DJIA              8970.20  +33.63     (+0.38%) 
 S&P 500           1097.60   +5.37     (+0.49%) 
 Nasdaq            1794.37  +13.27     (+0.75%) 
 Value Line Index   951.24   +8.21     (+0.87%) 
 30-Year Bond     104 6/32   +9/32   5.83 Yield 
 

HEROES

USWeb Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USWB)") else Response.Write("(Nasdaq: USWB)") end if %>, which provides Internet services to businesses, rose $1 3/4 to $22 3/8 after signing a multiyear, multimillion dollar contract with General Electric's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> NBC Interactive unit. USWeb will provide production and technical services to NBC Interactive's Internet-based programming and assist NBC affiliates with their online projects. As part of the deal, GE will receive a warrant to acquire up to a 3.8% stake in USWeb. In a conference call, USWeb chairman and CEO Joseph Firmage said the deal will generate $10 million in revenues for USWeb over four years, making NBC the company's fifth largest client. NBC Interactive president Martin Yudkovitz added that the deal was sealed without the input of Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, which has a marketing agreement with USWeb's Web publishing services and is a partner with NBC in their MS-NBC joint venture.

Commercial satellite company PanAmSat <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPOT)") else Response.Write("(Nasdaq: SPOT)") end if %> gained $4 5/8 to $55 3/4 after CE Unterburg Towbin upgraded the company to "buy" from "neutral." Meanwhile, Donaldson, Lufkin & Jenrette reiterated its "buy" rating on the stock. The analysts' actions capped a memorable week for the Greenwich, Connecticut-based firm, which watched helplessly last week as the failure of its Galaxy IV satellite disrupted service for 90% of U.S. pager users -- depressing its shares a good 10% -- and whipped the media into an other-worldly technophobic frenzy. Today, wireless communications firm AirTouch Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATI)") else Response.Write("(NYSE: ATI)") end if %> said it would give its AirTouch Paging unit's 3.1 million customers two free days of service to compensate for the blackout period caused by Galaxy IV. All told, AirTouch said the disruption will end up costing the firm approximately $2 million.

QUICK TAKES: Networking products maker Bay Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> rose $2 1/2 to $28 3/8 after signing a "memorandum of understanding" with Australian Internet services provider OzEmail Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OZEMY)") else Response.Write("(Nasdaq: OZEMY)") end if %> to collaborate on Internet telephony technology... Do-it-yourself home improvement retailer Home Depot <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %> climbed $2 3/4 to $77 after setting a two-for-one stock split yesterday... German automaker Daimler-Benz AG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAI)") else Response.Write("(NYSE: DAI)") end if %> gained $4 9/16 to $100 1/2 after increasing its fiscal 1998 revenue estimate to approximately $79 billion. Daimler's U.S. merger partner, Chrysler Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %>, was up $2 1/8 to $56 7/8.

Coffehouse operator Starbucks Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBUX)") else Response.Write("(Nasdaq: SBUX)") end if %> perked up $2 7/16 to $48 3/4 after reporting a 35% rise in May revenues to $100 million compared to a year ago. Comparable-store sales increased 7% year-over-year during the period, the firm said... Number 3 U.S. long-distance carrier Sprint Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %> rang up $2 3/8 to $74 after saying yesterday that it will acquire full ownership of its Sprint PCS wireless venture from partners Comcast Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSA)") else Response.Write("(Nasdaq: CMCSA)") end if %>, Tele-Communications Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %>, and Cox Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COX)") else Response.Write("(NYSE: COX)") end if %>... Professional staffing services provider StaffMark Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STAF)") else Response.Write("(Nasdaq: STAF)") end if %> advanced $1 5/8 to $36 5/8 after acquiring privately held information technology consulting services firm Tribase Systems Inc. for undisclosed terms.

Gen-X women's apparel retailer The Wet Seal <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WTSLA)") else Response.Write("(Nasdaq: WTSLA)") end if %> tacked on $2 11/16 to $28 3/4 after reporting Q1 EPS of $0.25, which was in line with the Street estimate. Analysts revised their earnings estimates downward in April after the company said cool weather in California had hurt March sales... Information management services provider Donnelley Enterprise Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DEZI)") else Response.Write("(Nasdaq: DEZI)") end if %> jumped $7 9/16 to $20 5/8 after agreeing to be acquired by financial information firm Bowne & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BNE)") else Response.Write("(AMEX: BNE)") end if %> for about $105 million, or $21 per share in cash... Spanish language TV programmer Univision Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UVN)") else Response.Write("(NYSE: UVN)") end if %> was lifted $4 to $35 after Morgan Stanley Dean Witter upgraded the company to "outperform" from "neutral."

Silicon wafer fabrication systems maker Novellus Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> gained $3 1/16 to $40 1/4 after Merrill Lynch reinstated coverage of the company with a "near-term accumulate" rating... Online retailer CyberShop International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYSP)") else Response.Write("(Nasdaq: CYSP)") end if %> rose $3 5/8 to $13 3/4 after signing advertising and marketing agreements ranging from 8 months to 18 months with Microsoft's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> Microsoft Plaza online shopping channel, high-speed Internet services provider @Home Network <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %>, and privately held Internet news provider PointCast Network... First Palm Beach Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FFPB)") else Response.Write("(Nasdaq: FFPB)") end if %> gained $7 3/4 to $44 1/4 after agreeing to merge with West Palm Beach, Florida-based Republic Security Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RSFC)") else Response.Write("(Nasdaq: RSFC)") end if %> in a stock swap valued at about $279 million.

Beverage, food, and aerosol can maker Crown Cork & Seal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCK)") else Response.Write("(NYSE: CCK)") end if %> added $2 1/16 to $52 1/8 after being upgraded to "buy" from "outperform" by Salomon Smith Barney, which sees the company's cash flow turning positive in fiscal 1999... 3D interactive entertainment graphics developer Engineering Animation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EAII)") else Response.Write("(NYSE: EAII)") end if %> moved up $3 5/8 to $48 after signing a creative partnership with Activision Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATVI)") else Response.Write("(Nasdaq: ATVI)") end if %> and privately held Wizards of the Coast Inc. to develop a role-playing game based on ancient Chinese and Japanese myths... Call center management systems developer Davox Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DAVX)") else Response.Write("(Nasdaq: DAVX)") end if %> rose $1 1/8 to $18 1/2 after Piper Jaffrey reiterated its "strong buy" rating on the stock.

Respiratory medical device maker Respironics Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RESP)") else Response.Write("(Nasdaq: RESP)") end if %> was lifted $1 3/16 to $16 1/8 after being upgraded to "outperform" from "hold" by Wheat First Union... British interactive consumer information service Freepages Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FREEY)") else Response.Write("(Nasdaq: FREEY)") end if %>, which does business as Scoot, added $1 to $12 1/4 after signing an agreement to link its online business finder service with Microsoft's (Nadsdaq: MSFT) Microsoft Network website... Information technology consultant AnswerThink Consulting Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANSR)") else Response.Write("(Nasdaq: ANSR)") end if %> rose $2 15/16 to $15 15/16 after the company sold 3.85 million shares in an initial public offering at a price of $13 per share.

GOATS

Richmond, Va.-based Owens & Minor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMI)") else Response.Write("(NYSE: OMI)") end if %> plunged $3 9/16 to $11 15/16 after announcing late yesterday that Columbia/HCA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %>, whose business accounts for 11%, or $360 million, of the company's revenues, has cancelled its medical and surgical supply distribution contract. The existing contract between the two companies was set to run through May of next year but has a 90-day cancellation clause. Calling the cancellation "surprising" and "disappointing," company CEO Gilmer Minor said the company expects to feel most of the impact of the cancellation next year and will "work aggressively to replace the business and/or reduce operating costs accordingly." It didn't help that rival McKesson Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCK)") else Response.Write("(NYSE: MCK)") end if %> this morning announced it has won a five-year comprehensive healthcare supply management agreement with Columbia/HCA that is expected to generate $1 billion a year in revenue. McKesson gained $6 3/16 to $80 1/4, while Columbia/HCA finished up $1 1/4 to $32 7/8. Salomon Smith Barney and Wheat First Union downgraded Owens & Minor to "outperform" from "buy."

Reform schools operator Youth Services International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YSII)") else Response.Write("(Nasdaq: YSII)") end if %> plummeted $9 7/32, or 54%, to $7 25/32 after warning it expects to report second quarter earnings that are "substantially less" than expectations. The company anticipates improved results in the third and fourth quarters, but expects that the remaining quarters and full-year 1998 revenues and earnings will fall "substantially below expectations." The company continues to face capacity utilization problems and admits it has "more work to do." Youth Services also announced it will acquire privately held Community Corrections Inc., which runs five residential boot camp facilities, for $6.75 million in stock. The company expects the deal will be immediately accretive with CCI contributing revenues of around $9 million a year. Stephens Inc. cut its rating on Youth Services to "neutral" from "buy." Meanwhile, detention facilities operator Cornell Corrections <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: CRN)") else Response.Write("(AMEX: CRN)") end if %> fell $5/8 to $22 7/16 on the news while Correctional Services Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCQ)") else Response.Write("(Nasdaq: CSCQ)") end if %> lost $1 3/4 to $13 1/4.

QUICK CUTS: Computers, peripherals, and computer-related services company Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> lost $1 9/16 to $63 7/8 after announcing it has distributed $210 million cash in profit-sharing to more than 118,000 employees... Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> fell another $2 3/8 to $105 5/8 in the aftermath of reporting to the FDA six deaths by patients who took its newly approved impotence drug Viagra, which the drug company has warned should not be taken with nitrates... Eli Lilly & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LLY)") else Response.Write("(NYSE: LLY)") end if %> finished down $1 3/8 to $63 1/2 as the pharmaceutical company announced a $2 billion share buyback program during this year and said it expects 15% to 20% sales growth and EPS growth of around 20% for the year.

Semiconductor components and dynamic random access memory chips maker Micron Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> was trimmed $15/16 to $23 13/16 after Goldman Sachs cut its 1998 EPS estimate to a loss of $0.95 from a loss of $0.55 and its 1999 estimate to a profit of $0.85 from earnings of $1.50, but kept its "recommend list" rating... Diversified electronics manufacturer Hitachi <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HIT)") else Response.Write("(NYSE: HIT)") end if %> took a hit of $2 1/2 to finish at $67 3/4 after reporting fiscal 1998 (ended March 31) EPS of $0.01, down from $0.19 a year ago. The company expects it will make $303 million in fiscal 1999, compared with net income of $26 million this year.

Irvine, Calif.-based consumer finance company First Alliance Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FACO)") else Response.Write("(Nasdaq: FACO)") end if %> tanked $3 5/8 to $9 13/16 after warning that it expects Q2 earnings will fall short of analysts' expectations due to a 10% to 20% drop in retail loan production and a significant increase in the level of prepayments... DUSA Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DUSA)") else Response.Write("(Nasdaq: DUSA)") end if %> sank $2 9/16 to $7 1/4 after announcing that the previously announced agreement in principle with a major multinational company cannot be closed at this time. The drug company said it is restarting talks with other potential dermatology alliance partners... Homecare company Apria Healthcare Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHG)") else Response.Write("(NYSE: AHG)") end if %> slid $1 1/4 to $7 3/4 after announcing that it will no longer actively seek acquisition offers or a major third-party investment. Instead, the company is restructuring its board of directors. Five directors have resigned to facilitate the process of recruiting new directors.

Movie theater company Carmike Cinemas <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKE)") else Response.Write("(NYSE: CKE)") end if %> was given two thumbs down, falling $1 9/16 to $25 3/4, after warning that it expects Q2 earnings to be "significantly lower" than analysts' estimates, which ranged from $0.48 to $0.62 per share. The company blamed the shortfall on the "disappointing" opening of Godzilla as well as the poor performance of movies in April... Pet supplies retailer PETsMART <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PETM)") else Response.Write("(Nasdaq: PETM)") end if %> shed $7/8 to $10 1/8 after reporting a breakeven first quarter compared with EPS of $0.05 (before charges) a year ago and in line with expectations... Wireless communications company Allen Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALN)") else Response.Write("(NYSE: ALN)") end if %> slid $1 1/16 to $12 3/4 after announcing that it expects lower-than-earlier-predicted Q2 results, with a 7% to 12% drop in revenues and EPS from continuing operations (before charges) of $0.05 to $0.07.

FOOL ON THE HILL
An Investment Opinion
by Alex Schay

The Price of Managed Care

True to the cost-conscious nature of the business, managed care provider United HealthCare Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %> announced this morning that it is prepared to pay about a 22% premium (based on Wednesday's close) for Louisville, Kentucky-based health maintenance organization Humana Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HUM)") else Response.Write("(NYSE: HUM)") end if %> in a stock swap valued at roughly $6.3 billion. The deal is valued at roughly 0.72 times Humana's trailing sales and boosted that company's shares $3 5/8 to $29 7/8 today, while United Healthcare shares were off slightly, losing $1 5/8 to $62 1/2.

If healthcare were a movie trilogy, the first installment would have been "Runaway Cost Wars" with the follow-up flick, "The Payers Strike Back" just exiting theatres. The "evil empire" with its managed care denizens mounted a strong offensive and has been roundly despised for practices that some feel lead to decreased quality of care. The final movie has just come out though, it's entitled "Return of the Customer."

Indeed, the United HealthCare-Humana merger conference call this morning [A replay of the conference call is available until Friday at (800) 475-6701 ref # 392034] was peppered with talk of greater "flexibility" and "access tailored to individual customer needs," and away from the more sensitive issues of gatekeepers and capitation. In some senses, the pricing environment reflects this new universe as companies across the board (non-profits included) have increasingly been pricing for profitability rather than market share after two years of historically low premium inflation. This is due in part to a number of secular industry shocks, like reductions in medicare reimbursements and rapidly growing technology-inspired medical care costs (with prescriptions hit especially hard). Here are the pro forma estimates for the merger today.

Pro Forma 1998 Estimates

Revenues             $26.9 billion 
 Operating Earnings   $1.26 billion 
 Net Income            $755 million 
 EPS                  $2.75 (274.54 million shares) 
 After the close, there will be 
 282 million shares outstanding 
 
 
 
 Operating Expenses  $4.77 billion 
 Cash Flow              $1 billion