The Moves

By Chris Rugaber (TMF RFK)
July 18, 2000

The following companies have been making waves -- good and bad.

Moves to Remember

Celera's Secondary Offering
Genetic researcher Celera's (NYSE: CRA) decision to sell 3.8 million shares to the public in February was a brilliant piece of timing, given that the company did so when its share price was near its all-time high. The secondary offering sold at $225 per share, which resulted in $855 million in cold, hard cash for Celera, which is no small sum for a company still years away from profitability. While the move did result in the filing of shareholder lawsuits, given that the stock's price fell steeply soon afterwards, it's almost certain that the secondary offering will remain clearly beneficial to the company for some time.

Hewlett-Packard Spins Off Agilent
Hewlett-Packard (NYSE: HWP) has proven quite adept at creating shareholder value this year. In addition to 36% price appreciation in the company's stock as of June 30th, H-P spun off its remaining holdings in Agilent Technologies (NYSE: A), its former testing and measurement unit which IPOed last year. Hewlett-Packard distributed 0.3814 shares of Agilent for each of its own shares on June 5th. Agilent closed at $77 that day, making the spin-off equivalent to a $29.37 per share dividend payment. When's the last time a company you owned did that?

AMD Stages a Comeback
Not long ago, chip makers such as Advanced Micro Devices (NYSE: AMD) and National Semiconductor (NYSE: NSM) seemed hapless in the face of the Intel (Nasdaq: INTC) juggernaut. Some even speculated that Intel spared these companies only to help protect itself from antitrust difficulties. Oh how things have changed. Last year, National Semiconductor quit the microprocessor business and went off to bigger and better things in analog chips, but AMD decided to stay and fight. And this year, as demand for microprocessors soared, AMD was ready with its newer Athlon chips, and even won a contract with PC maker Gateway (NYSE: GTW) when Intel couldn't meet the company's needs. As mentioned in our"Winners and Losers" series, AMD shares have soared 191% so far this year -- evidence that the company has had no shortage of good moves.

Disney, Through ABC, Gives Away Money
While many observers have chuckled at fledgling Internet companies offering steep price rebates and other goodies such as free shipping, sometimes giving money away can provide excellent results. Disney (NYSE: DIS) found this to be true after its subsidiary ABC began broadcasting ratings winner Who Wants to Be a Millionaire? Regis Philbin helped too, of course, and the show became a smash hit, helping Disney's broadcast revenues soar, and sending the stock upwards 32%.


Moves To Forget

Oracle Searches Microsoft's Trash
When several non-profit organizations began conducting an effective public relations and lobbying campaign on Microsoft's (Nasdaq: MSFT) behalf, all the while claiming to be independent, Microsoft competitor Oracle (Nasdaq: ORCL) suspected it was too good to be true. Investigations into these organizations confirmed the company's suspicions by discovering Microsoft was paying these groups large sums. While the company effectively embarrassed Microsoft and its hired guns by leaking evidence of their links to the press, it was later Oracle's turn to be embarrassed when it was forced to admit that the private detectives they'd retained had found much of the incriminating evidence in the trash. Not exactly something to burnish Oracle's high-tech image.

Oops: MicroStrategy Loses Billions in Market Cap
Probably the most dramatic riches-to-rags story so far this year is that of data mining software company MicroStrategy (Nasdaq: MSTR). The company went from sponsoring Super Bowl commercials in January and a stock price height of $333 to restating revenues and earnings on March 20th and seeing its shares plummet almost 62%, to $86.75 in a single day. The company became entangled in the fairly complex question of when a computer software and services company can book revenues, and seemed to acknowledge, with the restatement, that they had been too aggressive. Since the company was, according to some estimates, trading at over 680x trailing earnings, it couldn't afford "entanglements" of any kind.
In the major "ouch" category: High-profile Microstrategy CEO Michael Saylor lost over $6 billion of his personal wealth the day of the announcement. And he didn't even use margin!

Smith Corona Follows Typewriters Into Oblivion
It sounds like a joke: Hey, let's invest in a typewriter company (maybe it'll be a Rule Breaker!). Yet, until this year, you could still do just that. Typewriter manufacturer Smith Corona, which had been forced into bankruptcy in 1995 by the popularity of personal computers, emerged from Chapter 11 proceedings in 1997 in order to… try and sell more typewriters! According to Hoover's, the company did branch out into fax machines, inkjet cartridges, and telephone headsets, but shockingly, Smith Corona's core business (yes, typewriters) continued to decline, with sales falling from almost $500 million in 1989 to about $43 million last year, a surprisingly large number, when you think about it. The company filed for bankruptcy again in May, this time for good. Here's a helpful hint we can all learn from their experience: Don't manufacture obsolete products if you want your business to succeed.

E-Health Descends to E-Hell
In one of the more bone-headed moves of the year so far, healthcare application services provider TriZetto Group (Nasdaq: TZIX) attempted to purchase healthcare and pharmaceutical information provider IMS Health (NYSE: RX) in order to create a "global leader in business-to-business (B2B) eHealthcare information services." It was presumably a lame effort to keep up with manic shopper Healtheon/WebMd (Nasdaq: HLTH). The combination made little sense not least because the combined company planned to issue three different stocks to track itself and various business units, and the acquiring company (TriZetto) had a much smaller market cap than its target. Each company's stock collapsed the day of the announcement, with TriZetto plummeting 40%. The merger was called off in May, as the market continued to give it a thumbs-down. Shareholders in the two companies are still waiting to recover from the deal, with TriZetto down 63.9% as of June 30th, and IMS Health off 31%.

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