DJIA 8627.93 -207.01 (-2.34%) S&P 500 1077.01 -21.83 (-1.99%) Nasdaq 1715.75 -29.30 (-1.68%) Value Line ndx 910.89 -17.12 (-1.84%) 30-Year Bond 107 20/32 +1 1/32 5.59% Yield
Networking products company Bay Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> gained $2 7/16 to $30 3/4 after ending months of speculation by agreeing to merge with telecom equipment company Northern Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NT)") else Response.Write("(NYSE: NT)") end if %> in a deal valued at about $9.1 billion. Each Bay share will be converted into 0.60 of a share of Nortel stock, valuing Bay at $38.21 per share. Bay shareholders will end up owning about 21% of the combined entity. Nortel said the deal will be dilutive to its fiscal 1998 earnings and slightly accretive to fiscal 1999 earnings. The key to the purchase appears to be Bay's Internet-related products, which Nortel hopes to leverage into "substantial" revenue growth down the road. A skeptical market knocked Nortel's shares down $9 7/16 to $54 1/4. BCE Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCE)") else Response.Write("(NYSE: BCE)") end if %>, which will see its 51% stake in Nortel sliced to 41% once the deal is completed, lost $2 1/16 to $42 5/8.
CKE Restaurants <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKR)") else Response.Write("(NYSE: CKR)") end if %>, which operates 732 Carl's Jr. and 2,927 Hardee's restaurants, moved up $5 5/8 to $37 15/16 after reporting fiscal Q1 EPS of $0.47 versus $0.28 a year ago, beating the Street estimate of $0.40. Revenues jumped 124% in the period to $528.2 million, while net income more than doubled to $22.7 million from a year ago. Last year's results did not include the firm's Hardee's units, which have been acquired over the past year. The company posted some decent margin improvements during the quarter, as operating margins at company-operated Hardee's came in at 16.3% compared to 8.5% last year under previous ownership. The company intends to boost sales at Hardee's through a new advertising plan and a new look for the eateries. Moreover, some Hardee's restaurants near Rocky Mount, N.C. are already testing a plan to cross-promote some products from Carl's Jr. menus.
QUICK TAKES: Infoseek Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> gained $2 1/2 to $32 5/8 on market rumors that the Internet content aggregator will soon announce a large media deal with another company... Real estate investment trust (REIT) Crescent Real Estate Equities Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CEI)") else Response.Write("(NYSE: CEI)") end if %> rose $1 to $32 1/8 after saying it will boost its quarterly dividend to $0.63 per share from $0.38 per share after it completes its previously announced merger with Station Casinos <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STN)") else Response.Write("(NYSE: STN)") end if %>... Property and casualty insurer Vesta Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VTA)") else Response.Write("(NYSE: VTA)") end if %> gained $1 1/16 to $24 5/16 after The Wall Street Journal cited an Alabama government official as saying the market overreacted to the firm's announcement of accounting irregularities.
Semiconductor equipment manufacturers gained some ground after dropping Friday in sympathy with a profit warning from ASM Lithography <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASMLF)") else Response.Write("(Nasdaq: ASMLF)") end if %>. Novellus Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> advanced $2 to $33 1/4, and KLA-Tencor Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> added $5/8 to $25 9/16, but ASM fell another $1 1/8 to $28... Circuit City Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CC)") else Response.Write("(NYSE: CC)") end if %> gained $1 to $45 15/16 after Morgan Stanley Dean Witter upgraded the electronics retailer to "strong buy" from "outperform"... Wearable computer maker Xybernaut Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XYBR)") else Response.Write("(Nasdaq: XYBR)") end if %> picked up $25/32 to $5 25/32 after saying it will use IBM's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> multilingual speech recognition products to create a wearable computer able to function on commands in seven languages.
The American depositary shares of steel maker British Steel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BST)") else Response.Write("(NYSE: BST)") end if %> added $1 5/8 to $22 5/8 after reporting that its earnings fell by a less-than-forecasted 3% in the second half of fiscal 1998... Audio speaker maker Boston Acoustics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOSA)") else Response.Write("(Nasdaq: BOSA)") end if %> tacked on $1 1/2 to $36 3/8 after saying it has signed a new contract with an unidentified original equipment manufacturer (OEM) that will boost fiscal 1999 sales... Hardwood flooring maker Triangle Pacific Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TRIP)") else Response.Write("(Nasdaq: TRIP)") end if %> jumped $11 1/4 to $55 after agreeing to be acquired by flooring and ceiling products company Armstrong World Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ACK)") else Response.Write("(NYSE: ACK)") end if %> for $55.50 per share in cash and $260 million in assumed debt... Albany, N.Y.-based financial services firm Albank Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALBK)") else Response.Write("(Nasdaq: ALBK)") end if %> rose $13 1/4 to $64 3/4 after agreeing to merge with Cleveland-based thrift Charter One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COFI)") else Response.Write("(Nasdaq: COFI)") end if %>. Charter One dropped $2 7/8 to $31 3/16 on the news.
Cleveland-based investment bank McDonald & Co. Investments <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDD)") else Response.Write("(NYSE: MDD)") end if %> gained $2 1/8 to $32 15/16 after agreeing to be acquired by retail bank KeyCorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KEY)") else Response.Write("(NYSE: KEY)") end if %>. Each McDonald share will be exchanged for $35 in KeyCorp stock, representing a 13.5% premium to McDonald's closing price on Friday... Integrated Electrical Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IEE)") else Response.Write("(NYSE: IEE)") end if %> rose $1 11/16 to $19 7/8 after Merrill Lynch raised its near-term rating on the electrical installation contracting company to "buy" from "accumulate"... Title insurance and mortgage services company First American Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FAF)") else Response.Write("(NYSE: FAF)") end if %> rose $2 1/8 to $75 1/4 after forming a joint venture with three subsidiaries of Norwest Mortgage Inc., which itself is a unit of Norwest Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOB)") else Response.Write("(NYSE: NOB)") end if %>... Mortgage real estate investment trust (REIT) Ocwen Asset Investment Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OAC)") else Response.Write("(NYSE: OAC)") end if %> was lifted $1 1/8 to $17 3/16 after setting a fiscal Q2 dividend of $0.41 per share and an $0.08 per share special dividend to distribute its remaining fiscal 1997 taxable income.
Consumer products company Sunbeam Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOC)") else Response.Write("(NYSE: SOC)") end if %> fell $2 15/16 to $15 3/4 after announcing it has fired Al Dunlap as chairman and CEO and that it doesn't expect to meet its own earnings expectations for the second quarter. The company's outside directors decided to take drastic action because they had "lost confidence in Dunlap's leadership and earnings forecast" after an "unexpectedly bad first quarter." The company also attributed the decision to operating losses in the second quarter, which appear to be leading to Q2 and full-year earnings that will be "significantly below" estimates. Peter Langerman, an outside director since 1992 and COO of Franklin Mutual Advisers (the investment adviser to Sunbeam's largest shareholder, Franklin Mutual Series Fund) is now chairman. Taking over as CEO is Jerry Levin, former chairman and CEO of Revlon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: REV)") else Response.Write("(NYSE: REV)") end if %> and the Coleman Co., and executive vice president of MacAndrews & Forbes Holdings, Sunbeam's second largest shareholder. During a conference call this morning, Levin said Sunbeam is pursuing the right strategy, including increasing outsourcing and making good acquisitions. One thing Sunbeam did under Dunlap won't continue: Levin said he isn't in the "forecasting business" and won't be announcing (and thus won't have to revise) estimated earnings. To listen to the conference call, dial 1-800-633-8284 and enter 4417217.
Long-distance company Excel Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECI)") else Response.Write("(NYSE: ECI)") end if %> plunged $5 13/16 to $21 3/4 after announcing it has agreed to be acquired by Montreal-based telecommunications network firm Teleglobe <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TGO)") else Response.Write("(NYSE: TGO)") end if %> for about $3.1 billion in stock. The deal will form North America's fourth largest long-distance carrier. Excel shareholders will receive 0.885 Teleglobe shares for each Excel share (after taking into account Teleglobe's previously announced 2-for-1 stock split), which translates to a 17% discount to Excel's closing price on Friday. The companies expect the merger will immediately be accretive to the new Teleglobe's earnings per share before factoring in expected revenue enhancements and operating synergies. Teleglobe was up $1/2 to $52 1/8. Excel also warned that second quarter earnings will be between $0.22 and $0.25 a share due to lower-than-expected revenues, which is short of the analysts' mean estimate of $0.27.
QUICK CUTS: Diversified manufacturer 3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>, or Minnesota Mining & Manufacturing, dropped $5 13/16 to $81 after announcing it expects Q2 EPS between $0.90 and $0.94, lower than the $0.99 earned in the year-earlier period and substantially short of the analysts' mean estimate of $1.05. The company attributed the shortfall to economic weakness in Asia, the strength of the dollar, and modest growth in the U.S... General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> lost $1 1/2 to $68 3/8 after The Wall Street Journal reported that the automaker's factories around North America will probably shut down this week if the United Auto Workers' strikes at two parts plants continue... AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> fell $2 5/8 to $60 5/16 after the nation's largest long-distance company said that about 15,300 managers have opted to take the company's sweetened early retirement deal. The company had expected 10,000 to 11,000 managers to accept the buyout offer.
Oil and oil services companies continued to decline on concern of a glut in the world's oil supply. The price of crude oil fell to its lowest level in 12 years. Royal Dutch Petroleum <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RD)") else Response.Write("(NYSE: RD)") end if %> lost $2 to $53 9/16 and Mobil <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOB)") else Response.Write("(NYSE: MOB)") end if %> dipped $2 13/16 to $73 3/4. Among the oil services firms, Global Marine <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLM)") else Response.Write("(NYSE: GLM)") end if %> dropped $1 13/16 to $18 1/8; Ensco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESV)") else Response.Write("(NYSE: ESV)") end if %> slid $2 1/4 to $17 7/16; Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %> sank $3 15/16 to $68 13/16; Diamond Offshore <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DO)") else Response.Write("(NYSE: DO)") end if %> was down $2 3/16 to $41 1/4; Dresser Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DI)") else Response.Write("(NYSE: DI)") end if %> tanked $2 1/8 to $40 3/8; EVI Weatherford <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EVI)") else Response.Write("(NYSE: EVI)") end if %> lost $4 1/2 to $35; Camco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAM)") else Response.Write("(NYSE: CAM)") end if %> tumbled $4 1/2 to $54 1/2; Cooper Cameron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RON)") else Response.Write("(NYSE: RON)") end if %> slid $3 5/8 to $49 13/16; and National Oilwell <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOI)") else Response.Write("(NYSE: NOI)") end if %> dropped $2 7/16 to $28 3/4.
PC direct seller Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> sank $4 to $43 1/2 after announcing it has cut the prices on its E-Series managed desktop PCs by up to 9%... Baan Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAANF)") else Response.Write("(Nasdaq: BAANF)") end if %> slid $3 1/16 to $37 13/16 after Barron's quoted money managers as saying that the company's shares may drop to as low as $22 a share by the end of the year due to accounting changes and concern that the business management software developer may be losing market share to its competitors... Network Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSOL)") else Response.Write("(Nasdaq: NSOL)") end if %> sank $4 5/8 to $35 1/4 after Barron's reported that the company's shares could fall back to its initial offering price of $18 a share as competition increases in the Internet domain name registration business... Broderbund Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BROD)") else Response.Write("(Nasdaq: BROD)") end if %> plunged $3 to $17 3/16 after announcing that it expects a Q3 loss of $0.12 to $0.15 a share, short of analysts' estimates of a profit of $0.01, due to increased product returns and customer rebates during the quarter. The software developer has hired Donaldson, Lufkin & Jenrette to "explore strategic alternatives."
Wireless telecom equipment maker REMEC Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: REMC)") else Response.Write("(Nasdaq: REMC)") end if %> fell $1 to $9 7/8 after announcing that the company doesn't expect to meet analysts' expectations for the quarter ending July 31... Process machinery manufacturer Gencor Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GX)") else Response.Write("(AMEX: GX)") end if %> shed $2 1/4 to $21 1/4 after announcing a proposed public offering of 3.6 million shares. The proceeds of the offering would be used to pay down debt... Customized electronics manufacturing solutions company Solectron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLR)") else Response.Write("(NYSE: SLR)") end if %> shed $1 7/8 to $37 after reporting Q3 EPS of $0.41 compared with $0.36 for the year-ago period and the analysts' mean estimate of $0.41... Fuel cell developer Ballard Power Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLDPF)") else Response.Write("(Nasdaq: BLDPF)") end if %> lost another $4 3/8 to $26 5/8 after its CFO resigned after nine years.
Integrated circuits and electronics maker Benchmarq Microelectronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BMRQ)") else Response.Write("(Nasdaq: BMRQ)") end if %> plummeted $5 3/8 to $8 5/8 after announcing it expects a 10% to 15% drop in Q2 revenues and EPS from operations of $0.05 to $0.09, compared with analysts' expectations of $0.14. In addition, Unitrode Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UTR)") else Response.Write("(NYSE: UTR)") end if %> withdrew its merger agreement with the company... ChiRex Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHRX)") else Response.Write("(Nasdaq: CHRX)") end if %> plunged $6 3/16 to $14 3/16 after the contract drugmaker said production problems at its facility in England could mean a Q2 revenue shortfall of up to $2 million... Insurance firm Cincinnati Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CINF)") else Response.Write("(Nasdaq: CINF)") end if %> dipped $2 11/16 to $36 5/8 after announcing it expects Q2 earnings to be cut by $0.16 a share due to estimated pre-tax April and May storm losses of $40.3 million.
Data processing services company CCC Information Services Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCCG)") else Response.Write("(Nasdaq: CCCG)") end if %> sank $2 3/16 to $16 5/16 after warning it expects Q2 EPS of $0.15 to $0.16, short of analysts' mean estimate of $0.17... Scientific and industrial instruments maker Lifschultz Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LIFF)") else Response.Write("(Nasdaq: LIFF)") end if %> dropped $1 5/8 to $6 1/4 after reporting a Q3 EPS of $0.11, down from $0.15 last year... Rio Hotel & Casino <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RHC)") else Response.Write("(NYSE: RHC)") end if %> slid $2 1/8 to $19 1/4 after warning that Q2 EPS will be between $0.10 and $0.15, well below analysts' expectations of $0.36... Israel-based drugmaker Teva Pharmaceutical <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TEVIY)") else Response.Write("(Nasdaq: TEVIY)") end if %> sank $3 7/16 to $40 after warning that Q2 sales will be lower than expected due to dropping U.S. prices for its anti-convulsant drug.
FOOL
ON THE HILL
An Investment Opinion
by
Alex Schay
The Midas Touch
The announcement that outspoken Sunbeam <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOC)") else Response.Write("(NYSE: SOC)") end if %> chief executive officer Al Dunlap was getting a taste of his own chainsaw has prompted much speculation about the nature of his severance package. The Wall Street Journal reported today that the board is determined not to award Dunlap the balance of his $5 million three-year contract (which does not include stock options). However, this didn't quell speculation that Al might just depart Sunbeam with a hefty sum anyway. On an unnamed talk-radio show this morning, one irate pundit fumed about Al's multi-million dollar "golden parachute," which raised this columnist's pedantic hackles.
Just, what the heck is a golden parachute? This term gained currency during the 1980s during a period where a great deal of... ahem, "intercorporate investment" was going on. In order to stave off any unwanted advances, executives anticipating a possible future takeover would approve a lucrative termination package for themselves. Assuming a takeover materialized, they could "parachute" to financial safety if their positions were eliminated. This is obviously not the case with Al Dunlap, he may just end up getting his due -- as outlined by his contract.
Now that we're on the topic, don't confuse golden parachutes with golden handcuffs. These glittering shackles are also referred to in a more ornamental fashion as golden cufflinks. Either way, both cufflinks and handcuffs represent a very generous pay and benefits package designed to keep an executive from running away to another firm. Today's commentators have their knickers in a twist over the fact that Al Dunlap may well be leaving Sunbeam with those cufflinks in hand -- as a parting gift of sorts. However, Al is definitely not getting a golden handshake. This is defined as an exceedingly generous wad of cash given to an employee as go-away money. It's not really a parting gift, but rather an incentive to leave.
Well, at least Dunlap won't be leaving in a golden coffin. This word was coined when Occidental Petroleum unveiled plans to donate to founder Armand Hammer's namesake foundation seven times his annual salary upon his death. The word has been used ever since to describe any sizable sum given to the pet charity of a founder or long-time CEO when said person departs for that great boardroom in the sky. However, it's probably not very realistic to believe that Al Dunlap's "untimely departure" will result in Sunbeam donating a generous $30 million to fight chainsaw concessions in Nicaragua.
In the final analysis, Dunlap really wasn't a gold-collar employee after all. This is a corporate citizen who knows how to keep the trains running on time, and is also aware of all the inner-workings required to keep the wheels moving. Such a person needs to be heavily compensated in order to maintain loyalty to the firm. Dunlap, it appears, will be remembered at Sunbeam -- rightly or wrongly -- as the man who slashed but couldn't burn sufficiently on an operational level.
Anyway, as a parting gift from the Motley Fool (a severance package of sorts), here are some more colorful Wall Street words that pepper the merger and acquisition dialect:
Crown Jewel Defense: A management strategy to thwart a hostile takeover. The strategy centers on an agreement to sell to a third party the company's most valuable assets to make the company less attractive to the potential buyer.
Lobster Trap: A defense mechanism used by a company that has convertible securities outstanding to prevent an unfriendly takeover. This mechanism prohibits conversion into common stock of any convertible preferred stock or bonds if the owner of those securities would control 10% or more of the given firm's common stock following conversion.
White Knight: An individual or corporate investor that rescues a corporation from an unfriendly takeover by purchasing the company on terms more agreeable to its owners. Sometimes it is just ends up being the least-hated suitor.
Raider: Any party that attempts to buy a sufficiently large percentage of a company's stock so that it can install new management. Not used when simply referring to an investment.
Toehold Purchase: Term used to describe the purchase of less than 5% of a company's common stock. After 5%, a company or individual must disclose their stake as well as their intentions to the SEC.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
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