<BREAKFAST WITH THE FOOL>

Tuesday, May 18, 1999

"Men have become the tools of their tools." -- Henry David Thoreau

Latest Market Numbers

Amazon Invests in HomeGrocer

Ever-acquisitive Internet retailer Amazon.com (Nasdaq: AMZN) has bought a 35% stake in privately held online grocery store HomeGrocer.com Inc. for $42.5 million. This follows Amazon's recent acquisitions of Exchange.com and LiveBid.com and investments in Drugstore.com and Pets.com.

HomeGrocer.com has around 10,000 customers in Seattle and Portland, Oregon -- that's minute compared with Amazon's 8.7 million "Books, Music and More" customers. Now infused with new capital, HomeGrocer aims to expand into half a dozen new markets this year.

Like Amazon -- and most Internet companies -- HomeGrocer is operating in the red, though it hopes its Seattle operation will be cash-flow breakeven by this year's fourth quarter. HomeGrocer's key rivals are Peapod Inc. (Nasdaq: PPOD) (www.peapod.com) of Skokie, Illinois, and Webvan Group of Foster City, California.

David Risher, Amazon's senior vice president for product development, will join HomeGrocer's board, which is chaired by newly recruited former Netscape Communications CEO Jim Barksdale.

News to Go

All eyes on the Fed... The Federal Open Markets Committee (FOMC) meets today. Pundits are expecting an announcement indicating a change in its "bias" from a neutral stance toward favoring raising interest rates to keep inflation in check. An announcement, if any, would hit after 2 p.m. Eastern time.

Hewlett-Packard (NYSE: HWP) posted fiscal second-quarter earnings of $0.88 a share, up from $0.65 a year ago, exceeding expectations of $0.80. The company also reported a 3% gain in revenues to $12.4 billion and a 10% increase in orders. While pleased with its second quarter, HP gave a cautious outlook, saying that "challenges remain," including uncertainty about the impact of the Year 2000 problem (Y2K) and the transition under way in its enterprise storage business.

Department store retailer J.C. Penney (NYSE: JCP) reported fiscal first-quarter earnings of $0.61 a share, down from $0.64 in the same year-earlier quarter but ahead of analysts' mean estimate of $0.53. The company plans to create a separate tracking stock for its Eckerd Drugstore business and spin out 20% of it in an initial public offering (IPO). J.C. Penney also said it will outsource management of its credit-card operation.

Upscale jeweler Tiffany & Co. (NYSE: TIF) turned in fiscal first-quarter earnings of $0.44 a share compared with $0.31 last year. Analysts had predicted EPS of $0.35 to $0.40. U.S. retail sales rose 22%, with same-store sales up 12%, while international retail sales also gained 22% on "solid growth in most markets," including all-important Japan.

The defense-electronics holdings of telecommunications company GTE Corp. (NYSE: GTE) are being auctioned off for an expected price of more than $1.3 billion, with General Dynamics (NYSE: GD), L-3 Communications (NYSE: LLL), and Raytheon (NYSE: RTN.A) among the leading bidders, The Wall Street Journal reported. Other bidders include Northrop Grumman (NYSE: NOC), Litton Industries (NYSE: LIT), and Boeing (NYSE: BA).

Wall Street Journal publisher Dow Jones & Co. (NYSE: DJ) and wire service company Reuters Group (Nasdaq: RTRSY) plan to combine their interactive business services and databases to create Dow Jones Reuters Business Interactive LLC, which will be the third-largest provider of proprietary and third-party information to corporate and professional markets after Lexis-Nexis, a unit of Anglo-Dutch publisher Reed Elsevier Inc., and Dialog Corp. (Nasdaq: DLGC) of Britain.

Stop the presses! Fox Entertainment (NYSE: FOX) is charting new waters by spinning off a 30-minute sitcom version of its hit Monday night show Ally McBeal using the same characters and cast and even some of the same footage, according to The Wall Street Journal. The new as-yet-unnamed sitcom will be a half-hour extension of the existing show that will take plot lines introduced during Ally and develop them further in the sitcom. One thing's for sure, the new spin-off will be far cheaper to make than starting a new program from scratch.

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