Thursday, February 18, 1999

"If economists were any good at business, they would be rich men instead of advisers to rich men." -- Kirk Kerkorian

Latest Market Numbers

Dow Jones Internet Index

The publisher of The Wall Street Journal and Barron's and creator of the too-often quoted Dow Jones Industrial Average, along with 3,000 other indexes, has now compiled new indexes that track shares of Internet companies. The main attraction, the Dow Jones Internet Index, comprises stocks representing 80% of the market capitalization of Internet stocks. The number of stocks in the index now stands at 40 but could increase or decrease depending on the market.

The Dow Jones Internet Index is actually made up of two subindexes: the Dow Jones Internet Commerce Index and the Dow Jones Internet Services Index. The commerce index comprises stocks that derive at least half of their revenue from providing goods or services online, such as Amazon.com (Nasdaq: AMZN), Broadcast.com (Nasdaq: BCST), E*Trade (Nasdaq: EGRP), eBay (Nasdaq: EBAY), and Yahoo! (Nasdaq: YHOO). The services index is made up of stocks that derive no less than half of their revenue by providing Internet access or other services -- for example, America Online (NYSE: AOL), @Home (Nasdaq: ATHM), CNET (Nasdaq: CNWK), Network Solutions (Nasdaq: NSOL) and RealNetworks (Nasdaq: RNWK).

Components of the new indexes are value weighted, and large stocks are limited to taking up a maximum of 10% of the indexes. To be considered, initial public offerings (IPOs) must be at least three months old and have a three-month trading average closing price above $10 a share. The indexes will be reviewed quarterly and be adjusted as needed. For more on the new Internet indexes, including charts and details on methodology, click here.

The Chicago Board Options Exchange (CBOE) plans to launch an index option based on the Dow Jones Internet Commerce Index on February 26.

News to Go

AT&T (NYSE: T) won the blessings of federal regulators regarding its acquisition of cable operator Tele-Communications Inc. (Nasdaq: TCOMA) and thus cleared the final major hurdle to the deal. The companies' shareholders also voted to approve the transaction yesterday.

In an important vote of confidence for the Linux operating system, IBM (NYSE: IBM) announced an alliance with Red Hat Software to include the platform on certain IBM server and client systems alongside the standard Microsoft (Nasdaq: MSFT) Windows. This includes Netfinity servers, PC 300 Commercial Desktops, IntelliStations, and ThinkPads. The first demonstration of Linux will be several Red Hat websites powered by Netfinity servers.

Enterprise application software company PeopleSoft (Nasdaq: PSFT) said the SEC has finished reviewing the company's accounting of past acquisitions and it won't have to restate any financial statements for the last three years. The company said the SEC's action -- or, really, non-action -- shows that recently filed class-action shareholder lawsuits relating to its accounting methods are "groundless."

Dutch insurer Aegon NV (NYSE: AEG) announced it will acquire U.S. financial services company Transamerica Corp. (NYSE: TA) for $9.7 billion in cash (30%) and stock (70%), representing a 35% premium over Transamerica's closing price yesterday of $57 5/8. In addition, Aegon will assume about $1.1 billion of Transamerica's debt.

Food products company H.J. Heinz Co. (NYSE: HNZ) said it plans to sell or close 15 to 20 plants worldwide, cut as many as 4,000 jobs (9% of its global workforce), and sell its Weight Watchers classroom business to free up more money for marketing. The company will take pre-tax charges of about $900 million for the restructuring.

Despite pressure from investors, RJR Nabisco Holdings (NYSE: RN) CEO Steven Goldstone told analysts at a conference yesterday that spinning off the Nabisco food unit is currently "not practical," The Wall Street Journal reported. He added that the company is looking into ways to bolster its troubled international tobacco unit, including a possible joint venture or outright sale, in the first half of this year.

Biotechnology firm Inhale Therapeutic Systems (Nasdaq: INHL) announced it has agreed to develop an inhalable form of Biogen Inc.'s (Nasdaq: BGEN) Avonex, a treatment for multiple sclerosis. Under the terms of the agreement, Inhale will receive royalties on product sales, an up-front signing fee, and up to an estimated $25 million in research and development (R&D) funding and potential milestone payments.

More Foolishness

Don't miss the latest Dueling Fools installment on Sun Microsystems... Check out Louis' musings on Onsale and the future of e-commerce in last night's Fool on the Hill column... See what Dale has to say about yesterday's sell-off of shares of Dell Computer in his Boring Portfolio report.

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