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Calling the calling-off off, telecommunications network capacity company Ciena <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> and voice and data transport systems maker Tellabs' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %> have decided to go through with Tellabs' proposed acquisition of Ciena -- but not before Ciena prenuptially agreed to accept an offer that is roughly a third less in value -- $4.74 billion down from $6.86 billion. Instead of a one-for-one stock swap, Ciena shareholders will receive 0.8 of a Tellabs share for each Ciena share. Ciena celebrated with a $4 1/2 gain to $35 5/16, but Tellabs dropped $8 13/16 to $49 after saying the deal could further dilute 1998 and 1999 earnings -- by up to $0.13 a share this year and $0.15 a share next year. The marriage was put in doubt after Ciena issued a third quarter earnings warning and after AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> last week said thanks but no thanks to using Ciena's dense wavelength division multiplexing (DWDM) systems. Before today, Ciena's share price had plummeted 65% since July 20 when it was at $88 5/8. To listen to today's pre-recorded teleconference, dial (800) 753-9756.
QUICK TAKES: The Big Three automakers rebounded this morning from yesterday's losses. Chrysler <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> revved up $2 13/16 to $50 1/16 after Merrill Lynch raised its rating on the automaker to "intermediate buy" from "intermediate accumulate." Paine Webber upgraded General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> and Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> to "attractive" from "neutral," driving GM up $5/16 to $61 1/16 and Ford up $1 3/16 to $47 11/16... Local exchange carrier Bell Atlantic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEL)") else Response.Write("(NYSE: BEL)") end if %> rang up a $2 gain to $45 3/16 after Lehman Brothers reiterated its "buy" rating on the company, citing its lack of exposure to foreign and emerging markets... Congressionally chartered mortgage lender Fannie Mae <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNM)") else Response.Write("(NYSE: FNM)") end if %> rose $1 to $59 15/16 after announcing it will redeem the principal of $950 million in securities.
Telecommunications company SBC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %> picked up $1 1/8 to $39 5/8 after its Southwestern Bell Telephone Co. called for redemption of $175 million of notes to replace the debt with lower cost instruments. This is not expected to materially impact the company's earnings... AccuStaff Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASI)") else Response.Write("(NYSE: ASI)") end if %> gained $1 to $17 after announcing it will sell its commercial staffing business, Strategix, to Netherlands-based international staffing firm Randstad Holding for $850 million in cash. It also plans to change its name to Modis Professional Services... Enterprise software company J.D. Edwards & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JDEC)") else Response.Write("(Nasdaq: JDEC)") end if %> added $5 1/2 to $41 7/16 after reporting fiscal Q3 EPS of $0.16, up from $0.07 in the year-earlier period and $0.03 ahead of estimates.
DSC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIGI)") else Response.Write("(Nasdaq: DIGI)") end if %> jumped $2 7/8 to $25 1/4 after its shareholders yesterday approved its proposed merger with Alcatel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALA)") else Response.Write("(NYSE: ALA)") end if %>, which moved up $1 3/16 to $31 1/2... Integrated voice and data applications developer General Magic <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GMGC)") else Response.Write("(Nasdaq: GMGC)") end if %> soared $1 1/8 to $6 1/4 after announcing that in the first month of its progressive rollout of Portico, the company "exceeded plan objectives for user acceptance and system performance"... Santander Investment upgraded its rating on Argentine oil company YPF SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: YPF)") else Response.Write("(NYSE: YPF)") end if %> to "buy" from "market perform," driving the shares up $2 1/8 to $23 1/8.
Tele Danmark <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLD)") else Response.Write("(NYSE: TLD)") end if %>, the main communications services provider in Denmark, connected for a $3 7/8 gain to $51 1/16 after reporting a 18.3% rise in per-share earnings before one-time items in the first half of the year. The company said it is "confident" it will meet its goal of double-digit EPS growth for the year... First Hawaiian Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FHWN)") else Response.Write("(Nasdaq: FHWN)") end if %> rode a wave up $2 3/8 to $30 after Business Week's "Inside Wall Street" column quoted an analyst as saying the company is "the most undervalued and misunderstood bank stock around" and should be trading near $50 a share... Electric and natural gas company New Century Energies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCE)") else Response.Write("(NYSE: NCE)") end if %> added $1 11/16 to $45 9/16 after yesterday announcing plans for a $110 million transmission interconnection between two of its facilities -- Public Service Co. in Denver and Southwestern Public Service Co. in Amarillo, Texas -- aimed at keeping electricity rates lower.
Fiber-optic transmission and local area networking (LAN) products maker MRV Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRVC)") else Response.Write("(Nasdaq: MRVC)") end if %> tumbled $7 9/16 to $6 13/16 after saying that weak demand and delayed product launches will result in lower-than-expected revenues and earnings, sequentially lower gross margins, and higher operating expenses in fiscal Q3. The company didn't give a projection of what its earnings will be, but it's probably a safe bet that they will be south of the $0.32 per share expected by the sole analyst surveyed by First Call. Revenues are expected to come in 10% to 15% below the $65.7 million reported in Q2, due in part to shrinking demand from customers in Europe. The pre-announcement is a cold shower for shareholders who were tickled pink with MRV just one month ago, when the firm reported a 66% surge in Q2 revenues and beat earnings estimates by a penny. Since then, MRV's shares have fallen 35%, not including today's slide.
Computer Learning Centers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLCX)") else Response.Write("(Nasdaq: CLCX)") end if %> was crushed $7 13/32 to $5 31/32 after the operator of computer and information technology schools announced that it expects to report Q2 EPS of approximately $0.04 to $0.05 per diluted share, versus expectations for $0.16 and compared with net income of $0.12 per diluted share last year. Partial blame for the shortfall was attributed to a disheartening 16% decrease in Q2 same-center enrollment for the 16 Learning Centers open more than a year. Numerous damaging lawsuits over the last year (including one brought by the Attorney General of the State of Illinois) have tarnished the company's reputation, making it harder to recruit more wanna-be techies. While certainly a black eye for the firm, investors may want to take a closer look and determine whether the bad rap warrants Computer Learning Center's current share price discount to its classmates in the for-profit education biz.
QUICK CUTS: PC maker and marketer Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> slid $2 to $53 3/8 after cutting prices of its Solo line of notebook computers by as much as 6%. Other box and computing products makers were down as well. Compaq <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> lost $2 to $30 1/2 and Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> slipped $6 5/16 to $118 3/4... Gold mining company Barrick Gold Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABX)") else Response.Write("(NYSE: ABX)") end if %> was drilled $1 1/8 to $13 1/4 after the price of gold sank to a 19-year low on concerns Russia might flood the market by selling some of its gold reserves to bolster its sagging economy. Fellow miner Placer Dome <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDG)") else Response.Write("(NYSE: PDG)") end if %> also fell $5/8 to $8 3/4... Direct marketing company Harte-Hanks <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HHS)") else Response.Write("(NYSE: HHS)") end if %> dropped $1 5/16 to $23 1/8 after being downgraded to "neutral" from "attractive" by Bear Stearns... Online discount broker Ameritrade Holding Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMTD)") else Response.Write("(Nasdaq: AMTD)") end if %> fell another $1 5/8 to $16 7/8 after CEO Joe Ricketts told Bloomberg News yesterday that the firm's continued ad spending will result in "a small profit or breakeven" results in fiscal Q1 and Q2. Analysts surveyed by First Call called for a loss in Q1 and an $0.08 per share gain in Q2.
Internet conglomerate America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> fell $8 3/4 to $96 1/4 despite reporting yesterday that the worldwide membership of its namesake online service passed the 13 million customers mark. Other Internet-related stocks also traded lower. Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> sank $8 to $83 1/16, Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> slumped $4 3/8 to $29 7/8, Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> slid $13 1/8 to $105 7/8, Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> declined $2 9/16 to $21 3/16, and MindSpring Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSPG)") else Response.Write("(Nasdaq: MSPG)") end if %> slipped $4 to $30 3/4... Financial planning software firm Intuit <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> lost $2 1/8 to $43 1/8 despite reporting fiscal Q4 EPS of $0.03 versus a $0.19 loss a year ago, beating the First Call mean estimate by $0.02... Radio broadcasting company Chancellor Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMFM)") else Response.Write("(Nasdaq: AMFM)") end if %> lost another $1 1/2 to $41 1/4 after agreeing yesterday to buy radio station operator Capstar Broadcasting Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRB)") else Response.Write("(NYSE: CRB)") end if %> for $4.1 billion in stock and debt. Capstar dropped another $1 1/16 to $18 1/4.
Coffeehouse operator and Frappuccino marketer Starbucks Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBUX)") else Response.Write("(Nasdaq: SBUX)") end if %> fell $1 1/2 to $32 11/16 this morning. Yesterday, the company reported a 3% year-over-year rise in August same-store sales and a 26% rise in net sales to $108 million during the month... Portland, Oregon-based thrift holding company Wilshire Financial Services Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WFSG)") else Response.Write("(Nasdaq: WFSG)") end if %> sank $1 1/2 to $11 3/4 after Friedman Billings Ramsey lowered its rating to "speculative buy" from "buy"... Brokerage and investment bank Lehman Brothers Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEH)") else Response.Write("(NYSE: LEH)") end if %> fell $4 3/4 to $45 11/16 after an unidentified source told The New York Times that the company will lose "several million dollars" due to a swap transaction involving the Russian ruble... Camel cigarettes and Oreo cookies maker RJR Nabisco Holdings Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %> slumped $7/8 to $22 1/8 despite being chosen to replace MCI Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %> on the Standard & Poor's 500 Index.
Diversified financial services company Bay View Capital Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BVCC)") else Response.Write("(Nasdaq: BVCC)") end if %> capsized $3/4 to $17 3/4 after calling off its proposed purchase of privately held home equity lender PSB Lending Corp... Several other banks and brokers lost ground amid worries that Russia's economic woes will spread to other emerging nations, producing loan and trading losses. Bear Stearns Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSC)") else Response.Write("(NYSE: BSC)") end if %> dropped $3 13/16 to $40, Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> slid $4 13/16 to $73 1/2, BankAmerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> slipped $4 1/8 to $69 5/8, Travelers Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %> sank $2 to $48 1/2, Donaldson, Lufkin & Jenrette <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLJ)") else Response.Write("(NYSE: DLJ)") end if %> stumbled $2 1/4 to $38 5/8, and BankBoston Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BKB)") else Response.Write("(NYSE: BKB)") end if %> slumped $3 to $36.
Discount shoe retailer Payless Shoesource <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PSS)") else Response.Write("(NYSE: PSS)") end if %> tripped $5 1/2 to $42 15/16 after Morgan Stanley Dean Witter downgraded the stock to "neutral" from "outperform"... Telecommunications equipment maker Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> fell $1 13/16 to $80 7/8 after agreeing to sell its Bell Labs Design Automation Group to Cadence Design Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDN)") else Response.Write("(NYSE: CDN)") end if %> for unspecified terms. As part of the deal, Lucent said it will purchase some software products and services from Cadence... Forage and turf seed developer AgriBioTech <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABTX)") else Response.Write("(Nasdaq: ABTX)") end if %> was mowed down for another $1 5/8 loss to $8 1/8 on continuing fallout from market rumors earlier this week suggesting the company would restate its earnings figures. The company has denied the rumors, calling them "lies placed on the Internet by short sellers."
Vitamin and sports nutrition products retailer General Nutrition Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GNCI)") else Response.Write("(Nasdaq: GNCI)") end if %> deflated $2 7/16 to $14 7/8 after BancAmerica Robertson Stephens lowered its long-term rating to "attractive" from "accumulate"... Biotechnology firm EntreMed <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENMD)") else Response.Write("(Nasdaq: ENMD)") end if %> gave back $3/4 to $20 after rising 13% yesterday on word that it had received a "composition of matter" patent for its angiostatin protein, which has shown some cancer-killing traits in recent studies... Diversified energy holding company MCN Energy Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCN)") else Response.Write("(NYSE: MCN)") end if %> was zapped $8 to $17 1/2 after saying its fiscal 1998 and 1999 earnings will likely fall short of the Street's expectations due in part to weak energy prices. The firm is also reviewing its "strategic options," including the possible sale of its oil and gas exploration and production assets.
Electronics contract manufacturer and distributor Kent Electronics Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KNT)") else Response.Write("(NYSE: KNT)") end if %> slid $2 5/16 to $10 1/8 after saying "industry-wide pricing pressures" could reduce fiscal Q2 margins to 13% to 16% from 19.8% in Q1, possibly leading to a loss for the quarter... 3D graphics hardware and software developer Evans & Sutherland Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESCC)") else Response.Write("(Nasdaq: ESCC)") end if %> slid $2 5/8 to $20 7/8 following a Wheat First Union downgrade to "outperform" from "buy"... Semiconductor photolithography equipment maker Ultratech Stepper <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UTEK)") else Response.Write("(Nasdaq: UTEK)") end if %> was stepped on for a $1 loss to $18 7/8 after saying it will fire about 20% of its global workforce in an effort to cut costs. The staff reductions will result in an unspecified Q3 charge, according to the company.
FOOL
ON THE HILL
An Investment Opinion
by
Alex Schay
Market Jam
"Yeah, I hear it's backed up all da' way to the end of the turnpike. Could you move your car back so I can get off?"
Despite the fact that the pony-tailed guy with the tattoo pronounced turnpike more like "torn-pike" and off like "uoff," I was giving the request some serious thought. We had been sitting, engines idling, on a Southbound stretch of the New Jersey Turnpike for the better part of five minutes. Already, cursing, bellicose drivers were backing up the emergency lane and tearing up dirt along the side of the highway to get to the exit that was immediately to my right. The same exit that I was now eyeing like my last salvation.
Now, the question I asked myself was, "Which course of action would put me in a position of succumbing to the herd instinct?" Following the growing stream of drivers who were heading off the turnpike and making me feel like a sucker for waiting around, or staying ensconced in a sea of shiny metal bodies, secure and docile like the rest of the herd. The counterintuitive answer is that the Chevy Blazer churning up turf next to me trying to get to the exit was the "smart money," trying to get quickly out of the market... er, highway... and shift assets elsewhere... um, get home faster. Now that I've let the analogy slip and reminded readers of that horrid song about life being like a highway, please indulge me for a second, I promise not to "ride it all night long."
You see, at the time, all the pressure was building for people to get off the turnpike -- or at least those who could. All the people sitting in the middle lane between exits just cranked up the music and hung their legs out the window, unaware of the agonizing decision-making that was taking place nearby. Doomsday rumors were swirling around among the groups of people that got out of their cars to survey the scene. This was the mother of all traffic jams, and I was informed that the entire 42 mile expanse to Delaware was backed up, bumper to bumper. OK, I thought, let's use some common sense and scan the available public information. First, I craned my neck while standing on top of my car to survey the scene. It looked pretty ugly -- nothing but red lights as far as the eye could see. Now, hang on, if the turnpike was really backed up for 42 miles, wouldn't people start getting off on every available exit? Hence, unclogging some of the congestion.
Regardless of the relative merits of that reasoning, I concluded that the 42 miles of pain had to be the product of some convenience store owner nearby, desperate for some business. I've been in some pretty bad traffic jams, but they usually occurred as a result of some chemical spill or unusually bad accident. Accident, that's it! What's the New Jersey Turnpike Authority saying about all this? Tuning into the crackling recording yielded some interesting information. It turns out that "the Authority" was advising people to avoid delays by getting off at the exit immediately after the one right next to me (which as it turns out ended up causing the traffic jam). Well to make a long story short, traffic started moving again about five minutes after I decided to get off the road. (I actually stayed perched on an overpass looking for signs of life on the highway down below.) The funny thing is, traffic never so much as slowed down again for the entire ride home. What's the moral of the story? Even with the occasional traffic jam, the going is still better on the main highway than on the side roads. Stay invested and keep the rubber to the road.
The past couple days of market turmoil reminded me of this incident, as well as the fact that we (as humans) simply aren't wired for risk assessment and evaluating the potential returns on financial assets (yet). It definitely goes against our nature. As Michael Mauboussin reports in his "Frontiers of Finance" series for CS First Boston, the human mind has only been ruminating over modern finance theory for about 40 years. In the grand evolutionary scheme of things, that's not even a drop in the bucket. Let's assume it's now the "midnight" in our development as a species.
Time Line of Homo Sapiens
Event When (Yrs. Ago) Time of Day
Homo sapiens appear 2,000,000 12:00 A.M.
Mitochondrial Eve 180,000 9:50 P.M.
Domesticated homo sap. 20,000 11:46 P.M.
Hindu/Arabic numbering 800 11:59:25 P.M.
Modern Finance Theory 40 11:59:58 P.M.
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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