Brokerage and financial services company PAINEWEBBER GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PWJ)") else Response.Write("(NYSE: PWJ)") end if %> jumped $3 7/8 to $50 3/4 on speculation that it is being looked at by acquirers. Reuters reported that private partnership Goldman Sachs was said to have been checking out the company. That explanation seems to fit the pattern of top-flight institutional brokerages and underwriters hooking up with companies that offer big retail distribution bases. PaineWebber certainly offers that -- as well as mostly undistinguished mutual funds and other "retail-oriented" products offering individual investors the opportunity to underperform the market and pay big fees up-front.
Contract oil and gas driller READING & BATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RB)") else Response.Write("(NYSE: RB)") end if %> climbed $2 15/16 to $43 5/8 and oil services firm ROWAN COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RDC)") else Response.Write("(NYSE: RDC)") end if %> rose $2 1/16 to $38 1/8 after the U.S. aircraft carrier Nimitz was deployed for duty in the Persian Gulf. News of Iranian attacks on targets inside Iraq helped deflate the long bond as cash moves into short-term securities and as the price of November crude oil jumped 6% by mid-afternoon. Surprisingly, none of the integrated oil companies, with their huge reserves, moved on the news, although anything remotely positive for day rates in the oil drilling and services industry is viewed with alacrity by money managers and traders who still name this sector as one of their top picks.
QUICK TAKES: Brokerage A.G. EDWARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGE)") else Response.Write("(NYSE: AGE)") end if %> gained $3 1/2 to $38 7/8 as merger fever spreads through the retail brokerage sector... OGDEN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OG)") else Response.Write("(NYSE: OG)") end if %> rose $1 11/16 to $25 13/16 after the power generation and wastewater treatment services company agreed to buy 18 power plants from PACIFIC ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PET)") else Response.Write("(NYSE: PET)") end if %>... Shipyard HALTER MARINE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HLX)") else Response.Write("(AMEX: HLX)") end if %> increased $2 7/8 to $51 1/2 after announcing "the pending acquisition of three companies that will form the basis of its new Engineered Products Group" for $55 million in cash and stock... FILENET CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FILE)") else Response.Write("(Nasdaq: FILE)") end if %> jumped $6 1/2 to $22 3/4 apparently because Morgan Stanley raised its rating on the imaging and workflow software company to "strong buy" from "neutral"... ADVANTA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADVNA)") else Response.Write("(Nasdaq: ADVNA)") end if %> gained $4 5/8 to $34 as one of the best performers in a well-performing financial services sector today.
Commercial Internet service provider PSINET INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSIX)") else Response.Write("(Nasdaq: PSIX)") end if %> fell $3/4 to $7 1/2 on announcing an expected third quarter loss of $0.25 to $0.28 per share, compared with a loss of $0.31 last year. PSI is one of the few companies that has fiber in the ground that didn't move up this week on the WorldCom - MCI deal. Earlier this week, PSI announced free peering relationships for Internet service providers wishing to hook into PSI's high-capacity OC-48 fiberoptic backbone. This appears to be a strategic move against competitors that want to charge by bandwidth used or at least impose quality of service limitations on smaller Internet service providers that want to interconnect with national access providers. Potential acquirers might have a different view of that strategy.
Information and document management software company IMNET SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMNT)") else Response.Write("(Nasdaq: IMNT)") end if %> tumbled $2 15/16 to $21 7/16 after the company said that the Security & Exchange Commission (SEC) has informally questioned the company's auditors about IMNET's accounting practices. Reuters said the SEC is acting on the letter of an anonymous party "commenting" on the company's financial statements. Whenever this sort of comment comes along, it's either revenue recognition policies or asset accruals, and no surprise, IMNET capitalizes the cost of developing software. While insurance companies, banks, aerospace companies, and publishers capitalize the costs of developing products and then amortize those costs over the life of the assets, some investors (who are often short-sellers) don't see the legitimacy in software companies doing this. Such interested parties concerned with IMNET's financials might also want to drop a line to the SEC on the shady practices of companies like Berkshire Hathaway and Boeing.
QUICK CUTS: Computer assisted design and engineering software firm ANSYS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANSS)") else Response.Write("(Nasdaq: ANSS)") end if %> dropped $1 1/16 to $8 5/16 after reporting that it expects financial results for the third quarter ending September 30, 1997 to be below analysts' estimates due to lack of contract closure at the quarter's end... PENNSYLVANIA ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PNT)") else Response.Write("(NYSE: PNT)") end if %> fell $2 1/4 to $29 1/16 after announcing that it plans to purchase the Archbald Power Corp. in Lackawanna County, Pennsylvania, and that it will convert its 25 Megawatt cogeneration plant there into a gas-fired facility.
FOOL ON THE HILL
An Investment Opinion by Randy Befumo
Will Subscribers See the Internet-Access-by-Cablevision When They're @Home?
Cable providers and their kin have been advancing toward their all-time highs, rebounding from the five-year lows they hit in late 1996. Today, everyone is abuzz about how cable will become the primary means to access the Internet. Microsoft's high-profile investment in CABLEVISION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVC)") else Response.Write("(NYSE: CVC)") end if %> back in June has caused a wholesale change in the way investors perceive the group, and @HOME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> has become the vanguard company of a new era. The fears of Digital Broadcast Satellite (DBS) cutting into cash flow growth for the cable providers so palpable in late 1996 has disappeared, replaced by a fervor to buy regardless of the price among "big-picture" investors.
Unfortunately for investors, history shows that when you disengage your brain and become indifferent to valuation, it is often a prelude to disaster. Especially with cable companies. In late 1993, the promise of 500 channels of interactive cable was the story. The fulfillment of this mandate was to come with the proposed multi-billion dollar merger between BELL ATLANTIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEL)") else Response.Write("(NYSE: BEL)") end if %> and TELE-COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %>. Bell Atlantic Chairman Ray Smith promised that movies on demand, interactive home shopping, and video games through interactive television would be in as many as nine million homes by 2001. TCI, Comcast, Continental Cable, Cox, and Time Warner were all working together to develop technology to send telephone services over cable lines. Cox was testing movies-on-demand and other interactive services. Things, to say the least, looked good.
If you had told investors in late 1993 that cable companies would drop around 15% per year over the next four years, they probably would have laughed at you. Anyone focused on the big picture could obviously see that interactive TV was the next wave, the Holy Grail, the paradigm shift. Even without the Internet coming out of the blue, there were signs even then that a lot of this excitement was excessive and somewhat irrational. In late 1993 there were roughly 100 cable networks, but almost all were unprofitable. Even heavies like Court TV were bleeding red ink, with only a few ventures like MTV and ESPN producing a reliable stream of cash. Why many believed that interactive television would suddenly cause a spike in interest for cable networks that were unsuccessful one-way was never really explained, but only assumed.
Today with Cablevision up $4 5/16 to $68 1/4 and @Home rising $4 1/4 to $26 5/8 after announcing an exclusive alliance, it seems like deja vu all over again. In return for giving Cablevision warrants to purchase 11 million shares at 50 cents a share, @Home gets a crack at providing a $40 per month connection to the Internet and its proprietary content to those among Cablevision's 5.5 million subscribers wired for two-way cable. @Home, a joint venture among Comcast, Cox, TCI, Rogers Cablesystems, Shaw Cablesystems and Kleiner Perkins, provides Internet connectivity and proprietary content over a system based on cable modems and two way cable. When the company came public in July of 1997, it had roughly 11,000 subscribers. In @Home's press releases it stresses it has access now to more than 50 million customers, with the only trick now being that it has to sign them up at more than two times the going rate for getting online over your telephone.
Valued at close to $3.4 billion after today assuming that Cablevision exercises its warrants for 11 million shares, the company makes even $8.9 billion AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> look cheap. A quick comparison between the two online providers indicates the degree of excitement over cable access to the Internet. While @Home promises possible access to 50 million customers, America Online already has more than 11 million subscribers following the acquisition of CompuServe. While Cablevision is more moderately valued at only 1.1 times sales by comparison to @Home (but still relatively high historically for a cable provider), this also indicates how much of the current era of good feelings has been priced into both of these companies. Investors may well want to keep the euphoria of late 1993 in mind as they are evaluating these companies today.
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Randy Befumo (TMF Templr), a Fool
Fool on the Hill
Dale Wettlaufer (TMF Ralegh), another Fool
Heroes & Goats
Alex Schay (TMF Nexus6), another Fool
Heroes & Goats
Brian Bauer (TMF Hoops), and yet another Fool
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