial public offering of that unit's end-to-end e-business solutions business.
Today's Top Stories:
Amazon Angles for Home Improvement Market
Richard McCaffery (TMF Gibson)
Investors worried that online retail giant Amazon.com (Nasdaq: AMZN) can't compete with brick and mortar competitors can relax. The world's biggest Internet retailer is now selling bricks and mortar.
Seattle-based Amazon.com today announced four new additions to its product line as the online holiday season looms: home improvement, software, video games, and gift ideas. The stores open tomorrow.
In addition, Amazon has purchased Tool Crib of the North, a privately held catalog company that sells tools and equipment. Amazon did not buy Tool Crib's chain of retail and equipment stores in North Dakota and Minnesota, which will remain privately held.
After running up $13 1/16 yesterday to close at $78 on buzz of today's announcement, investors showed their disappointment this morning as the stock fell more than $4 in trading. Apparently, entry into the world of lawn rakes and mouse traps isn't what investors hoped for after Amazon's statement yesterday that the "new additions to its product lines will impact the competitive landscape of online shopping."
Still, it's worth noting Amazon's move into these new product lines, especially the hardware offering because it's such a difficult online category. Keep in mind that even home improvement king Home Depot (NYSE: HD) hasn't yet rolled out a service that allows customers to buy all their hardware products online.
After all, how can you make money shipping a ladder? Most companies couldn't, and Amazon has yet to prove it can. But its asset management, cash flow management, and customer service skills set the company apart from many of its peers and bode well for long-term investors willing to take risks.
In addition, Amazon's scale should provide the company with a strong advantage in the hardware industry. As of September 30 the company had 13.1 million customer accounts, up more than 190% from 4.5 million a year ago.
This is a powerful asset, one that gives the company bargaining power when it comes to negotiating shipping rates. If the hardware category is successful, of course, Amazon can negotiate volume discounts with suppliers.
Amazon will charge just $4.95 a shipment regardless of weight, and product returns include a no hassle policy as well as free pick up for larger items. The more Jeff Bezos, Amazon's chief executive, adds customer touches and backs them up with the proper execution, the more his strategy seems to make sense.
For example, at the new Gift Ideas store Amazon not only wraps gifts, but also lets customers pick the wrapping paper and attach a personalized note. Customers can even fill out wish lists for friends and family, which could one day prevent your grandmother from buying you that horrible pair of pants instead of a GameBoy.
No question the company has a lot to prove. In the hardware segment alone it will have to compete with rival websites such as hardware.com and TrueValue.com. But the company has created critical mass around its many products and services and keeps setting the bar for other online retailers. It remains the company to beat in this fast-growing market segment.
Go Figure! Doctors Given Final Say on Treatment
Bill Mann (TMF Otter)
Sometimes common sense drives a sound business decision.
In a landmark decision that will likely change the basic precepts by which companies provide managed care, No. 2 health insurer UnitedHealth Group (NYSE: UNH) announced today that it was dropping the advance review process on doctor treatments that has become a bane of the health maintenance organization (HMO) industry.
The move will directly affect the 14 million Americans for whom UnitedHealth provides insurance, but it also presents a potential sea change in the fundamental way managed health is provided. This change comes at a time when the managed health companies are being besieged by state lawmakers and consumer-protection groups who have become sharply critical of HMO delays or rejection of treatments recommended by doctors.
This change represents a potential financial and public relations boon for UnitedHealth. UNH reported that they spend in excess of $100 million annually on the review process, and in 99% of the time they agreed to the treatment. After an extended internal analysis, the company has found that it would be cheaper to drop the advance control of doctor-prescribed care but to perform post-treatment reviews instead.
The end result is that UnitedHealth's customers will receive faster care at the sole discretion of a medical professional, doctors will be freed to use their medical judgment, and UnitedHealth believes they will still save money. Couple this with the goodwill that UnitedHealth will receive from consumer and doctor advocacy groups and this switch in policy seems to be beneficial for all sides. All in all, this is quite a savvy move for the company, one that could prove troublesome to competitors that continue to micromanage their costs by denying certain treatments
So what took UnitedHeatlh so long to make a decision that seems so logical? And where are the other HMO's priorities?
The lack of prior change has much to do with the sacrosanctity of HMOs' core rationale that companies could provide more economical service by putting various treatments through a rigid cost/benefit analysis. HMOs have been the dominant healthcare insurance plans in the U.S. since early this decade, but their management of healthcare has been under attack by consumer-advocacy groups and doctor's organizations, such as the powerful American Medical Association.
The HMO approval process has long been highly unpopular with many doctor organizations, which have pointed out the impropriety of a bureaucratic process holding the final say in treatment. UnitedHealth's Chief Medical Officer told the Dallas Morning News that UNH ran a test project in Tennessee finding its overall costs decreased by 8% when they ceased micromanaging treatments.
Under the new policy, UnitedHealth will perform post-treatment reviews of the procedures prescribed by its doctors, but it will pay even if it disagrees with the doctor's decision. By subjecting the doctors to post-treatment review, UnitedHealth believes that it can continue to guide in regard to cost/benefit without denying or delaying treatments that would in any case be approved.
It remains to be seen what this decision will have on other HMOs, particularly Aetna (NYSE: AET), the industry's largest player. Certainly, the goodwill that UnitedHealth should receive from their policy change will further spotlight the management practices of its competitors, though whether they will make similar consumer-friendly moves remains to be seen. UnitedHealth has retained a reputation among many doctors as a less intrusive cost manager compared to other HMOs, Aetna in particular.
As such, there is no guarantee that Aetna and others would realize the same cost savings that UnitedHealth expects. However, it is a certainty that they will be watching developments at their rival quite closely.
More of Today's Best:
FOOL ON THE HILL An Investment Opinion
Don't Forget FDX in UPS Hoopla
Warren Gump (TMF Gump)
-- The pending initial public offering (IPO) of United Parcel Services (NYSE: UPS) has gathered a lot of attention this week, with the price range raised to $47-$49 per share, up from prior estimates of $36-$42. If successfully completed, this $5 billion+ deal with become the biggest U.S. IPO ever, topping the Conoco (NYSE: COC.A) debut earlier this year. As the world's largest package delivery concern, UPS will instantly become the premier stock to own in the sector. In fact, I would guess that many shareholders of FDX (NYSE: FDX), the owner of Federal Express and RPS, have sold or plan to sell some of their FDX shares to raise cash to purchase some UPS stock. This decision may be a good one, but I would caution people from throwing FDX out in the wind.
FULL STORY >>
FOOL PLATE SPECIAL An Investment Opinion
Dollar General's Q3 Roll Call
Brian Graney (TMF Panic)
-- Discount variety retailer Dollar General (NYSE: DG) turned in fiscal third-quarter earnings of $0.19 per share this morning, up from $0.15 a year ago and in line with the First Call mean estimate. Sales growth was a strong 21.6% for the period, continuing the 20%+ year-over-year sales growth trend started during the first two quarters of the year. Despite the growth, Dollar General's stock reacted this morning with about as much emotion as Gen. Thomas "Stonewall" Jackson at the First Battle of Manassas. While still up 34% on the year, Dollar General's shares have slid 22% from their 52-week high in the past month as the company's same-store sales have slowed.
FULL STORY >>
BREAKFAST WITH THE FOOL
Microsoft Vs. John Q. Public?
Richard McCaffery (TMF Gibson)
-- Fallout from Judge Thomas Penfield Jackson's statement of fact regarding Microsoft (Nasdaq: MSFT) continued today as some speculated that the real danger to the company could be a blizzard of lawsuits from consumers and competitors, The Wall Street Journal reported. The threat of class action lawsuits from consumers and rivals -- the kind of swampy mess the tobacco industry is now wading through -- is Microsoft's primary reason to settle the case before Judge Jackson issues a final ruling, which is expected to come around the second quarter of next year. Damages from plaintiffs claiming Microsoft abused its monopoly power to impede competition could reach into the billions, though it would be difficult to put a price tag on such claims.
FULL STORY >>