Before we get rolling today, just a quick follow-up to the Immunex (Nasdaq: IMNX) article last week. I received a few nice notes from both shareholders and even someone that works at the company regarding their Nuvance asthma drug. Apparently trials have not gone as well as I thought they were for the Nuvance drug; several of the trials have been unsuccessful. This is somewhat disconcerting simply because without any meaningful drugs in the pipeline, Enbrel has to carry the day and the valuation. Thanks to those who wrote in.
For the past several months, we've been talking mostly about possible changes to the portfolio strategy and the appropriateness of the individual companies in the Rule Maker portfolio. It's probably a good idea to spend today looking at some of the recent news on the Maker companies to see what, if any, significant happenings are coming out of the various corporate headquarters.
Let's start with Intel (Nasdaq: INTC) and Cisco Systems (Nasdaq: CSCO), both of which are hosting major analyst conferences this week. Cisco's conference was yesterday and Intel's is tomorrow. The major news coming out of Cisco's conference yesterday is that CEO John Chambers is "cautiously optimistic" about gaining market share in the current fiscal quarter (Q2). Chambers shared that November orders were on track, but he failed to comment on the rest of the quarter.
He also told investors that Cisco would no longer be commenting about the strength of its business during any given quarter, preferring to wait instead until the end of the quarter. Shares are up a bit this morning, but the way it was reported in the media, you'd think this was the best news ever.
Personally, while I'm happy that the bleeding may be slowing down for Cisco, I'm not all that impressed with what Chambers had to say yesterday. Gaining market share in the quarter could be as much a result of Cisco's deeper penetration as it is some other company's weakness. It also pays no attention to the overall size of the market. Gaining market share in a decreasing market isn't all that exciting to me. Finally, it worries me a little that November is in the books and Chambers can't/won't comment on the quarter. Are things that uncertain in the short-term or is he just being tight-lipped?
Intel is going to hold its analyst conference tomorrow and the speculation is that the company will raise its guidance for this quarter's (Q4) revenue to the high end of the range ($6.5 - $6.8 billion). All I can say to that is "I certainly hope so!" After all, the shares are up 65% in the last 60 days and absent some positive news, those gains are totally unwarranted.
My hope for tomorrow's conference is that we'll get some insight into Intel's newer businesses, specifically the wireless communications, servers, and network communications. These have been a wildcard for the company thus far and some good news will go a long way to quelling people's fears about future growth. I'd also like to hear a little about current consumer demand for the Pentium 4 and when Intel will be rolling with its 0.13 micron Northwood chips. Various reports have Northwood debuting right after the New Year with Intel introducing a 2.2 Ghz or faster speed chip. With Advanced Micro Devices (NYSE: AMD) releasing their 1900 series, Intel is once again under fire from industry analysts regarding the superiority of their chips.
American Express (NYSE: AXP) hasn't had a ton to report lately. The most interesting pieces of news coming out of the company have been that more layoffs are expected and that slowing consumer demand is hurting the business. This shouldn't come as any great shock to investors, but it could represent opportunity. As a general rule, I'm a contrarian and think that the best opportunities to buy stocks are when nobody else wants them. AmEx might be a decent example of this right now. The economy is in recession, the company is laying off workers, the consumer is scared, the nation is in a certain amount of turmoil, and the shares are off 44% from their high this past year.
Now, don't go off and buy AmEx shares just because I'm saying there may be an opportunity here. My assessment is off the cuff and very simplistic. All I'm saying is that some circumstances have converged that might make this company worthy of your interest and additional due diligence.
Lastly, American Express announced that they will soon be farming out part of their mutual fund business and allowing other company's funds to be sold by AmEx sales people. These funds include a value-oriented fund being run by Mario Gabelli and some small-cap funds run by Pilgrim Baxter and Wellington Management. The obvious assumption here is that AmEx funds have performed so poorly that they want something new to show potential investors. Seems a bit ironic to me.
In Johnson & Johnson (NYSE: JNJ) land, a fair amount of uncertainty has been popping up lately on both the litigation side and with regard to a few of its key growth areas. Seems like everyone wants a piece of J&J lately. Employees are suing for discrimination, patients are suing based on the recall of problem drug Propulsid, and Lifescan recently paid $45 million for a diabetes monitor suit.
Of greater consequence, perhaps, is the fact that in two major areas of growth, Johnson & Johnson may be facing stiffer competition. Procrit, which is a $3 billion anemia drug for the company may be coming under fire from Amgen. Johnson and Johnson licensed a protein from Amgen that allows Procrit to be produced. Amgen is likely to come out with a new Anemia drug called Aranesp that patients won't have to take as often and that could significantly eat into Johnson & Johnson's share of that market. Johnson & Johnson doesn't have anything new in the pipeline to compete with Aranesp.
On the medical device side of things, Johnson & Johnson has been widely praised for establishing a large lead in the drug-eluting stent market. These little babies are the latest and greatest devices used to treat heart patients with clogged arteries. Because they are drug-coated, the chances of the arteries closing back up, once the procedure is done, declines dramatically.
Unfortunately for Johnson & Johnson, analysts now believe that companies like Guidant (NYSE: GDT) and Boston Scientific (NYSE: BSX) are closer on J&J's heels than previously thought. Prudential recently speculated that Johnson & Johnson's stents will be approved in the U.S. and selling in Q4 of 2002. That would indeed be good news for the company, but that would also pave the way for the other companies to enter the market here more quickly. Analysts have been playing both sides lately, with Prudential raising estimates and its target price and Morgan Stanley cutting the shares to neutral.
For more on the drug-eluting stent market, and the great opportunities there, check out the report I wrote for this year's Industry Focus on the cardiovascular medical device market.
Let's stop here for now. Next week we'll look at the remainder of the companies in the Maker portfolio and see what things have been affecting their outlooks recently.
David Forrest is Fool HQ's #1 ranked ping-pong player, but the bigger they are, the harder they fall. The Motley Fool is investors writing for investors.
