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Closing Market Numbers
DJIA 11200.54 +56.27 (+0.50%) S&P 500 1433.43 +15.34 (+1.08%) Nasdaq 3911.15 +127.28 (+3.36%) Russell 2000 475.79 +8.60 (+1.84%) 30-Year Bond 95 19/32 -7/32 6.46 Yield
Today's Market Movers:
Computer products direct retailer Micro Warehouse (Nasdaq: MWHS) boxed up a $2 13/16 gain to $18 1/16 after a group of investors led by Northwest Airlines (Nasdaq: NWAC) chairman Gary Wilson and former IBM (NYSE: IBM) CFO Jerome York agreed to take the company private in a $725 million buyout. In exchange for their shares, Micro Warehouse shareholders will receive $19 per share in cash.
Internet incubator CMGI (Nasdaq: CMGI) picked up $48 1/4 to $270 1/4 after Merrill Lynch analyst Henry Blodget started coverage of the firm with a near-term "accumulate" rating and a 12- to 18-month price target of $300 per share.
GO.com (NYSE: GO), the tracking stock for media giant Walt Disney's (NYSE: DIS) online operations, surged $6 1/8 to $28 on reports that Disney chairman and CEO Michael Eisner recently bought shares in the company. Additionally, Schroder & Co. analyst Arthur Newman raised his rating on GO.com to "outperform significantly" from "perform in line."
A quartet of companies received a boost today thanks to price target increases from J.P. Morgan. Optical and wireless networking equipment company Nortel (NYSE: NT) rose $6 7/16 to $99 1/4 after its price target was raised to $125 per share from $85 per share, while wireless handset and chip maker Motorola (NYSE: MOT) gained $3 27/32 to $138 1/2 on a target revision to $165 from $120. CDMA chipset maker Qualcomm (NYSE: QCOM), which is now seen hitting $570, added $30 1/16 to $496 7/8 while Internet router and Layer 3 switches maker Foundary Networks (Nasdaq: FDRY) advanced $20 to $314 thanks to its new $360 target.
Internet and broadband access provider Juno Online Services (Nasdaq: JWEB) ramped up another $37 3/4 to $66 3/4, extending yesterday's 77% gain, after saying it will add free Web access to its existing free dial-up e-mail service. PaineWebber also reportedly doubled its price target for the firm to $120 per share. Fellow free Internet access provider NetZero (Nasdaq: NZRO) was lifted $10 3/8 to $33 15/16 as well.
Online discount broker National Discount Brokers (NYSE: NDB) traded down $3 7/8 to $31 after announcing fiscal Q2 operating EPS of $0.25 per share, down from last year's $0.32 per share, due in part to a 23% increase in sharecount. The company also said its average acquisition cost per account more than tripled to $379 from $107 a year ago.
PC maker Micron Electronics (Nasdaq: MUEI) slid $1 3/8 to $11 despite reporting fiscal Q1 EPS of $0.15 versus $0.12 a year ago. However, revenues dropped 13% to $353 million during the period. Reportedly on market share erosion concerns in the PC market, several analysts lowered their full-year earnings expectations for the firm today.
Management consultant Navigant Consulting (NYSE: NCI) voyaged $1 1/8 lower to $9 after saying lower than expected revenues will lead to Q4 EPS between $0.20 and $0.25, missing the First Call mean estimate of $0.40. The company said it is aiming for EPS of $1.00 to $1.10 next year, much lower than the previous estimate of $1.95.
Technology-related online content provider CNET Inc. (Nasdaq: CNET) slumped $6 9/16 to $67 7/16 after First Union Securities analyst Carolyn Trabuco cut her rating on the company to "buy" from "strong buy."
Today's Top Stories:
Bank One's Real McCoy Real Gone
Dave Marino-Nachison (TMF Braden)
Following a late 1999 that saw his company's stock take a dive Rodney Dangerfield would envy, longtime Bank One (NYSE: ONE) Chairman and CEO John McCoy resigned today, effective immediately. Investors cheered the news -- as they often do in the short term when management is shaken up during hard times -- as the shares rose more than 10% today.
McCoy, a member of the company's board since 1983 and the man who once relished the job of leading Bank One into the next decade -- the company merged with First Chicago NBD last year -- will be replaced as chairman by board member John Hall, retired chairman and chief executive officer of oil refiner and chemicals company Ashland Inc. Bank One President Verne Istock -- who ran First Chicago -- will act as CEO while the company looks for a full-time replacement.
While the company didn't issue an official reason for McCoy's departure, the Fool's archive tells the story pretty well. In late August, the company said slowing growth and margin pressure at its First USA credit card division (the nation's leading Visa issuer, purchased in 1997) was going to hurt results for the rest of the year as customer attraction and retention has become both more difficult and more costly. Click here for a Foolish take on the story.
And though some Fools might rejoice at tales of a credit card company hitting the skids -- and one did in a column that followed closely on the news' heels -- Bank One shareholders have suffered. Though we're not the types to have fun at investors' expense, readers might do well to revisit Bill Mann's Aug. 27 Fool on the Hill column, in which he notes that an environment that's bad for credit card issuers can be a good one for penny-wise Fools.
The bad news continued into the fall. Whether one saw the writing on the wall or not, the October management reshuffling has turned out quite portentous. Istock gave his chairmanship to McCoy and took over the president's duties, taking over the daily operations of some of the company's key businesses, a move precipitated in part by the resignation of First USA head and then-Chairman Dick Vague.
Not only did it presage further changes at the top, though, it also served as a precursor to a further scaling back of financial estimates thanks to a familiar problem. On Nov. 10, Bank One scaled full-year estimates even further back as Bill Boardman had filled in for Vague and his team's review found the picture even less attractive than it looked over the summer. McCoy canceled a scheduled investor update soon after; the CEO of the company's fledgeling WingSpanBank.com Internet operation trumped him a few days later by jumping ship.
Now investors are waiting not only to see who will step in and try to right Bank One's ship but just how leaky it really is; an update scheduled for next month will be hotly awaited. Investors should keep in mind that today's move was predicated not by change so much as the promise of it, and watch what follows closely. Despite it's damaged stock, Bank One is still a large and powerful financial institution. What new leadership will do with it remains to be seen.
Bank One Message Board
Fool on the Hill, 8/27/99, "Reveling in Bank One's Struggles"
Breakfast With the Fool, 8/25/99, "Credit Card Woes at Bank One"
OnHealth Nabs Crown in War for Eyeballs
Richard McCaffery (TMF Gibson)
Online health website OnHealth Network (Nasdaq: ONHN) got the nod in the Internet battle for eyeballs today as it logged more Internet traffic in November than any other health-related destination on the Web, according to Media Metrix (Nasdaq: MMXI).
The Seattle-based company jumped more than 20% on the news.
OnHealth's coronation as the number one site represented a coup over rival drkoop.com (Nasdaq: KOOP), which held the position of top-ranked health-related website for eight consecutive months.
OnHealth now has 3 million unique users in November, up 108% from 1.4 million in October, and page views jumped 22% to 15.9 million, up from 13 million in October. According to Media Metrix, OnHealth is the 82nd most frequently visited site on the Web, which gives you an idea of how successful the company has been with increasing its online community.
Both OnHealth and drkoop trade in the same ball park, with OnHealth closing last night at $10 1/8 and drkoop at $14 5/8. OnHealth is off about 55% from its 52-week high, while drkoop is down about 65%.
Investors may wonder why OnHealth and drkoop trade at such a discount to rivals like Healtheon/WebMd (Nasdaq: HLTH), which closed last night at $38 1/16 and has a $2.6 billion market value. OnHealth has a $244 million market value and drkoop has a $450 million market cap.
The big difference between the companies is their business model, and investors shouldn't get caught up in the idea that all Internet business are created equal.
OnHealth is a content provider, which means the bulk of its revenue comes from advertisers. No one's really sure how this business model will pan out, and analysts that follow the company are eager to see it diversify its revenue stream with e-commerce offerings, syndication of content, and other services that bring in cash. The company has made strong moves in some of these areas, but investors need to ask tough questions -- is it a content provider with a business model that will last?
OnHealth's strength so far has been its consumer-oriented website, which provides user-friendly content on a wide range of health topics. It's recently spiced up its offerings with provoking interactive tools that let readers recommend doctors, check symptoms, quit smoking, and address other personal health issues. Its site has won a string of awards that attest to its appeal and ease of use.
Healtheon, on the other hand, has a business-to-business and business-to-consumer model. The company is working to connect patients, physicians, and
healthcare institutions through its partnerships, content, and Web-based information network. The goal is to reduce costs and improve efficiencies, as well as the quality of care, by building a network. It also has loads of cash.
Another top-shelf rival is CareInsite (Nasdaq: CARI), which is developing a Web-based e-commerce system to be used by doctors, suppliers, and patients. Medical Manager (Nasdaq: MMGR), which provides a range of medical information services and makes medical plastics and filtration systems, owns 72% of CareInsite's stock. Analysts like CareInsite because it already has a customer base.
And the competition doesn't stop there. New health-related websites are cropping up every day. The latest rage is so-called extreme vertical sites, which offer surfers in-depth focus on one topic, like cancer research (Oncology.com) or mental disorders (Depression.com).
Any further look at OnHealth should focus on ways the company will earn money to compete with information technology companies that have an installed user base and now offer content and other community-based information services.
More of Today's Best:FOOL ON THE HILL An Investment Opinion
Investing in Biotech
Warren Gump (TMF Gump)
-- Although the price-to-earnings ratios of most biotechs are quite high, I believe the sector's opportunity-to-price ratio is greater than that of any other sector. This perspective is formed by the tremendous prospects brought on by advances in genomics, particularly the pending unraveling of the human genome. The better understanding of the human body brought on by this endeavor should result in extraordinary developments over the next three to twenty years. Investors with the patience to put their money in these stocks should be well rewarded for their duration.
FULL STORY >>
FOOL PLATE SPECIALAn Investment Opinion
CheckFree Catches a BlueGill
Dave Marino-Nachison (TMF Braden)
-- Shares of online bill payment services firm CheckFree (Nasdaq: CKFR) didn't move much this morning, rising only slightly following the company's announcement of the purchase of electronic billing software developer BlueGill Technologies. The hard numbers: CheckFree will exchange approximately 3.2 million of its common shares for privately held BlueGill, valuing it at approximately $250 million. The deal is expected to account for approximately $5 million of revenue -- fiscal 1999 revenues were approximately $250 million -- and $0.10 of charges to earnings per share for fiscal 2000 (ending June 30).
BREAKFAST WITH THE FOOL
Sports Heroes Creating Online Store
Richard McCaffery (TMF Gibson)
-- John Elway, Michael Jordan, and Wayne Gretsky, the triumvirate of recently retired sports heroes, are kicking off an online sporting goods business. The three legends and their financial partners are buying the sporting goods business of sports news and information website SportsLine.com (Nasdaq: SPLN). It's a 10-year contract worth $120 million. Under the plan, MVP.com, Elway's recently purchased website, will buy the sporting goods business. Elway initially planned to promote MVP.com as a sports and fitness news website, but he now plans to focus on selling merchandise. MVP.com will launch its website in January, which will offer tips and stories from sports figures and such. It will also sell a wide range of sports equipment and apparel.
FULL STORY >>
Revenue Slowdown Vexes Vixel
Brian Graney (TMF Panic)
-- Storage area network (SAN) products developer Vixel Corp. (Nasdaq: VIXL) was pounded for a big loss this morning after warning that it will report a fiscal Q4 loss between $0.26 and $0.30 per share on lower-than-expected revenues. Analysts surveyed by First Call had been hoping for a loss of only $0.25 per share or so. Revenues are seen between $7.5 million and $8 million for the period, a 10% to 16% sequential slide. Management said some customers have delayed orders for the company's 8100 full fabric fibre channel switch ahead of the introduction of its new 7000 series switch, which will hit the market in February. Also hampering earnings were slowness in the firm's entry-level SAN products, which was chalked up to the Y2K bugaboo.
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