DJIA 9196.39 -15.45 (-0.17%) S&P 500 1121.32 +2.46 (+0.22%) Nasdaq 1876.27 +10.09 (+0.54%) Value Line ndx 983.44 +0.44 (+0.04%) 30-Year Bond 102 12/32 -7/32 5.95% Yield
Lunchtime News | |
Related Items | |
|
FOOL PLATE SPECIAL
An Investment Opinion
by Louis Corrigan
Hewlett-Packard Jams Up
Shares of Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>, heavyweight manufacturer of printers, workstations, PCs, and medical and industrial metrology equipment opened sharply lower this morning following a surprise earnings warning that came long after the closing bell last night. At midday the stock stood at $71 5/8 -- off $10 -- after trading as low as $70. In last night's press release, company Chair/CEO Lewis H. Platt said that earnings for the second quarter ended April 30 would come in around $0.65 per share, well below the $0.75 recorded in the year-ago period and below the First Call consensus EPS estimate of $0.77. Revenue growth remained solid at 16%, but a lower-margin product mix hurt profits. The shortfall was caused by increased price competition in the PC arena, where Hewlett has been grabbing market share, and by weak sales of high-margin measurement systems caused by continuing troubles throughout Asia. The news led several brokerage firms, including J.P. Morgan and Lehman Brothers, to cut their ratings on the company.
Other PC makers also swooned within minutes of the open, but all were soon bouncing back. The reason seems fairly simple. Hewlett had risen steadily over the last month, climbing from $60 1/2 to Wednesday's high of $82 3/8 on positive analyst comments. With about 40% of its revenues coming from its stellar printer franchise, Hewlett was seen as less susceptible to competitive pressures affecting the overall PC market in light of the rush to under $1,000 computers and Compaq's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> widely publicized inventory troubles and ensuing price cuts. Indeed, as recently as April 27, H-P was reporting just 20 days worth of desktop PC inventory. At the same time, research outfits International Data Corp. and Dataquest reported that Hewlett's PC shipments soared between 69% to 72% in the first quarter versus the year ago period. Hewlett was gobbling up market share on the way to becoming the number-four PC maker worldwide and number six in the U.S.
This surprise earnings warning, though, means Hewlett has not been able to escape the industry pressures. That's hardly surprising given that Hewlett has actually missed earnings estimates every quarter since it joined the Dow Jones Industrial Average a year ago and that H-P has itself cut prices on business PCs by 20% to keep up with general industry deflation. The company should benefit from a new build-to-order channel assembly strategy to be implemented this summer and from more focus on establishing closer, more integrated contact with customers. Still, price is what's currently ruling the PC battles, and H-P is simply not positioned to remain standing in that war without suffering some wounds along the way. More surprising than H-P's shortfall, then, is the fact that no Wall Street analyst did the work to see the writing on the wall. The low estimate for the quarter was just $0.73 per share. Given that there are 25 highly paid professionals covering this company, that's disappointing but, sadly, hardly shocking.
Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> gained $3 7/16 to $90 3/8 on news that the Justice Department won't attempt to block the company's scheduled shipment of Windows 98 to computer makers tomorrow even as it and several state attorneys general are on the verge of filing antitrust suits against the software and operating systems giant. There are also reports that Microsoft is in talks with the Justice Department about a possible settlement.
IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> jumped $4 1/8 to $126 after CEO Louis Gerstner told analysts to expect double-digit revenue growth in the next several years despite the computer company's recently reported lower-than-expected revenue growth. Bear Stearns raised its rating on the company to "buy" from "attractive."
Internet companies rose after MasterCard International and Internet content aggregator Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> announced a strategic multi-year marketing alliance dedicated to building consumer awareness of the benefits of shopping online. The companies will promote Excite's Shopping Channel in its first-ever Internet-related broadcast advertisement, which will debut tonight during NBC's final Seinfeld episode. Excite gained $2 3/8 to $64 5/8. Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> moved up $2 11/16 to $71 1/8; Netscape <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> advanced $1 1/2 to $28 5/8; online auction retailer Onsale <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONSL)") else Response.Write("(Nasdaq: ONSL)") end if %> was bid up $2 13/16 to $32 3/4; and bookseller Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> rose $1 3/8 to $94 1/4.
PolyGram <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PLG)") else Response.Write("(NYSE: PLG)") end if %> added another $2 9/16 to $55 9/16 as The Wall Street Journal reported that there may be a bidding contest for the world's largest record label following the news of majority owner Philips Electronics' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHG)") else Response.Write("(NYSE: PHG)") end if %> talks with Seagram <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VO)") else Response.Write("(NYSE: VO)") end if %>. Philips moved up $2 13/16 to $100 7/8. Leveraged buyout firms Forstmann, Little & Co. and Thomas H. Lee Co. met with PolyGram's senior management last night. David Bonderman, founding partner of the Texas Pacific Group investment firm, and buyout specialist Leon Black of Apollo Partners also are considering separate bids, according to the Journal.
Development stage biotechnology company ZymeTx Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZMTX)") else Response.Write("(Nasdaq: ZMTX)") end if %> surged $1 25/32 to $10 3/8 after announcing an agreement with the Oklahoma Medical Research Foundation to license a ZymeTx technology that has demonstrated a reduction of HIV in laboratory tests. The company plans to file an initial new drug application with the FDA following the successful completion of ongoing pre-clinical studies.
C-Phone Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CFON)") else Response.Write("(Nasdaq: CFON)") end if %> rang up another $3 15/16 to $13 11/16 after announcing the launch of an Internet set-top box to provide Web access via TV using an analog phone line. Today the video communications products developer issued a statement clarifying that to date it has supplied "limited quantities of this device to certain of its business and institutional partners. Retail distribution plans for the device are being formulated."
Biopharmaceutical company Aviron <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVIR)") else Response.Write("(Nasdaq: AVIR)") end if %> gained $2 5/16 to $31 1/4 after a study published in the May 14 issue of The New England Journal of Medicine found that the company's FluMist intranasal influenza virus vaccine provided 93% protection against culture-confirmed influenza and also provided 98% protection against influenza-associated ear infections.
Micro Focus Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MIFGY)") else Response.Write("(Nasdaq: MIFGY)") end if %> leapt $5 7/8 to $51 5/8 after reporting Q1 earnings of $0.32 per American depositary share vs. $0.15 last year. Analysts had expected $0.20. Revenue for the quarter increased almost 50% to $48.7 million.
Multimedia communications company Qwest Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QWST)") else Response.Write("(Nasdaq: QWST)") end if %> tacked on $1 1/16 to $39 7/16 after announcing an agreement with Ameritech <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %> to jointly offer residential and small business customers a combined local and long-distance package of services. The package, called CompleteAccess, brings together Ameritech's local phone service with long-distance service from Qwest.
Europe's fourth largest oil company Elf Aquitaine <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELF)") else Response.Write("(NYSE: ELF)") end if %> rose $3 1/2 to $74 3/16 after Merrill Lynch upgraded its rating on the company to "intermediate-term buy" from "accumulate" and tagged it the "focus stock of the week." Merrill Lynch called the French company "the major revaluation story in the sector" and predicted its share price will double in the next three years.
MGI Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MOGN)") else Response.Write("(Nasdaq: MOGN)") end if %> gave back $2 1/16 to $10 3/4 after the company's 65% advance yesterday that came about due to management remarks at its annual meeting about its anticancer drug, MG 114. Chief Operating Officer James V. Adam told shareholders that the company believes MG 114 is "... just as promising, and just as unproven, as other cancer therapies recently discussed in the media." Adam is talking about EntreMed's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENMD)") else Response.Write("(Nasdaq: ENMD)") end if %> anticancer drugs, which were highlighted in a New York Times piece that drove its stock up dramatically in one day.
The company that combined 7 Habits of Highly Effective People management gooroo Steven Covey with Franklin Day Planners, Franklin Covey <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FC)") else Response.Write("(NYSE: FC)") end if %>, fell $2 3/16 to $22 1/8 after announcing that it expects a 6% to 8% drop in same-store sales for its third quarter and EPS of $0.01 to $0.05, well below the single Zacks estimate of $0.20. The company said changes in competitive distribution channels hurt its performance and that it is responding to those changes. For the full year, Franklin Covey estimates EPS of $1.68 to $1.73 (before an extraordinary item), about flat with fiscal 1997 earnings (before extraordinary items).
Residential properties real estate investment trust (REIT) New Plan Realty Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NPR)") else Response.Write("(NYSE: NPR)") end if %> lost $1 3/4 to $23 3/8 and diversified REIT Excel Realty Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XEL)") else Response.Write("(NYSE: XEL)") end if %> fell $1 1/16 to $27 7/16 after announcing a merger agreement this morning. Excel will declare a 1-for-5 stock dividend and then issue one share of stock for each share of New Plan outstanding, valuing New Plan at $23 3/4, which is below its previous close of $25 1/8. The combined company will own 34.7 million square feet of real estate and will have a post-split dividend of $1.60 per share, indicating a post-split yield of 7%.
Innova Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVA)") else Response.Write("(Nasdaq: INVA)") end if %> lost $2 25/32 to $12 3/32 after the provider of wireless telecom infrastructure equipment issued negative guidance on April revenues. The company said a significant European order was cancelled after its customer did not receive the PCS license it had expected. Further, a Mexican customer pushed out orders until later in the year. Unable to adapt quickly enough to the change in its order book due to component shortages, the company says its completion this quarter of an enterprise resource planning software system implementation will ameliorate such shifts in the future.
Shares of Walt Disney Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> slid $2 1/4 to $116 1/4 on another downgrade, this one from institutional broker Schroder & Co. Schroder removed the entertainment company from its "recommended list" and is another in a fairly steady drumbeat of downgrades that have followed the stock's extremely strong performance in the first quarter. Last week, Goldman Sachs lowered its estimate of 1999 EPS to $3.65 from $3.80 but worried more about the current value of the stock than earnings
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
Click here for continually updated Portfolio Numbers.
ANOTHER FOOLISH THING
See something moving a stock that we didn't cover?
E-mail the Fool News Team
and we will start working on the story.
Unfortunately, we cannot answer every e-mail
or respond to individual questions.
|
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 |