<BREAKFAST WITH THE FOOL>

Wednesday, February 17, 1999

"It's possible to own too much. A man with one watch knows what time it is; a man with two watches is never quite sure." -- Lee Segall

Latest Market Numbers

Tighter Ties for AOL & eBay?

America Online (NYSE: AOL) is reportedly in talks with eBay Inc. (Nasdaq: EBAY) regarding a closer business relationship, which could entail anything from jointly developing content to AOL acquiring a minority stake in the online auction company, according to The Wall Street Journal. Although discussions remain "fluid," AOL management reportedly is very interested in building stronger ties with eBay, and AOL's CEO Steve Case has referred to eBay as one of the Internet businesses he most admires, the Journal reported, citing "people familiar with the situation."

AOL and eBay already have an ongoing relationship. Last September, the companies broadened a marketing pact originally signed in December 1997. Under the current agreement, eBay pays AOL at least $12 million over three years and provides a unique front page exclusively for AOL users in exchange for more than 100 links on AOL in areas where collectors are likely to hang out.

In a closer alliance, eBay's online auction expertise would complement AOL's Digital Cities service, which provides entertainment guides on individual cities. This would allow AOL to enter the auction business and allow eBay to auction bulky items such as cars or furniture in specific markets. In addition, such an alliance would further boost eBay's substantial lead over its competitors, including Yahoo! (Nasdaq: YHOO), whose auction service -- run by Onsale Inc. (Nasdaq: ONSL) -- now has some 100,000 listings.

News to Go

PC maker and direct seller Dell Computer (Nasdaq: DELL) announced fiscal fourth quarter earnings of $0.31 a share, up 55% from a year ago and meeting analysts' expectations. Revenues increased 38% to $5.17 billion, falling short of analysts' projections as well as the 56% average growth rate in the preceding eight quarters. Dell also announced a 2-for-1 stock split that will take effect March 5. For more on Dell's earnings, see last night's Evening News. The company's conference call is available on its website.

Hewlett-Packard (NYSE: HWP) said its fiscal first quarter earnings increased to $0.92 a share from $0.86 a year earlier, topping First Call's analysts' mean estimate of $0.83. But the computing giant reported a mere 1% increase in revenues and warned that "there are many reasons for continued caution, given the economic environment." In its conference call, HP said it expects Q2 sales to rise just slightly year-over-year, between 1% and the mid-single digits, and fiscal 1999 sales growth on the low end of its earlier projection of an 8% to 10% gain.

Casual apparel retailer Abercrombie & Fitch (NYSE: ANF) reported fiscal Q4 EPS of $1.12, a 65% jump from $0.68 last year, crushing analysts' mean estimate of $0.97. Net sales jumped 44% to $304.6 million, while same-store sales increased 26%.

"Scrupulously complying" with an order from a tough U.S. district judge, the union representing American Airlines pilots made an initial $10 million payment for the sick-out it staged last week that disrupted travel for millions of travelers. The union faces the possibility of an even larger fine today. Meanwhile, AMR Corp.'s (NYSE: AMR) American Airlines is virtually back to a normal schedule of flights.

Semiconductor equipment maker Applied Materials (Nasdaq: AMAT) reported fiscal Q1 EPS of $0.11 (excluding one-time items), down from $0.52 last year but better than analysts' mean estimate of $0.06. The company said, "The near-term outlook for our industry is favorable, with an improved DRAM [dynamic random access memory] pricing environment, healthy PC demand and a strong U.S. economy."

Wireless communications software company Geoworks Corp. (Nasdaq: GWRX) said that online "books, music and more" retailer Amazon.com (Nasdaq: AMZN) will acquire a 7% stake in the company for $5 million and assume its Seattle office lease and hire certain employees.

Web community theglobe.com (Nasdaq: TGLO) reported a Q4 loss of $0.53 a share compared with last year's loss of $0.16 and analysts' expectations of a loss of $0.65. Revenues totaled $2.8 million, up 78% from the prior quarter and 682% from the same quarter a year ago.

Chocolate maker Hershey Foods (NYSE: HSY) announced plans to buy back up to $230 million in shares using proceeds from the company's recent sale of its pasta business. The authorization comes on the heels of its completion of a $200 million program authorized in early 1996.

More Foolishness

The latest addition to the Rule Maker Portfolio: Yahoo! Read all about it in the Buy Report... Check out a special feature on "The Promise of the Internet"... Whatever you do, don't miss the latest StockTalk interview, with Jerry Kaplan, president and CEO of online discount retailer Onsale... The latest Daily Trouble: Knoll Inc.

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