Friday, March 5, 1999

"For those who do not think, it is best at least to rearrange their prejudices once in a while." -- Luther Burbank

Latest Market Numbers

Intel to Acquire Level One

Taking its business to another level, Intel (Nasdaq: INTC) announced late yesterday that it will acquire networking chip maker Level One Communications (Nasdaq: LEVL) for about $2.2 billion, or about $48 3/4 a share, in stock -- an 80% premium over Level One's closing price yesterday of $27 1/8. The acquisition is the largest in Intel's 31-year history. The Pentium chip maker said the deal will provide Intel with "the silicon building blocks necessary to supply the rapidly growing demands created by the Internet and e-commerce" and establish Intel as a "leading component supplier for the rapidly growing Internet and Intranet equipment market segments."

Indeed, the acquisition will give Intel a piece of the communications chip market, an area that's growing more rapidly than the processor market, which is slowing due to sluggish PC sales. According to market research company Dataquest, sales of communications chips in the next three years are expected to increase at twice the rate of sales of microprocessors, Intel's primary source of revenue. Intel said it will continue looking for other networking acquisition candidates. Earlier this week, the company completed its $185 million purchase of Internet-equipment maker Shiva Corp.

Level One shareholders will receive 0.43 of an Intel share for each Level One share (the figure will be adjusted for Intel's previously announced 2-for-1 stock split). Level One will become a wholly owned subsidiary under Intel's Network Communications Group. The companies don't expect any immediate changes to either of their product lines, and Level One intends to continue using its existing manufacturing relationships and providing its products to customers under existing agreements. Intel said it will concentrate on selling networking equipment to small businesses.

To listen to a replay of yesterday's conference call discussing the details of the deal, dial (888) 567-0712 (within the U.S.) or (402) 220-4002 (from outside the U.S.). The recording will be available through next Thursday (March 11).

Separately, The Wall Street Journal reported that Intel is determined to avoid the public relations gaffes committed by Microsoft Corp. (Nasdaq: MSFT) as it comes to Washington, D.C., for its own antitrust trial next week. Unlike Microsoft, which has tried to dispute government charges that it bullied its customers and competitors, Intel won't deny using its information as a weapon at times -- it simply says that its actions are within the law.

News to Go

Computer superstore retailer CompUSA (NYSE: CPU) warned that based on lower-than-expected sales for the first nine weeks of its fiscal third quarter ending March 27, it expects same-store sales to fall by a percentage in the high single digits and earnings per share results to be breakeven before one-time charges. In addition, the company anticipates a loss for its fiscal fourth quarter.

Adelphia Communications (Nasdaq: ADLAC) said it will acquire Century Communications (Nasdaq: CTYA) for around $5.2 billion in cash, stock, and about $1.6 billion in assumed debt, a deal that will make Adelphia the fifth-largest cable TV operator in the country with some 4.7 million subscribers. Century's Class A shareholders will receive cash of $9.16 per share plus 0.6122 of an Adelphia Class A share for each Century Class A share -- for a total market value of $44.14 based on yesterday's close. Century's Class B shareholders will get $11.81 in cash and 0.6360 of an Adelphia Class A share -- for a total consideration of $48.14 a share.

Life sciences firm Monsanto's (Nasdaq: MTC) new arthritis-pain drug, Celebrex, has surpassed Viagra in generating record numbers of daily prescriptions early in its marketing cycle, The Wall Street Journal reported. According to NDC Health Information Services, in three of the last four days, Celebrex topped the total prescriptions generated by Viagra at a comparable stage in its marketing cycle.

Asian markets rallied today, with the Nikkei soaring 710.55 points, or 5% -- its biggest gain in five months -- to 14,894. In Hong Kong, the Hang Seng gained 328.26, or 3.3%, to 10,241.12, led by HSBC and Hong Kong Telecom.

Computer services firm Perot Systems (NYSE: PER) said it won a contract from AT&T (NYSE: T) to provide support and maintenance for the long-distance giant's billing systems.

@Home Corp. (Nasdaq: ATHM) will be added to the Nasdaq 100 Index after the close of trading next Tuesday (March 9). The high-speed Internet access company will replace Tele-Communications Inc. (Nasdaq: TCOMA), which is being acquired by AT&T (NYSE: T).

Harvey Entertainment (Nasdaq: HRVY), the company that manages and markets animated characters such as Casper and Richie Rich, received an offer from founder and former head Jeffrey Montgomery to buy the company for about $31.4 million, or about $7.50 a share, an 18% premium over yesterday's close.

More Foolishness

Don't miss this week's StockTalk interview with theglobe.com's Co-CEOs Todd Krizelman and Stephan Paternot -- see what two college buddies, fueled with a little pizza and a lot of drive, can do... Get a rundown of February retail same-store sales figures... The latest Daily Double: Security First Technologies.

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