DJIA 7726.24 -58.45 (-0.75%) S&P 500 988.56 -14.04 (-1.40%) Nasdaq 1536.69 -78.29 (-4.85%) Value Line ndx 750.35 -19.14 (-2.49%) 30-Year Bond 112 17/32 +2 5/32 4.71% Yield
Greensboro, N.C.-based Vanguard Cellular Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VCELA)") else Response.Write("(Nasdaq: VCELA)") end if %> jumped $1 7/16 to $21 5/16 after the cellular phone systems operator announced it has agreed to be acquired by AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>, which happens to be, among other things, the nation's largest cellular phone company. The total consideration comes to about $1.5 billion in cash, stock, and assumed debt of $600 million. Vanguard shareholders will choose between $23 a share in cash or 0.3987 of an AT&T share for each Vanguard share, provided that 50% of the deal will be in cash while the other 50% will be in stock. The cash price represents a 16% premium over Vanguard's closing price Friday, while the price in stock, based on AT&T's close Friday, reflects a slightly higher value of roughly $23.37 a share, or a premium of 17.6%. With networks in Allentown, Pennsylvania, Portland, Maine, and Charleston, West Virginia, Vanguard will help fill the gaps in areas in the eastern U.S. where AT&T doesn't have wireless networks, which will cut down on roaming charges. The companies expect to complete the merger in the first quarter of next year.
Cancer drug developer Sequus Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEQU)") else Response.Write("(Nasdaq: SEQU)") end if %> surged $3 3/16, or 29.3%, to $14 1/16 on news it will be acquired by controlled-release drug maker Alza Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AZA)") else Response.Write("(NYSE: AZA)") end if %> for about $580 million, or $16.975 a share in stock based on Alza's closing price Friday. Sequus shareholders will receive 0.4 of an Alza share for each Sequus share. Alza said the acquisition will "significantly strengthen Alza's commercial product portfolio in oncology and enhance the company's research and development capability." The deal is expected to add to earnings beginning in 1999, as soon as the companies close the transaction. But Alza shares tumbled $2 1/2 to $39 15/16 on concern that it's too early to tell how successful Sequus' lead product Doxil, an anti-cancer drug, will be, though the company pegs the drug's U.S. sales at $45 million for 1998.
QUICK TAKES: Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> gained $2 5/16 to $79 7/16 after the healthcare products manufacturer announced it will acquire FemRx Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FMRX)") else Response.Write("(Nasdaq: FMRX)") end if %> for around $22 million in cash. Meanwhile, J.P. Morgan started coverage of the company with a "market perform" rating and a 12-month price target of $87... Regional phone company Ameritech Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %> rang up $2 7/16 to $54 after Paine Webber raised its rating on the company to "attractive" from "neutral," while Bell Atlantic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEL)") else Response.Write("(NYSE: BEL)") end if %> climbed $1 5/8 to $53 and U.S. West <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USW)") else Response.Write("(NYSE: USW)") end if %> added $1 1/8 to $55 on the same treatment.
New Jersey-based public utility holding company Public Service Enterprise Group (NSYE: PEG) advanced $1 11/16 to $42 3/16 after filing a shelf registration with the SEC on Friday for up to $150 million in debt securities. Carrying forward $200 million in previously registered securities, the company's registration now totals $350 million... Industrial tool and specialty equipment products company Global Industrial Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GIX)") else Response.Write("(NYSE: GIX)") end if %> soared $1 1/2 to $8 7/8 on news that investment holding company WHX Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHX)") else Response.Write("(NYSE: WHX)") end if %> has acquired a 9.9% stake in the company and may move to buy the entire company. In response, Global Industrial has amended its shareholder rights agreement to keep WHX from acquiring a 10% or more stake in the company.
New Jersey Resources Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NJR)") else Response.Write("(NYSE: NJR)") end if %> picked up $15/16 to $37 7/8 after BT Alex. Brown raised its rating on the parent of New Jersey Natural Gas to "buy" from "market perform"... Specialty chemical company LeaRonal Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LRI)") else Response.Write("(NYSE: LRI)") end if %> jumped $1 9/16 to $18 5/8 after Barron's "Up & Down Wall Street" column reported that the company's shares may be undervalued... Biotechnology company Neose Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NTEC)") else Response.Write("(Nasdaq: NTEC)") end if %> rose $1/2 to $10 1/2 after The Wall Street Journal's "Heard on the Street" column reported that the company may soon announce a "lucrative" venture with personal care and drug company Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> to make a carbohydrate to be used as a bulking product when baking with J&J's sugar-based substitute sucralose.
Data equipment gorilla Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> was crunched $7 7/16 to $48 5/16 after SG Cowen lowered its rating to "buy" from "strong buy." Cowen also moved its 1999 EPS estimate $1.44 from $1.46 and cut the 2000 number to $1.76 from $1.85. This compares with the current mean 1999 and 2000 EPS estimates of $1.46 and $1.81. With a very high number of estimates in the mix and Cowen's former estimates not skewing the mean, this move signals a middle-of-the-pack (quantitatively) analyst setting off an early warning to the market. What looks like value based on estimates either represents good value or the estimates are off. That being the case, the market is very sensitive to indications of changes in the near-term business trend. A Washington Post report that the Federal Trade Commission is investigating the company for possibly holding illegal (read: collusive) discussions with rivals Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> and Northern Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NT)") else Response.Write("(NYSE: NT)") end if %> did not help Cisco's share price today, either.
Several banks and brokerage firms fell today on what may be known hereafter as "The Day of the Downgrade." CIBC Oppenheimer led the way on the ratings reduction front, fearing that the sector will have near-term performance problems due to its exposure to hedge funds and the continued economic turmoil in emerging markets. Travelers Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %> lost $4 1/8 to $34 7/16, Citicorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> fell $9 3/16 to $85 13/16, Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %> dropped $2 1/4 to $41 1/2, Morgan Stanley Dean Witter <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MWD)") else Response.Write("(NYSE: MWD)") end if %> declined $3 1/16 to $40 13/16, and Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> shed $3 1/16 to $42 15/16. Merrill took out its own ratings ax today as well, saying brokers and their ilk will see lousy results from their underwriting and trading businesses in the second half of the year compared to the first half. On those comments, J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> slid $3 5/8 to $79 7/8, Lehman Brothers Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEH)") else Response.Write("(NYSE: LEH)") end if %> slipped $2 3/8 to $26 5/8, and Donaldson, Lufkin & Jenrette <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLJ)") else Response.Write("(NYSE: DLJ)") end if %> slumped $2 9/16 to $22 15/16.
QUICK CUTS: Digital audio and video production and editing tools maker Avid Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVID)") else Response.Write("(Nasdaq: AVID)") end if %> slid $9 5/16 to $13 11/16 after saying it will report a "modest profit" in fiscal Q3 (excluding acquisition charges) due to delayed purchasing decisions by some of its customers. The Street had been expecting earnings of $0.33 per share in the period... Database software firm Oracle Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> slipped $2 1/4 to $23 3/4 after disclosing in a federal filing on Friday that deep discounts by some vendors in the database market and other pricing pressures may have the effect of "significantly reducing the prices that the company can charge for its products"... Document and small package delivery systems operator AirNet Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANS)") else Response.Write("(NYSE: ANS)") end if %> deflated $15/16 to $14 after saying it will report fiscal Q3 EPS between $0.20 and $0.24, missing the First Call mean estimate of $0.28.
Union Carbide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %> leaked $15/16 to $42 5/16 after PaineWebber slapped the chemical company with a seldom-seen downgrade to "unattractive" from "neutral"... Call center management software provider Davox Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DAVX)") else Response.Write("(Nasdaq: DAVX)") end if %> was cut $1 1/16 to $5 7/16 after saying customer purchasing delays will result in fiscal Q3 EPS between $0.11 and $0.13, or roughly half the First Call mean estimate of $0.26... Medical diagnostic test kits maker Meridian Diagnostics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KITS)") else Response.Write("(Nasdaq: KITS)") end if %> was knocked down $1 1/2 to $5 3/8 after saying it expects fiscal Q4 EPS between $0.05 and $0.07, down from $0.16 last year and below the First Call mean estimate of $0.15.
Business software developer Smallworldwide PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SWLDY)") else Response.Write("(Nasdaq: SWLDY)") end if %> got a little smaller today, falling $3 9/16 to $5 15/16 after warning late Friday that a decrease in licensing revenues from Asia and Latin America will result in a fiscal Q1 loss of $0.14 to $0.18 per share. The Street had been expecting a loss of $0.01 per share in the period... Automated manufacturing software developer Aspen Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AZPN)") else Response.Write("(Nasdaq: AZPN)") end if %> tumbled $7 15/16 to $6 7/8 after saying its fiscal Q1 revenues will be "below plan" at an estimated $46 million, resulting in a loss of around $0.26 per share for the quarter. The Street had been expecting earnings of $0.06 per share... Business software developer PeopleSoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSFT)") else Response.Write("(Nasdaq: PSFT)") end if %> sank $3 9/16 to $20 3/4 after BT Alex. Brown downgraded the company to "market perform" from "strong buy." Donaldson, Lufkin & Jenrette also reduced its rating to "neutral" from "buy."
Enterprise resource planning software developer J.D. Edwards & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JDEC)") else Response.Write("(Nasdaq: JDEC)") end if %> dropped $4 3/4 to $30 3/8 following a BT Alex. Brown downgrade to "buy" from "strong buy"... Enterprise software firm Siebel Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEBL)") else Response.Write("(Nasdaq: SEBL)") end if %> slipped $5 9/16 to $18 9/16 following an SG Cowen downgrade to "neutral" from "strong buy"... Dense wavelength division multiplexing equipment maker Ciena Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> slid $1 1/4 to $11 5/16 following a Goldman Sachs downgrade to "market outperform" from "recommend list"... Consumer services firm Cendant Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> slipped $1 1/4 to $9 1/2 after canceling its deal to buy Providian Auto and Home Insurance Co. from Aegon N.V. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AEG)") else Response.Write("(NYSE: AEG)") end if %> because Providian "no longer met Cendant's acquisition criteria." Cendant said the development will not affect its proposed merger with American Bankers Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABI)") else Response.Write("(NYSE: ABI)") end if %>, which lost $2 7/8 anyway to $37 1/2.
TV station and newspaper operator A.H. Belo Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BLC)") else Response.Write("(NYSE: BLC)") end if %> dropped $1 7/16 to $16 11/16 following a Salomon Smith Barney downgrade to "neutral" from "outperform"... Real-time network voice and video transmission systems developer NetSpeak Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSPK)") else Response.Write("(Nasdaq: NSPK)") end if %> was silenced by a $13/16 loss to $6 9/16 after saying it will report a fiscal Q3 loss between $0.35 and $0.39 per share, which is worse than $0.22 per share loss the Street had been expecting... ADC Telecommunications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADCT)") else Response.Write("(Nasdaq: ADCT)") end if %> slumped $2 7/16 to $17 9/16 after SG Cowen downgraded the high speed network transmission systems developer to "neutral" from "buy"... Thrift holding company BankAtlantic Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBX)") else Response.Write("(NYSE: BBX)") end if %> fell $1 1/4 to $5 1/8 after warning that its fiscal Q3 and Q4 earnings will be "significantly less" than the $6.4 million and $8.2 million earned during the same quarters last year, respectively.
FOOL
ON THE HILL
An Investment Opinion
by
Dale Wettlaufer
Conference Calls
[Ed. Note: With the quarterly earnings reporting season just getting underway, today we reprint a Fool on the Hill column on company conference calls that originally appeared Mar. 3, 1998.]
Formerly the exclusive domain of institutional investors, access to company conference calls is slowly becoming available to individual investors. This is not only good for investors, but it is also good for any publicly traded firm -- if that firm can accept the idea that it is beneficial for the company to keep its share price in line with intrinsic value. Rather than disserting on why a company should not lock investors out of its conference calls (or conference call replays, which are more efficient and convenient for everyone concerned), a more beneficial use of this space for new Fools is to explain what a conference call is and how Fools can profit from listening to them.
What Is a Conference Call?
A conference call is a quarterly teleconference in which the management of a company updates its owners and the analysts that follow the company and industry. In the conference call, the company's chairman, CEO, or president usually starts things off with a general overview of what happened during the quarter. Then the chief financial officer (CFO) comes on and details financial performance for the quarter. This can sometimes be a boring recital of what is contained in the press release, with the CFO moving on to detail later in the call, but sometimes the CFO will give exacting color to the numbers.
What's in the Numbers
Whether they packed into the start of the conference call or given in response to questions asked during the call, the numbers presented by a company's CFO are usually more helpful than what is contained in the press release. For example, very few companies publish a statement of cash flows when they report earnings, leaving that until the necessary filing of a 10-Q up to 45 days later. Cash flow statements can help investors bridge the gaps between the income statement and the balance sheet.
Some companies don't even publish a balance sheet for the quarter, which leaves out even more detail for investors. The CFO will usually go over some of the key balance sheet items needed to assess capital efficiency. In the absence of a cash flow statement, the balance sheet can give vital details on changes in cash, inventories, payables and receivables, changes in fixed assets, and changes in the way a company has been financed. Depending on the type of company in question, the inventory breakdown between raw materials, work in process (WIP), and finished goods can tell an investor how things went during the quarter and what might be coming up for in next quarter.
After a Fool has become comfortable working with these data, he or she will miss them when a company doesn't publish the information in the press release. It's not uncommon to hear the data detailed on the conference call even when it's not included in the press release. Companies hope the information will filter back to investors through analysts or reporters, but analysts have no incentive to tell non-clients about the information and reporters frequently miss reporting on important balance sheet information. Getting comfortable with the data is the first step -- getting on the conference call to be able to assess the data firsthand is the second important step.
Strategy
One thing that is missed in federal filings like the 10-Ks and 10-Qs are discussions of strategy and tactics. While discussions of strategy appear in securities registration statements or in boilerplate form each year in the annual report, hearing tactical updates on how strategies are being carried out gives an investor a better idea of what is happening at the company. The business world is highly dynamic -- things change every day, week, month, quarter, and year. How the company adapts to changes, which is the tactical side of business, tells an investor as much (or more) about the quality of the company as a highly detailed statement of mission and strategy.
Being able to listen to a conference call helps an investor know what the company is planning. If a company's management tells investors and analysts during the conference call that their plans are A, B, and C for the coming period, it's much easier to assess the progress of the business over time. Without an informed idea of the yardsticks by which a company's management measures its own success, it's harder for an investor to know what he should be looking for.
This has morphed itself into the whole game of meeting or beating estimates, but making its projected EPS number isn't the only way to tell how a company did during the quarter and the year. On the conference call, the company can talk about margins, what sort of unit growth and pricing it is looking for, what sort of production challenges its is facing, the competitive environment, what customers are thinking, what challenges vendors are facing, and how various units have performed. Though some companies will say everything an investor needs to know in the press release, it's rare to never that you'll see the above issues in a quarterly earnings press release.
In the end, conference calls are what an investor makes of them. There may be only one piece of information that rounds out an investor's knowledge so that the investor will buy more stock. There may be a particularly illuminating interchange between an executive and a questioner on the call. The management's discussion of a particular set of issues may lead an investor to correct his approach to looking at the company or to gauging the company's success.
Whatever it is that each particular investor gets out of the call, it's highly important to listen to them at least once in a while to stay in touch with what's happening at the company. No other medium besides the conference call can provide the level of detail or the dynamics of real-time interchanges between informed followers of the company and its owners. That includes the annual meeting or the annual report. If you owned a private business, you would want to be able to hear a couple times a year how things are going, and not just on a superficial level. It's no different with a public company, especially when secondhand information can get garbled, misunderstood, and miscommunicated by the time it gets to the poor investor that didn't get to listen to the call.
Should you own a company that gives investors access to the conference call or conference call replay, that's great. If the company is reluctant to open it up to you, explain that you are an owner and that you are genuinely interested in what's happening with the business. The more that people ask about it, the more companies will understand that it's an important issue to their investors. At some point, access will be a standard feature of being an owner of publicly traded companies -- and there will be a lot informed and rational shareholders of publicly traded companies when that comes to pass.
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
Editing |