Tuesday, December 29, 1998

"Corporation. An ingenious device for obtaining individual profit without individual responsibility." -- Ambrose Bierce

Latest Market Numbers

Schwab Tops Merrill Lynch

Online brokerage firm Charles Schwab Corp.'s (NYSE: SCH) 5% gain yesterday may have paled in comparison to rival E*Trade Group's (Nasdaq: EGRP) 26% rise, but it was Schwab that reached an unprecedented milestone Monday: Its market capitalization now exceeds that of the Wiseguy of the Wise, Merrill Lynch & Co. (NYSE: MER). As of the close of trading yesterday, Schwab's market value stood at $25.5 billion compared with Merrill's $25.4 billion.

The fact that investors now think Schwab is worth more than Merrill is especially ironic (poetic justice?) considering that the world's largest brokerage has been highly critical of online trading. A notable quote by Merrill Vice Chairman John Steffens, a.k.a. "The Big Bad Wolf": "The do-it-yourself model of investing, centered on Internet trading, should be regarded as a serious threat to Americans' financial lives." Looks like online trading is more of a serious threat to Merrill and its ilk than anything else. A Merrill spokesman, James Wiggins, "shrugged off questions about being surpassed by a relative upstart," The Wall Street Journal reported.

To be sure, Schwab's market cap is still $19 billion short of that of Morgan Stanley Dean Witter, but Rome wasn't built in one day. Plus, judging from the inexplicable, meteoric rise of Internet-related companies such as eBay (Nasdaq: EBAY) -- up more than 1,000% from its all-time low of $25 1/4 -- Internet mania may well drive Schwab into the stratosphere. Schwab's upward momentum can be seen in this chart showing its stock price movement over the past year. Compare that with charts for Merrill and Morgan Stanley, and it's clear why many investors have put their money on Charles Schwab.

News to Go

Pentium chip maker Intel (Nasdaq: INTC) has filed papers with the SEC disclosing it may sell about $18.3 million in shares of Internet search software developer Inktomi Corp. (Nasdaq: INKT) and around $4 million in shares of online "Computer Network" CNET (Nasdaq: CNWK). While the filings indicate an intent to sell, they don't obligate Intel to go through with the sale.

Oilfield services company Halliburton (NYSE: HAL) warned that it now expects to earn $0.14 to $0.16 a share in the fourth quarter, far short of analysts' expectations of $0.36. The company late yesterday announced plans to cut 2,750 more jobs and record a $24 million ($0.05 per share) after-tax charge in the fourth quarter. It was only in October that the company increased its number of layoffs to about 8,100, or roughly 8% of its workforce.

Oil drilling equipment maker Halter Marine Group (HLX) also said it anticipates fiscal Q3 earnings will fall below analysts' estimates due to higher-than-expected costs for the construction of six drill barges. The company added that it probably won't meet its revenue goal of $1 billion by fiscal 2000.

No. 2 soft-drink maker PepsiCo's (NYSE: PEP) beverage sales increased 7.7% in the four weeks ended December 6, according to consumer data-tracker Information Resources Inc. The growth was driven in part by the introduction of its new Pepsi One one calorie diet soda this fall.

Britain's General Electric Co. (GEC) -- no relation to "GE, we bring good things to life" -- reportedly is in talks with several potential merger partners, including Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Thomson-CSF of France, and British Aerospace PLC of the U.K. For now, there's no front-runner. "It's varied from week to week and even from day to day," said a GEC spokesman.

According to The Wall Street Journal, insurance companies may soon guarantee corporate revenues and expenses, which may in effect insure earnings per share. Such coverage would likely be tailored to individual companies and would leave insurers plenty of escape hatches in case companies tried to manipulate the system to take advantage of potential payments.

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor