DJIA 8299.36 +330.58 (+4.15%) S&P 500 1047.49 +41.96 (+4.17%) Nasdaq 1611.01 +70.04 (+4.55%) Value Line ndx 772.15 +25.26 (+3.38%) 30-Year Bond 108 5/32 +30/32 4.97% Yield
Alan Greenspan was "da man" today as the Federal Reserve surprised the market by cutting interest rates by 25 basis points, or a quarter percentage point, to 5% and the discount rate for bank loans from the Fed by a quarter point to 4.75%. It's the first time since April 1994 that the Fed has adjusted interest rates between official meetings of the Federal Open Market Committee (FOMC), which already cut interest rates by 25 basis points when it last met Sept. 29. The discount rate, however, hadn't been changed since January 1996. The FOMC is scheduled to convene again on Nov. 17, when it may again lower interest rates. Banks (and other stocks in general) rallied today on the announcement. Citigroup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> surged $4 3/8 to $40, Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %> soared $4 13/16 to $46 1/2, First Union <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTU)") else Response.Write("(NYSE: FTU)") end if %> rocketed up $4 1/2 to $54 1/2, American Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %> rose $7 5/8 to $88 1/2, Morgan Stanley Dean Witter <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MWD)") else Response.Write("(NYSE: MWD)") end if %> powered ahead $6 7/16 to $55, Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> jumped $4 9/16 to $48 1/16, Lehman Brothers <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEH)") else Response.Write("(NYSE: LEH)") end if %> was up $4 1/8 to $33 1/4, J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> picked up $6 1/4 to $92 7/8, and Bank One <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ONE)") else Response.Write("(NYSE: ONE)") end if %> added $2 1/16 to $45 3/16.
Avis Rent A Car <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVI)") else Response.Write("(NYSE: AVI)") end if %> sped up $4 5/16, or 34%, to $17 after the rental car company reported third quarter earnings of $0.83 a share, up from $0.45 a year ago and ahead of analysts' mean estimate of $0.76, according to First Call. Revenues for the quarter jumped 12.5% to $652.4 million on the back of a 2.7% price increase, higher fleet utilization, and improved costs per transaction. Avis, which is 21%-owned by Cendant Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %>, also announced plans to buy back up to 5 million shares, up from the previously announced target of 1.5 million. The surprising good news from Avis boosted the shares of other rental-car agencies on hopes that competitors also will raise rates. Hertz Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRZ)") else Response.Write("(NYSE: HRZ)") end if %> added $3 5/16 to $35 1/16, Budget Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BD)") else Response.Write("(NYSE: BD)") end if %> jumped $3 5/16 to $21 1/2, and Dollar Thrifty Automotive Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DTG)") else Response.Write("(NYSE: DTG)") end if %> was bumped up $1 1/8 to $9 13/16. Dollar Thrifty also was helped by news that investment group Tweedy Browne recently raised its stake in the company to 7.33% from 6.35%.
Oil and natural gas producer Oryx Energy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ORX)") else Response.Write("(NYSE: ORX)") end if %> was pumped up $3 5/16 to $14 13/16 after announcing it will be acquired by Kerr-McGee Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMG)") else Response.Write("(NYSE: KMG)") end if %> for about $3.14 billion in stock and assumed debt. Oryx shareholders will receive 0.369 of a Kerr-McGee share for each Oryx share. That valued Oryx at about $17.32 a share, a 50.6% premium to its closing price of $11 1/2 yesterday. Kerr-McGee shareholders will own about 55% of the new company, while Oryx will own the remaining 45%. Kerr-McGee, which fell $4 3/16 to $42 3/4 today, expects the deal to be accretive to 1999 earnings and cash flow. It plans to achieve cost savings and synergies of more than $100 million a year by cutting jobs, vacating expensive office space in Dallas -- where Oryx is based -- and consolidating operations. The combined company will be the nation's fourth-largest independent oil and gas exploration and production company, with about 4,400 employees.
QUICK TAKES: Soft drink giant Coca-Cola Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> popped up $3 1/8 to $67 1/2 after reporting Q3 EPS of $0.35 (excluding a gain), beating last year's results by a penny and matching analysts' reduced expectations (see Breakfast With the Fool for more information)... PC maker and direct seller Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> gained $5 5/16 to $58 1/16 after its Asia Pacific President John Legere reportedly said Dell's business will continue to grow in Asia by taking market share from its competitors despite the economic downturn plaguing the region, according to Reuters... Telecommunications equipment maker Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> picked up $4 1/4 to $71 on news it has won a four-year $200 million agreement with Tyco Submarine Systems Ltd., which will use Lucent's new optical fiber called TrueWave XL and its bandwidth management system to connect cities around the world.
Delta Air Lines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> took off for a $7 gain to $93 1/2 after reporting fiscal Q1 EPS of $4.16, up from $3.26 a year ago and ahead of analysts' forecasts of $3.94. The airline's passenger load factor increased 2.16 percentage points to a record of 76.7%... Computer-based information systems maker Unisys Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UIS)") else Response.Write("(NYSE: UIS)") end if %> added $2 to $24 1/2 after reporting Q3 EPS of $0.26, double last year's $0.13 and a penny ahead estimates (see today's Fool Plate Special)... Bristol-Myers Squibb <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMY)") else Response.Write("(NYSE: BMY)") end if %> rose $4 3/16 to $102 7/8 after France approved the company's biggest-selling cancer drug, Taxol... Colgate-Palmolive <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CL)") else Response.Write("(NYSE: CL)") end if %> brushed up $4 13/16 to $81 9/16 after reporting Q3 EPS of $0.66, up from $0.58 last year and in line with estimates.
Beverage and entertainment giant Seagram <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VO)") else Response.Write("(NYSE: VO)") end if %> added $1 5/8 to $30 5/8 after saying it is in discussions regarding selling its Mumm and Perrier-Jouet Champagne companies to an unspecified French group, though it would maintain distribution rights... Card-based transaction systems maker Diebold Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DBD)") else Response.Write("(NYSE: DBD)") end if %> processed a $5 15/16 gain to $27 5/16 after this morning reporting Q3 EPS of $0.43, topping analysts' mean estimate of $0.37. The company also announced that ATM company Card Capture Services Inc. has a contract with Hollywood Entertainment Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HLYW)") else Response.Write("(Nasdaq: HLYW)") end if %> to place 500 Diebold-manufactured ATMs in Hollywood Video stores nationwide... Technical, embedded, Web, e-commerce, and enterprise information systems software developer Rational Software Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RATL)") else Response.Write("(Nasdaq: RATL)") end if %> surged $3 5/16, or 22.5%, to $18 1/16 after reporting fiscal Q2 EPS of $0.14, an improvement over the loss of $0.74 a share last year and $0.02 ahead of analysts' expectations. The company also said it plans to buy back up to 6 million shares.
Computer digital color printing products maker Electronics for Imaging <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EFII)") else Response.Write("(Nasdaq: EFII)") end if %> leapt $4 5/16 to $22 3/8 after reporting Q3 EPS of $0.31, compared with $0.43 for the same year-earlier period and $0.13 in the previous quarter. That beat analysts' mean estimate of $0.23... High-bandwidth switching systems manufacturer Xylan Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XYLN)") else Response.Write("(Nasdaq: XYLN)") end if %> added $1 5/16 to $13 1/4 after reporting Q3 EPS of $0.22, up from $0.10 a year ago and $0.20 in the previous quarter and in line with estimates... Enterprise software company Baan Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAANF)") else Response.Write("(Nasdaq: BAANF)") end if %> finished up $1 9/16 to $12 9/16 after saying it may change its management and structure to boost sales... Internet service provider MindSpring Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSPG)") else Response.Write("(Nasdaq: MSPG)") end if %> ended up $1 to $26 1/16 after late yesterday announcing it has acquired the consumer dial-up Internet subscribers of Cyber Connections Inc. of Atlanta for an undisclosed sum.
Chancellor Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMFM)") else Response.Write("(Nasdaq: AMFM)") end if %> gained $4 3/16 to $30 5/16 on news the radio broadcaster has canceled its proposal to buy a 50% stake in Mexico's largest radio broadcaster Grupo Radio Centro SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RC)") else Response.Write("(NYSE: RC)") end if %>, which dropped $7/16 to $5... Online development services firm USWeb Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USWB)") else Response.Write("(Nasdaq: USWB)") end if %> gained another $2 1/2 to $13 13/16 after yesterday reporting Q3 EPS of $0.02 (before charges), beating analysts' expectations of a loss of $0.01... Online business-to-business services company Open Market <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMKT)") else Response.Write("(Nasdaq: OMKT)") end if %> rose $1 5/8 to $7 after saying America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> has licensed its Transact software for an undisclosed sum... Luxury goods maker LVMH Moet Hennessy Louis Vuitton <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LVMHY)") else Response.Write("(Nasdaq: LVMHY)") end if %> American depositary receipts tacked on $2 to $35 after its Louis Vuitton subsidiary offered to buy 3.4% of its shares from minority shareholders for $390 million.
Suiza Foods <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SZA)") else Response.Write("(NYSE: SZA)") end if %> added $2 1/4 to $31 1/4 after Prudential Securities raised its rating on the fresh milk distributor to "accumulate" from "hold" with a 12-month price target of $36... Foundation Health Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FHS)") else Response.Write("(NYSE: FHS)") end if %> surged $1 5/8, or 25.7%, to $7 15/16 after Superior National Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNTL)") else Response.Write("(Nasdaq: SNTL)") end if %> said it anticipates completing its purchase of the company's money-losing workers' compensation subsidiary by Dec. 10... Boole & Babbage <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOOL)") else Response.Write("(Nasdaq: BOOL)") end if %> jumped $1 3/8 to $20 1/2 after pre-announcing fiscal Q4 EPS of $0.34, up from $0.24 last year. Analysts are currently forecasting EPS of $0.29... Brokerage firm Kent Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KENT)") else Response.Write("(Nasdaq: KENT)") end if %> leapt $1 3/4 to $8 1/4 after announcing a 2-for-1 stock split effective Nov. 9.
Earnings Movers
Altera Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALTR)") else Response.Write("(Nasdaq: ALTR)") end if %> up $7/8 to $38 1/2; Q3 EPS: $0.43 (excluding charges) vs. $0.40 last year; Estimate: $0.38
BF Goodrich Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GR)") else Response.Write("(NYSE: GR)") end if %> up $3 to $32 7/8; Q3 EPS: $0.80 vs. $0.78 last year; Estimate: $0.77
Comerica Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMA)") else Response.Write("(NYSE: CMA)") end if %> up $2 5/8 to $56 1/16; Q3 EPS: $0.95 vs. $0.83 last year; Estimate: $0.95
E*Trade Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGRP)") else Response.Write("(Nasdaq: EGRP)") end if %> up $15/16 to $14 3/16; Q4 EPS: $0.13 loss (excluding charges) vs. $0.15 gain last year; Estimate: $0.14 loss
Golden West Financial (NYS: GDW) up $6 3/16 to $84; Q3 EPS: $1.85 vs. $1.56 last year; Estimate: $1.78
Legato Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LGTO)") else Response.Write("(Nasdaq: LGTO)") end if %> up $5 3/8 to $42 1/4; Q3 EPS: $0.20 (excluding charges) vs. $0.11 last year; Estimate: $0.17
Millipore Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MIL)") else Response.Write("(NYSE: MIL)") end if %> up $1 11/16 to $20 9/16; Q3 EPS: $0.06 loss (excluding charges) vs. $0.39 gain last year (excluding charges); EPS: $0.10 loss
NACCO Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NC)") else Response.Write("(NYSE: NC)") end if %> up $10 1/4 to $89 1/2; Q3 EPS: $2.50 vs. $1.78 last year
Owens & Minor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMI)") else Response.Write("(NYSE: OMI)") end if %> up $13/16 to $14 11/16; Q3 EPS: $0.20 vs. $0.16 last year; Estimate: $0.20
Raychem Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RYC)") else Response.Write("(NYSE: RYC)") end if %> up $1 11/16 to $25 5/16; Q1 EPS: $0.47 vs. $0.70 last year; Estimate: $0.49
SBC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %> up $1 3/16 to $44 9/16; Q3 EPS: $0.53 vs. $0.45 last year; Estimate: $0.53
TranSwitch <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TXCC)") else Response.Write("(Nasdaq: TXCC)") end if %> up $1 1/2 to $18 1/4; Q3 EPS: $0.13 vs. $0.01 last year; Estimate: $0.09
TRW Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRW)") else Response.Write("(NYSE: TRW)") end if %> up $3 1/2 to $51 1/4; Q3 EPS: $0.85 vs. $0.85 last year; Estimate $0.85
VideoServer Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VSVR)") else Response.Write("(Nasdaq: VSVR)") end if %> up $1 13/16 to $10 3/8; Q3 EPS: $0.08 vs. $0.04 last year; Estimate: $0.05
Whitman Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WH)") else Response.Write("(NYSE: WH)") end if %> up $1 5/8 to $18 11/16; Q3 EPS: $0.26 (before charges) vs. $0.21 last year; Estimate: $0.25
Instant photographic imaging products maker Polaroid Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PRD)") else Response.Write("(NYSE: PRD)") end if %> dropped $2 15/16 to $19 9/16 after reporting fiscal Q3 EPS of $0.40 (excluding a gain from the sale of real estate) versus $0.55 a year ago and missing the Street's mean estimate of $0.55. Revenues dropped 13% from a year ago to $448.8 million, thanks largely to a 28% slide in international sales during the period. Polaroid's Russian operations were to blame for about half of the ugly overseas slide, as the company decided not to ship products into the land of Lenin and vodka during the quarter. Another $10 million of the decline was due to unfavorable foreign exchange rates in the firm's other global markets. Chairman and CEO Gary Dicamillo said the company will take unspecified "actions" starting in Q4 that will impact earnings negatively but allow Polaroid to compete on a better footing in the future.
Digital wireless communications network operator Nextel Communications<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NXTL)") else Response.Write("(Nasdaq: NXTL)") end if %> slid $2 3/8 to $17 5/16 after reporting a fiscal Q3 net loss of $1.56 per share, which includes $0.55 per share in charges to account for preferred stock dividends, negative results from international operations, and losses from interest rate hedging. The Street had expected a $1.35 per share loss. While company saw its total revenues explode 144% to $506.6 million in the quarter compared to a year ago, it appears Nextel is having some trouble controlling such high-paced growth. For example, the firm reportedly had a hard time keeping up with demand for the popular Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> i1000 cell phones that Nextel offers its customers. Chairman and CEO Daniel Akerson probably summed it up best: "We've got to stay ahead of this growth," he reportedly told analysts during a conference call today.
QUICK CUTS: Internet portal Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> dropped $1 7/8 to $32 3/4 ahead of reporting pro forma fiscal Q3 EPS of $0.02 (excluding charges and certain amortization provisions) after the bell, beating the Street's mean estimate of a $0.02 loss... Gene discovery and expression technologies firm Incyte Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INCY)") else Response.Write("(Nasdaq: INCY)") end if %> was knocked down $3 13/32 to $21 27/32 after reporting pro forma fiscal Q3 EPS of $0.15 (excluding acquisition-related charges), up from $0.08 a year ago but below the Street's mean estimate of $0.20... Living tissue surgical glue maker CryoLife Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRY)") else Response.Write("(NYSE: CRY)") end if %> fell $7/8 to $11 1/4 after Warburg Dillon Read downgraded the firm to "buy" from "strong buy" after it missed analysts' estimates for fiscal Q3 earnings yesterday.
Genentech Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GNE)") else Response.Write("(NYSE: GNE)") end if %> slid $2 1/4 to $71 3/4 after Merrill Lynch lowered its near-term rating on the biotechnology company to "accumulate" from "buy"... Mortgage lender and real estate investment trust (REIT) IndyMac Mortgage Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NDE)") else Response.Write("(NYSE: NDE)") end if %> slammed into a retaining wall and fell $1 1/8 to $12 after reporting fiscal Q3 EPS of $0.54 versus $0.46 a year ago, which was in line with analysts' estimates. However, the company said its Q4 and fiscal 1999 earnings will be "below current levels" due to the difficult market environment for its business... Cleveland-based bank holding company National City Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCC)") else Response.Write("(NYSE: NCC)") end if %> slipped $1 15/16 to $64 after Morgan Stanley Dean Witter lowered its rating to "neutral" from "outperform."
Competitive local exchange carrier Electric Lightwave <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELIX)") else Response.Write("(Nasdaq: ELIX)") end if %> was zapped for $7/8 to $5 1/2 following a Morgan Stanley Dean Witter downgrade to "neutral" from "outperform"... Fish oil processor and online "webzine" operator Zapata Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZAP)") else Response.Write("(NYSE: ZAP)") end if %> was jolted $3/8 to $6 7/8 after putting its acquisition-driven Internet expansion on hold due to recent market volatility in the valuations of Internet-related companies. The firm said it will not follow through with previously announced letters of intent to acquire 31 separate companies... Pasta producer and marketer American Italian Pasta Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PLB)") else Response.Write("(NYSE: PLB)") end if %> was burned $5 1/16 to $17 15/16 after saying the $1.30 per share First Call mean earnings estimate for its fiscal 1999 is a nickel too high. However, the company expects its fiscal 1998 earnings to be in line with the $0.98 per share expected by analysts.
Application-specific integrated circuit (ASIC) maker LSI Logic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LSI)") else Response.Write("(NYSE: LSI)") end if %> fell $9/16 to $11 5/16 after Donaldson, Lufkin & Jenrette lowered its rating to "market perform" from "buy"... Bearings and industrial drive systems maker Applied Industrial Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: APZ)") else Response.Write("(NYSE: APZ)") end if %> was rolled for a $1 loss to $13 1/2 after saying its fiscal Q1 EPS will be "approximately half" of the Street's mean estimate of $0.36 per share... Color printer servers maker Splash Technology Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLH)") else Response.Write("(Nasdaq: SPLH)") end if %> sank another $9/16 to $6 1/2 after reporting a 20% drop in fiscal Q3 earnings yesterday... Specialty chemicals maker MacDermid Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRD)") else Response.Write("(NYSE: MRD)") end if %> spilled $1 1/8 to $36 5/8 after Janney Montgomery Scott cut its rating to "accumulate" from "buy"... Nutritional supplements marketer Twinlab Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TWLB)") else Response.Write("(Nasdaq: TWLB)") end if %> slid $1 1/4 to $17 1/8 on fears the company would fall short of the Street's fiscal Q3 earnings estimates. Late in the day, though, Twinlab said its Q3 earnings excluding charges would be a penny ahead of the First Call mean estimate of $0.33 per share.
FOOL
ON THE HILL
An Investment Opinion
by
Alex Schay
Documentum Roars Back
Back in the 1980s when approximately $8 billion per year was spent on paper business forms, the productivity gains inherent in transitioning from hard form to binary units made the shift a slam dunk. The realization that for every dollar spent on a form, a company could wind up spending twenty more on filing, copying, routing, amending, and ultimately getting rid of the darn thing, led to a kind of urgency described by the authors of the The Profit Zone, "Help my organization -- which uses 20,000 different types of paper forms -- to transition from paper to an electronic forms system so that we can lower our total systems costs from $20 to $10."
Today the concept of "total ownership cost" has been taken to its logical (and absurd) extreme as personal finance columnists admonish their adherents to conduct the calculus on their pets, cars, etc. It looks like Spot has got to go -- administrative costs skyrocketed in the most recent quarter, which brought up Total Dog Cost Per Year (TDCY) as a percentage of salary by 50 basis points. Sorry Spot ol' buddy, the marginal gains in utility are just not there anymore. Anyway, now that paper forms carry the stigma of the Dark Ages, new costs need to be strained out of the system -- but like an orange that's already been given a mighty squeeze, the second time around always yields a little less liquid. Wait a second, you're still doing that by hand? Let's introduce the Electric Juicer.
According to an industry report conducted by IDC Research, roughly 80% of corporate data is still unstructured. Electronic data sits in a dizzying array of formats: text files, word processing documents, spreadsheets, graphics and images, as well as video and audio. On top of this, all of the data types also exist in multiple formats by virtue of having been created by different applications. Compounding the problem even further (despite the omnipresent desire of Information Technology managers for technological homogeneity) are software applications running on a variety of computer platforms that may be geographically dispersed with little data sharing capability. Enter the enterprise wide document management companies -- in a time where there is a continuing convergence between the document companies and and the imaging and production workflow segments.
Fears that capital spending in the document management area will dry up during the coming economic cataclysm have clobbered the entire group over the last month -- as well as the broader enterprise software market. As of yesterday's close, here is how some of the significant players have fared in terms of price declines for the last month:
FileNET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FILE)") else Response.Write("(Nasdaq: FILE)") end if %> -71%
Open Text <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OTEXF)") else Response.Write("(Nasdaq: OTEXF)") end if %> -6%
PC Docs <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DOCSF)") else Response.Write("(Nasdaq: DOCSF)") end if %> -34%
Documentum <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DCTM)") else Response.Write("(Nasdaq: DCTM)") end if %> -45%
Today, however, Documentum <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DCTM)") else Response.Write("(Nasdaq: DCTM)") end if %> roared back almost 25%, gaining $7 5/8 to $31 5/8 on the heels of the release of its third quarter financials. Excluding a merger-related charge, EPS grew 36% to $0.19, up from $0.14 in the third quarter of 1997 and ahead of estimates of $0.17. From its inception in 1990 through December 1992, the company's activities consisted primarily of developing its products, establishing its infrastructure, and conducting market research. Documentum shipped the first commercial version of its Server product in late 1992, and since then most of its revenues have been from licensing its entire family of enterprise document management system (EDMS) products and related services, which include maintenance and support, training, and consulting services. The company launched EDMS '98 during the quarter, and investors skeptical about incremental revenue flow from the "new options" were heartened today.
It's easy to misunderstand the return on investment characteristics surrounding the implementation of these packages, but when a company like Novartis is looking to recoup its initial investment in roughly two years and then see permanent cost and productivity benefits thereafter, it's worth a closer look at some of the case studies -- if only to get a handle on the IT decision-making involved. Perhaps Documentum's greatest asset is that EDMS includes solutions for integrating with popular desktop, groupware, and enterprise applications like Microsoft Office, SAP R/3, PeopleSoft, Adobe FrameMaker, Lotus Notes, AutoCAD and MicroStation, allowing the firm to piggyback on the success of some of the enterprise resource planners (ERPs).
In addition, the company's Relevance acquisition will not result in the actual movement of new products until the fourth quarter, but the first application that will be shipped is a sales intelligence system that complements other sales force automation systems from Siebel, Vantive, Clarify, PeopleSoft, SAP, and Oracle. This is going to provide Documentum with some very high visibility moving into 1999. The dilutive effects of the acquisition are expected to be offset by the accretive benefits (in 1999) to the tune of $0.02 per share in earnings.
With a trailing return on invested capital (ROIC) of 9.6%, Documentum is not yet getting a juicy spread on its cost of capital, but the firm ultimately may be looking at some sustained competitive advantage period (CAP) if its claim that it is winning 8 out of every 10 engagements with FileNET is to be taken at face value. Interested investors -- comfortable with analyzing the still relatively rich valuations in the enterprise software segment -- should check out the pricing environment and the IT adoption issues. At the very least, it wouldn't hurt to cut these companies into a broader watch list along with the ERP behemoths.
[Correction: In yesterday's "Fool on the Hill" column about Ziff-Davis <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %>, we incorrectly said that CNET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNWK)") else Response.Write("(Nasdaq: CNWK)") end if %> has an alliance with Disney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> for the new Snap! portal site. CNET's partner is actually NBC.]
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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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