Motley Fool QuickNews

Friday 12/31/99

Closing Market Numbers

DJIA         11,497.12  +44.26    (+0.39%) 
S&P 500       1,469.26   +4.79    (+0.33%)
Nasdaq        4,069.09  +32.22    (+0.80%)
Russell 2000    504.73   +8.14    (+1.64%)
30-Year Bond  95 12/32  -24/32  6.48 Yield

Today's Market Movers:

UPS

Fiber optic network builder Global Crossing (Nasdaq: GBLX) moved up $2 3/16 to $50 despite US West's (NYSE: USW) announcement that it has sold 65% of its stake in Global Crossing, or about 24 million shares. The transaction will reduce US West's Q4 EPS by about $0.44 after taxes. US West rose $1 13/16 to $72.

Financial market data provider Track Data Corp. (Nasdaq: TRAC) tacked on $3 5/16 to $10 3/16 after saying it plans to offer access to its myTrack online trading system through 3Com's (Nasdaq: COMS) Palm Pilot VII wireless devices, allowing myTrack users to look up quotes, place trades, and check positions.

Community healthcare resource centers operator Dynacq International (Nasdaq: DYII) climbed $6 7/16 to $18 after setting a two-for-one stock split.

Integrated communications provider CapRock Communications (Nasdaq: CPRK) advanced $9/16 to $32 7/16 after Wachovia Securities analyst Stephen Shook started coverage of the firm with a long-term "buy" rating and a price target of $42 per share.

DOWNS

Online streaming media software company RealNetworks (Nasdaq: RNWK) moved back $6 7/16 to $120 5/16 today. The shares have come under fire this week after reports that the company would lose a contract to supply leading Web portal Yahoo! (Nasdaq: YHOO) with the means to play audio and video over the Internet in favor of a Microsoft (Nasdaq: MSFT) product. Bloomberg last night reported that Yahoo! considered doing so but changed its mind.

Shares of online software retailer Egghead.com (Nasdaq: EGGS) were a hot property this week following the release of Media Metrix Web metering data that placed the company's website among the Internet's top e-commerce sites for the week of Dec. 19. "The basic issue is that we're a leading brand, we're well-recognized and we service our customers well," CEO Jerrold Kaplan said earlier this week in an attempt to keep the good feelings swirling. The shell cracked today as the stock fell $2 13/16 to $16 3/16.

Oilfield services company Schlumberger (NYSE: SLB) gave up $2 1/8 to $56 1/8 today. The company completed the spinoff of its Sedco Forex offshore contract drilling business, which will be merged with Transocean Offshore Inc. (NYSE: RIG). Transocean shares moved up slightly today; the company will own 48% of the newly formed entity, Transocean Sedco Forex Inc., with Schlumberger stockholders owning the rest.

Stocks in general fell like crazy in anticipation of the Year 2000 problem (not really). Fool News reporters were seen hastily completing afternoon wrap-ups as they prepared to leave the office early to stock their bunkers with gold, snack-sized Chips Ahoy! cookie packets, and paraffin-dipped back issues of Barron's.

Today's Top Stories:

FOOL PLATE SPECIAL An Investment Opinion
Thoughts on Amazon for the New Year
By Brian Graney (TMF Panic)

Here's a lead that's sure to grab some attention on a slow news day: Amazon.com (Nasdaq: AMZN) has lost its mojo, baby! Sure, it's shameless to run a story about Amazon on a day like today. But remember last year? As 1998 was winding down, the online retailer was on everyone's mind, prompting feature articles in glossy financial magazines and a bout of price target silliness from the dependable Wise on Wall Street. Ah, those were the good old days.

In the days leading up to the end of the current year, the situation is much different. Jeff Bezos ends up as Time's "Person of the Year" pin-up for 1999 and all of the regular Amazon naysayers appear to be holed up in their underground Y2K bunkers. This week, Amazon's proprietary consumer data-monitoring software lead to a privacy complaint with the Federal Trade Commission. What happened? Zilch. Last year, Internet-hype sickened commentators would have flocked to this story like vultures to a caribou carcass. This year, the folks on Wall Street seem more interested in when the next season of Who Wants to Be a Millionaire? is scheduled to start. What's up with that?

E-commerce is yesterday's news. Business-to-business e-commerce, now that is where the action is these days. Oddly enough, Amazon's sudden unpopularity in the mainstream business press comes exactly at the moment when some of the old fears that bears used to regularly take turns lobbing at the company like grenades have turned out to be duds. Can Amazon's business model be on the verge of -- gulp! -- acceptance by the consensus?

Perhaps the biggest myth about Amazon that was blown down in 1999 has been the idea that there are "low barriers to entry" in e-tailing. The argument used to be that the company was doomed to fail because any nitwit with a T-1 connection and a copy of HTML For Dummies could come in and plunder Amazon's customers like the Romans rolling through Carthage in the Third Punic War. As investors this year have discovered, that line of thinking has turned out to be an absolute fallacy.

Here's a short performance list of a few 1998 e-tailing IPOs that were supposed to prove the validity of the "anyone can do it" e-commerce theory:

                1999      1998     Current
  Company      Return   IPO Price   Price   

Cyberian Outpost
 (Nasdaq: COOL)  -63%    $18      $9 7/8
Beyond.com
 (Nasdaq: BYND)  -61%    $9       $7 15/16 
CyberShop
 (Nasdaq: CYSP)  -53%    $6 1/2   $5 1/2

The list is just a snapshot and doesn't include 1999 IPO losers like Value America (Nasdaq: VUSA) or barnesandnoble.com (Nasdaq: BNBN), which are both ringing in the new year with stocks trading below their initial public offering prices.

In contrast, Amazon is prepared to end 1999 with a return of about 52%, with most of the gain coming since Barron's last went back to the "low barriers to entry" well in its now-infamous "Amazon.Bomb" article in late May. (At a mere $3.50 per copy, Barron's once again proved this year that it is one of the best contrarian stock market indicator bargains out there. Good job, guys. Keep up the lousy work.)

This discussion will take on added relevance in the new year as low-cost retailer Buy.com prepares to enter the fray with its own initial public offering. This IPO has been in a holding pattern since Halloween like a TWA flight over LaGuardia. With the poor results turned in by most of its already public e-tailing rivals in 1999, the foot-dragging is not a shocker. Running a negative gross margin and making up the difference with ad revenues is not a business model that investors are going to embrace anymore, a point that Value America made all-too-clear earlier this week.

Instead, investors today are seemingly only willing to invest in the company that has the early competitive advantage in e-tailing. At this stage in the game, that company is Amazon. In the coming years, Amazon might very well end up as the biggest business flop of all time, especially if it makes boneheaded moves like sacrificing customer service, hiring ineffective managers, or losing sight of what the online consumer wants. But as another year in Internet time draws to a close, the chances that an upstart will come along and knock Amazon from its e-tailing perch become that much slimmer. The barriers to entry, as several e-tailers found out in 1999, are just too high.

Related links:

Fool Plate Special, "Value America Not Living Up to Its Name," 12/29/99

Fools on "Amazon.bomb," 06/08/99

Fool on the Hill, "The Internet and Human Endeavor," 12/03/98


Rawlings Picked Up off Waivers
By Dave Marino-Nachison (TMF Braden)

Though home-run duels and affable Dominicans have helped Major League Baseball reclaim its post as chief among America's midsummer diversions, Rawlings Sporting Goods (Nasdaq: RAWL) hasn't been able to boast a similar return to prominence.

The company's shares have slumped like an aging catcher over the past two years, and Wall Street has been losing interest. On Dec. 15, CIBC World Markets, one of the few brokerages still following the stock, cut the company from its coverage list.

It's not surprising. Rawlings is coming off a fiscal year (ended August 31) during which it lost $3.4 million amid spiraling marketing costs and a slew of unexpected charges. Ridden with debt, Rawlings has looked about as appealing as an RFK Stadium hot dog, which is probably the real reason they won't bring baseball back to D.C.

Like a veteran baseball man signing on to manage the Milwaukee Brewers, Rawlings management believes there is still hope of better days at the ballpark. Earlier this month, the company ended a nearly six-month strategic review (more buzzwords in this Foolish feature) with the announcement that it intends to sell some businesses, cut jobs, refocus marketing, and rejigger its manufacturing operations with an eye toward a return to profitability.

And today the company worked to allay concerns that it might be following Joltin' Joe to Kevin Costner's Iowa backyard by announcing that it snagged a five-year, $75 million credit pact from General Electric's (NYSE: GE) GE Capital Corp. to replace another arrangement that was going to run its course in April. Company auditor Arthur Andersen, after considering the news, reversed its "going-concern opinion" on the company, which in essence reflected worry that Rawlings was heading into the bottom of the ninth in serious need of a pinch hit.

A few investors were willing to take a swing on the news, the shares rising about 5% -- not much in real-dollar terms -- this morning. Should you? While the company's balance sheet isn't exactly pristine, the GE Capital arrangement should ease investors' minds about whether Rawlings will be around to help baseball into the next thousand years, which means their concerns can return to the evaluation of management's ability to make their restructuring go. Some value types like to look for out-of-favor American institutions to round out their portfolios, and heading into the year 2000 Rawlings certainly fits the bill.

The next time investors are likely to hear from Rawlings will probably be Jan. 13, as the company has scheduled a conference call for 3 p.m. EST to discuss both full-year fiscal 1999 results and Q1 2000. Rawlings appears to have reached a fork in the road. The question now, former New York Yankee Lawrence Peter "Yogi" Berra -- who shares a hometown, St. Louis, with Rawlings -- might have said, is whether the company will take it.

More of Today's Best:

FOOL ON THE HILL An Investment Opinion
It Takes a Market to Raise a Child
By Bill Mann (TMF Otter)
-- Dear Hannah,
Tomorrow will be the beginning of the second millennium in your life. The day after will be the start of the third week of your life. You have many, many weeks yet to go, but unless there are some really astounding medical breakthroughs, you most likely will be entering the last millennium of your life. If you really want, next year we can celebrate the REAL changing of the millennium, but to me there is something poetic about the advent of the year 2000 that 2001 will not be able to match.
FULL STORY>>

BREAKFAST WITH THE FOOL
What's the Opposite of Technology? Utilities
By Richard McCaffery (TMF Gibson)
-- It's no surprise that technology stocks outperformed every other sector in the Standard & Poor's SuperComposite 1,500 this year. This group of stocks rose 71.9% in 1999, compared to 70.9% last year. The hottest-performing sector in technology? Semiconductor equipment, which jumped 157%, compared to a mere 26.5% last year, as the industry pulled out of a viscous slump. When you think of semiconductor equipment, think Applied Materials (Nasdaq: AMAT), which hopped from $41 1/2 to $127 3/4 for a 208% gain.
FULL STORY>>

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