Motley Fool QuickNews
April 14, 2000
Closing Market Numbers
DJIA 10,307.32 -616.23 (-5.98%)
S&P 500 1,357.52 -82.99 (-6.11%)
Nasdaq 3,321.97 -354.81 (-10.68%)
Russell 2000 453.68 -35.54 (-7.83%)
30-Year Bond 106 17/32 +1/32 5.79 Yield
NOW 50 1880.85 -106.85 (-5.38%)
Ups
Playground equipment manufacturer PlayCore (NYSE: PCO) swung up $2 3/4 to $9 1/8 after entering into an agreement to merge with an affiliate of Chartwell Investments for $10.10 per share in cash, a 50% premium to its closing price yesterday. PlayCore's board of directors unanimously approved the transaction.
Telecommunications equipment and consulting company Network Access Solutions (Nasdaq: NASC) climbed $15/16 to $13 15/16 after canceling plans to sell 5.75 million shares in a secondary offering due to market conditions.
Lasar vision correction company Visx (Nasdaq: VISX) glanced up $7/16 to $14 13/16 after reporting flat Q1 income of $0.31 that beat Street estimates by 3 cents. Robertson Stevens upgraded the company from "long-term accumulate" to "buy" as a result. Visx emphasized 17% growth in its VisionKey card division.
Pharmaceutical sales information exchange company Dendrite Intl. (Nasdaq: DRTE) branched up $15/16 to $17 15/16 today after Goldman Sachs upgraded the company from "market outperformer" to "trading buy" ahead of Tuesday's Q1 earnings announcement. Goldman Sachs set a six-month price target of $25 to $27 on Dendrite shares.
Downs
Shares of data mining communications company MicroStrategy (Nasdaq: MSTR) burned $5 1/2 to $33 9/16 after the company said the Securities and Exchange Commission has begun an investigation of its revenue recognition accounting practices. Share of the Vienna, Virginia-based company have plunged since the company's March 20 announcement that it was restating revenues and earnings for 1998 and 1999.
Clothing retailer Gap Inc. (NYSE: GPS) was dressed down $2 13/16 to $38 7/8 after an analyst at U.S. Bancorp Piper Jaffay downgraded the stock to "buy" from "strong buy" and lowered his price target to $48 from $56 per share.
Consumer electronics retailer Best Buy (NYSE: BBY) got shocked to the tune of $14 9/16 down to $70 1/8 after the SEC reported that CEO Richard Schulze filed on April 10 to sell 310,000 shares of common stock in the company. Senior vice president Kenneth Weller and board director Frank Trestman also recently filed to sell shares.
RISC processor design company MIPS Technologies (Nasdaq: MIPS) flopped $10 5/16 to $27 3/8 after the company said net income for the third quarter was $0.26 per diluted share, compared to $0.27 a year ago, as royalty revenue declined 22% due to lower Nintendo 64 video game product royalties. The company missed estimates by a penny.
Female Web surfer cyber-retreat iVillage Inc. (Nasdaq: IVIL) ran down $1 5/16 to $10 5/16 after the company announced that a search is underway to fill the newly created position of president. This move raises fears that a management shake-up surrounding fiery CEO Candice Carpenter may be in the works.
FOOL PLATE SPECIAL An Investment Opinion
Tribune Company Posts Earnings
By
Brian Lund (TMF Tardior)
Tribune Company (NYSE: TRB), master of all media, published its first-quarter results this morning. Operating revenues grew to $782 million, 9% ahead of last year's first quarter. Operating EBITDA (earnings before interest, taxes, depreciation, amortization, equity results and non-operating items) rose 11% to $230 million. Operating earnings per share (EPS) turned in at $0.32, 19% ahead of the year-ago quarter and substantially in line with expectations.
Non-operating income dropped 80% to $66 million. Whoa! 80%?! What's going on?
Never fear, good people. The sky is not falling at Tribune. Its earnings are just erratic. Tribune is not just a boring, old newspaper company, publisher of the Chicago Tribune and the Orlando Sentinel. It is that, but it also operates 22 major market television stations, including national super-station WGN-TV, and four radio stations, including three stations in Denver and WGN-AM in Chicago. It manages websites for all of its newspapers and TV stations. It provides supplemental education materials and is a major publisher of children's books and non-fiction consumer titles.
Oh, and it owns the Chicago Cubs.
More interestingly, its Tribune Ventures arm invests in emerging Internet businesses. It started in 1991 with a 10% stake in a little company called America Online (NYSE: AOL), in which Tribune still holds 5.7 million shares. It also took a substantial stake in Excite, way back before it was public, and retains 3.4 million share of Excite@Home (Nasdaq: ATHM).
The list of Tribune's other publicly traded holdings, unfortunately, reads like a pronouncement of public pillorying: VarsityBooks (Nasdaq: VSTY); LightSpan Inc. (Nasdaq: LSPN); Exactis.com (Nasdaq: XACT); iVillage (Nasdaq: IVIL); and the infamous Peapod (Nasdaq: PPOD). Each of these stocks has fallen over 50% in the last month, some much more than that previously.
It's not a great looking portfolio, especially since Excite and AOL have been nothing special lately. Of course, it's important to note that Tribune took its stake in all of them prior to their IPO, so their price was lower than the IPO price.
Still, the Venture division has more than paid for itself. Tribune has funded its purchases largely with the sale of much of its AOL stake. In fact, $0.23 of last year's first-quarter non-operating EPS gain came from sale of AOL shares, with another $0.80 coming from the sale of WGNX in Atlanta. It's unusual gains like these that cause imbalances in Tribune's EPS most quarters.
Tribune also holds a number of pre-public ventures, as well as several private properties, including 25% of the WB Network. WB-affiliates, thanks largely to reruns of Friends, helped drive operating profits in the broadcasting division up 33% last quarter, producing close to half of the company's overall operating income.
Tribune continues to expand. The company announced its intention to merge with newspaper and magazine publisher Times Mirror (NYSE: TMC), operator of the Los Angeles Times, Newsday, and Field & Stream, among others. Tribune also intends to invest $100 million through its Venture group this year. They may have more plans, but since their conference call excludes the general public, I don't know about them. You would think that a media company would be more communicative with its investors.
Tribune's early adoption of the Internet has put it in the vanguard of media companies. Its current holdings show some weakness, but the company has shown a willingness to grow and adapt to changing markets. At nine times 2000 earnings estimates, Tribune represents an interesting prospect.
Related Links:
Tribune Discussion Board
Tribune home page
Daily Double, 10/28/99: The Tribune Co.
Ford Opens War Chest
By
Richard McCaffery (TMF Gibson)
The world's second largest automaker, Ford Motor (NYSE: F) rolled out it's long awaited move to spin off its automotive parts unit to shareholders along with a sweetener: a plan to distribute $10 billion to shareholders in the form of additional shares or cash.
Under terms of the plan, Ford shareholders will be able to receive $20 in cash per share or the equivalent value in new Ford common shares. The distribution is expected to be completed this summer. The company also plans to spin off 100% of the shares of Visteon, its automotive parts business, based on an exchange rate to be determined later.
A cash dividend may not be all the rage among investors right now. In many ways this is good news, signifying perhaps that investors are looking to invest in companies whose share price will appreciate over the long term rather than companies that will act like bonds, paying out a regular stream of income in the form of dividends (not that dividends are a bad thing, mind you.)
Dividends of course get taxed and investors that take the cash from Ford will have to take a capital gains hit. Not many investors want to face that kind of tax penalty. Instead, they'd rather the company keep the profits and reinvest them in the business, a move that should always -- over the long term -- add to the intrinsic value of a company's shares.
That said, I'm no fan of companies that sit on top of a huge mound of cash (i.e., Microsoft) while the slings and arrows of inflation and lost opportunity eat away at its value. Investor Warren Buffett (Forgive me for quoting Buffett again, but I just finished reading a stack of Berkshire Hathaway annual reports) said the single most important decision business managers make is the allocation of capital. If a company doesn't think it can earn an above average-return by investing excess profits, then that money should go back to shareholders -- period.
In that vein, there are two aspects of Ford's plan that look good for shareholders. First, the company is giving out $10 billion in one fell swoop. By any standard that's an enormous distribution. Now, Ford has $23.5 billion in cash, equivalents, and short term investments on its balance sheet, but the automotive industry is a cash-intensive business. This means the company has to hang onto $10 billion or $15 billion in cash in case of an industry downturn. The rest it's giving back to shareholders. It takes a lot of discipline on the part of managers to say, in essence, our shareholders can make better use of this money than we can.
Second, the company is giving investors a choice. Those that really believe in Ford or don't want to take the tax hit have the option to receive the money in additional Ford shares. It will be interesting to see how many Ford investors pick this option. "It is expected that Ford Motor Company executives will make this election and more fully align themselves with shareholders," said Bill Ford, the company's chairman. Since the Ford family controls 40% of the voting stock, the statement carries some weight.
As an automaker, Ford has a lot of strikes against it. The car business is cyclical and cash intensive. R&D costs are soaring, cars are commodities, and there is a worldwide supply glut. Still, the company is finding ways to improve value through focusing on its customers, streamlining production, spinning off its low margin Visteon business, and it's looking to generate incremental revenue through AutoXchange, its business-to-business parts-exchange platform. Ford is a blue chip company. There are better investments, but as one investor can attest from this piece in The Washington Post, Ford has withstood the test of time.
Related Links:
Ford Discussion board
FOOL ON THE HILL An Investment Opinion
Fear, Uncertainty, Doom
By
Bill Mann (TMF Otter)
I heard an amazing thing this morning on television. A professional money manager opined that the current drop in stock prices should be good for the mutual fund industry because individual investors and do-it-yourselfers were likely to take this as a keen reminder that the market is not evergreen, that it is easy to lose money in equities. That really makes my blood boil.
FULL STORY
BREAKFAST WITH THE FOOL
Juniper, Foundry Show Strong Growth
By
Dave Marino-Nachison (TMF Braden)
With much debate about the potential for long-term growth in data networking equipment gorilla Cisco Systems' (Nasdaq: CSCO) market value -- but little debate about the huge and growing demand for its Internet infrastructure products -- many investors' attentions have turned to the Rule Maker and NOW 50 component's upstart competitors. And some investors have chosen to put their money behind Juniper Networks (Nasdaq: JNPR) -- but also the likes of Foundry Networks (Nasdaq: FDRY) and JNI Corp. (Nasdaq: JNIC). Click here for a 12-month comparative share price chart, and here for a November story that discusses some of the industry's opportunities and challenges.
FULL STORY
J & J Snack Foods Looks for Hot Summer
By
Dave Marino-Nachison (TMF Braden)
When do Foolish news writers bemoan our general rule of not writing about over-the-counter (OTC) stocks? On days like today, when we might have had the opportunity to write about the earnings report of Lincoln Snacks, the proud maker of Fiddle Faddle and something I've never heard of called Screaming Yellow Zonkers (a butter-glazed popcorn snack Bill Barker says is fantastic). But we can't. Instead, then, we'll turn to the news out of Pennsauken, N.J.-based J & J Snack Foods (Nasdaq: JJSF). Shares of J & J -- not to be confused with Drip Port holding Johnson & Johnson (NYSE: JNJ) -- dropped a few points this morning after the company told investors to expect disappointing fiscal second-quarter financial results when earnings are reported April 20. The company expects EPS of $0.08, down from last year's $0.12 and missing First Call's four-analyst consensus estimate of $0.14.
FULL STORY
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