<BREAKFAST WITH THE FOOL>
Thursday, February 11, 1999
"The most difficult part of getting to the top of the ladder is getting through the crowd at the bottom." -- Arch Ward
EDS, WorldCom Join Forces
In a sweeping alliance involving a swapping of assets and huge outsourcing deals, information services provider EDS (NYSE: EDS) will acquire MCI WorldCom's (Nasdaq: WCOM) information technology services unit MCI Systemhouse for $1.65 billion in cash. In return, MCI WorldCom will outsource to EDS significant applications development and maintenance services and virtually all of its infrastructure services, representing $5 billion to $7 billion in revenues over 10 years for EDS. Meanwhile, EDS will outsource the bulk of its global network to MCI WorldCom, bringing in an extra $6 billion to $8.5 billion in revenues in the next decade.
The deal allows both companies to streamline their operations and focus on their core businesses while at the same time "greatly enhancing [their] marketing muscle and allowing [them] access to new markets," said John Sidgmore, MCI WorldCom vice chairman. The two companies intend to jointly bid for major corporate contracts under which MCI WorldCom would provide the network and EDS the data crunching and systems integration services. As part of the agreement, more than 12,000 MCI WorldCom employees located primarily in the U.S. and Canada are expected to become EDS employees. At the same time, MCI WorldCom plans to offer jobs to roughly 1,000 EDS network employees around the world.
To listen to a replay of a conference call held at 8:30 this morning Eastern time, dial (800) 839-4171 after 10:30 a.m. Eastern.
News to Go
A federal judge ordered AMR Corp.'s (NYSE: AMR) American Airlines pilots to end a five-day sick-out that has cost the nation's second-largest airline an estimated $31 million thus far and may still affect travel during the upcoming Presidents' Day long weekend. About 1,500 pilots more than normal have called in sick since the union's protest began on Saturday. Yesterday American cancelled another 1,000 of its 2,250 daily flights.
Macy's and Bloomingdale's parent Federated Department Stores (NYSE: FD) this morning announced it will acquire direct marketer Fingerhut Cos. (NYSE: FHT) for $25 a share in cash. That represents a 33% premium to Fingerhut's closing price yesterday of $18 13/16. Federated expects the acquisition to be dilutive initially but anticipates that the deal will accelerate growth and increase its return on investment.
Wireless communications company Nextel Communications (Nasdaq: NXTL) has agreed to sell its 2,000 communications towers to privately held SpectraSite Communications Inc. for $560 million, The Wall Street Journal reported. Under the agreement, SpectraSite of Cary, N.C., will build an additional 1,700 towers for Nextel over the next five years, and Nextel will then rent space on the towers from SpectraSite.
High-end designer and luxury goods maker Gucci Group (NYSE: GUC) said LVMH Moet Hennessy (Nasdaq: LVMHY) has requested that it hold a special shareholder meeting to consider adding a ninth member to Gucci's board. Separately, the Competition Office of the European Commission is investigating whether LVMH's 34.4% stake in Gucci gives it a concentration in the company.
Hotel owner and operator Patriot American Hospitality (NYSE: PAH) plans to drop its status as a real-estate investment trust as part of a financial restructuring it is negotiating with two competing bidders, The Wall Street Journal reported. The change in status would end dividend payments paid to Patriot shareholders, which could save the company up to $80 million a year.
Latest Earnings Announcements:
Cendant Corp. (NYSE: CD) -- Q4 EPS: $0.22 (continuing operations) vs. $0.13 last year; estimate: $0.20
CNET Inc. (Nasdaq: CNET) -- Q4 EPS: profit of $0.18 (before unusual items) vs. loss of $0.62 last year; estimate: profit of $0.10
Fox Entertainment Group (NYSE: FOX) -- fiscal Q2 EPS: $0.17 vs. $0.13 last year; estimate: $0.13
MarketWatch.com (Nasdaq: MKTW) -- Q4 EPS: loss of $0.47 vs. Q3 EPS of $0.40
News Corp. (NYSE: NWS) -- fiscal Q2 EPS: $0.34 vs. $0.41 last year; estimate: $0.33
What makes Fools' knees weak and hearts race? Their favorite stocks, of course. Find out which stocks Fools love... Don't miss the latest round of Dueling Fools on General Electric... Louis (TMF Seymor) ponders online business models in last night's Fool on the Hill column.
-- Wednesday's Evening News
-- Fool Community
-- Post of the Day
-- Latest Fribble
Also, check out the Lunchtime News at 12:30 p.m. for updates on the top stories of the day, and remember to start each business day with Breakfast With the Fool at 9 a.m.
Let us know what you think of this feature. Send all comments and suggestions (including Foolish quotes) to the Breakfast Fools.