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Wednesday, March 3, 1999

"When two men in business always agree, one of them is unnecessary." -- William Wrigley Jr.

Latest Market Numbers

Jones Apparel to Buy Nine West

Women's clothing designer and marketer Jones Apparel Group (NYSE: JNY) announced late yesterday that it will acquire women's shoe designer, maker, and retailer Nine West Group (NYSE: NIN) for around $1.4 billion in cash, stock, and assumed debt. Nine West shareholders will get $13 in cash plus roughly 0.5011 of a Jones Apparel share, depending on Nine West's average share price before the transaction closes, for each Nine West share. Based on the companies' share prices yesterday before trading was halted, the deal values Nine West at $26 -- a 14% premium over Nine West's closing price yesterday of $22 13/16.

The acquisition is expected to be "slightly" accretive to Jones Apparel's 1999 second half earnings and to add "significantly" to its earnings growth -- $0.15 to $0.35 a share -- in 2000. The two companies had more than $3.6 billion in combined trailing 12-month revenues and could generate about $4.5 billion in revenue next year. Jones Apparel Chairman Sidney Kimmel said the company sees "excellent potential for brand synergies" to expand Nine West into the mass market and "significant cross-selling opportunities in apparel, footwear, and accessories using both companies' strong brand names."

Nine West has been struggling in the face of falling demand, with its earnings declining for five straight quarters -- it reported a 46% drop in profits in its most recent fiscal third quarter due to heavy discounting. Its stock has sunk 60% from its high of $57 1/8 in October 1996. Newly appointed Nine West Chairman Mark Schwartz, currently president and CEO of leveraged buyout firm Palladin Capital Group and a member of Jones Apparel's board of directors, said the company's turnaround program is underway and that it will continue to improve its operating performance and cash flow by cutting overhead, rationalizing its retail and international businesses, reducing inventories, and lowering investment in working capital. "We see strong positive trends in their business," he said.

News to Go

Networking company 3Com (Nasdaq: COMS) warned that its fiscal third quarter (ended February 26) earnings will not meet analysts' expectations due to an unexpected slowdown in the U.S. and Latin American enterprise markets, a weakness in the traditional two-tier distribution channel, and lower-than-expected PC original equipment manufacturer (OEM) sales. The company said it expects earnings from ongoing operations of $0.23 a share, below analysts' mean forecast of $0.36. The company expects to report earnings on or around March 23.

Dell Computer (Nasdaq: DELL) today plans to launch a new online store called Gigabuys.com that will sell 30,000 electronics products, including software, memory chips, printer cartridges, digital cameras, and 3Com's Palm Pilot hand-held computers. Dell has been selling some 6,500 accessories through a program called DellWare. Ordering on Gigabuys.com will be integrated with purchases on Dell.com, allowing customers to use one "shopping cart" for both sites.

After months of searching for a buyer, RJR Nabisco Holdings (NYSE: RN) is expected to sell its struggling overseas tobacco unit in the next 10 days for around $6 billion, The Wall Street Journal reported. Interested parties are said to include industry leader Philip Morris Cos. (NYSE: MO). Last month, RJR said it was exploring options to bolster its weak international tobacco business, including a possible joint venture or outright sale.

The New York Times reported that life sciences company Monsanto (NYSE: MTC) has been in preliminary talks to be acquired by chemicals giant DuPont (NYSE: DD) in a way that would allow Monsanto to retain its special character and habits, with its own compensation and incentive programs and possibly its own stock. Last June, Monsanto agreed to be acquired by American Home Products (NYSE: AHP) for $34.4 billion, but the deal was canceled in October.

The Hong Kong government said it is in preliminary talks with Walt Disney Co. (NYSE: DIS) about possibly building a Disney theme park there. The government has held talks with Disney for some time and should now begin "intensive negotiations with a view to determining by June 1999 whether this new project can be brought to fruition," Financial Secretary Donald Tsang said.

Sony Corp. (NYSE: SNE) unveiled the widely anticipated second generation of its hot-selling Playstation video-game console. With a 128-bit microprocessor, compared with a 64-bit chip now, Playstation II can produce three-dimensional characters of the same quality as those seen in the movie Toy Story. It can also connect users to the Internet and a PC and play music and movies using CD-ROMs.

Personal-finance software maker Intuit Inc. (Nasdaq: INTU) announced it has agreed to buy privately held Computing Research Inc. for $200 million in cash and stock in an effort to expand its small business product offerings.

Defense contractor General Dynamics (NYSE: GD) said it will receive a $250 million federal tax refund in the second quarter from research and experimentation tax credits from 1987 through 1989 and other tax amounts carried forward from 1981 through 1986. The company said it expects a $300 million refund in the third quarter.

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