DJIA 9344.41 -19.05 (-0.20%) S&P 500 1242.86 -11.18 (-0.89%) Nasdaq 2356.51 -49.04 (-2.04%) Russell 2000 400.85 -5.31 (-1.31%) 30-Year Bond 98 4/32 -1 2/32 5.38 Yield
FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
Dell Sales Called Light
PC juggernaut Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> lost $8 7/8 to $93 this morning after both Salomon Smith Barney and BancBoston Robertson Stephens said in research notes that they expect the company to come in a little light on revenues for the fourth quarter. According to Bloomberg, BBRS analyst Dan Niles expects the company's sales to come in about $300 million light of his quarterly estimate of $5.5 billion, due to "intensified [competitive pressure], especially in the corporate market." On that news, other PC vendors were pared as well, with Gateway Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> off $3 1/4 at $72 3/4, Micron Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %> down $1 1/16 at $13 7/8, IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> down $5 1/2 to $173, and Compaq <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> $1 3/16 lower at $43 5/8. Hewlett Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> bucked the trend, gaining $1 13/16 to $77 1/16.
The thinking here goes that Dell competitor Compaq took some market share with stepped up marketing initiatives, including a better direct sales effort. If the competition was most intense in the corporate market, investors fear that that will impact the company's sales of higher-end units such as laptops and servers. The anecdotal evidence points to better execution by Compaq in PCs, but not in the higher-end products. This quarter's sell-out of Compaq products from the distribution channel was excellent, increasing 43% year-over-year. But some of that was done with promotional incentives and could also be due to smaller distributors clearing out inventories to generate cash. The success of Compaq's efforts in direct sales, build to order, and configure to order will have to be assessed over a number of quarters, though certainly investors like to be out in front of trends.
Salomon Smith Barney and BBRS certainly want to get in front of that curve, but investors don't really have to wait that long to hear it straight from Dell itself. The Round Rock, Texas, company will be holding its fourth quarter conference call on Tuesday afternoon. Both analysts and CS First Boston said they believe Dell can attain the consensus earnings estimate of $0.31 per share for the quarter, which is, as they say, "the bottom line." Earnings and cash flow for this quarter really aren't the issue, as investors have their ears to the ground attempting to detect a tectonic shift in the PC landscape.
If Dell is indeed ceding a little business over the short term in desktops but gaining share in higher-priced servers and mobile computers, that's actually good news. Knowing that the company is acting in a rational manner on prices and hitting its strategic goals of improving the sales mix is exactly what one would want to hear. For smaller companies making their moves into the corporate market, especially Micron, that might not be such good news, but Micron has some very strong sauce that it's brewing up to gain corporate sales. As investors await the Dell call, they shouldn't let their imaginations run too wild here.
Medical devices maker Boston Scientific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSX)") else Response.Write("(NYSE: BSX)") end if %> gained $5/8 to $26 5/8 after announcing it will cut 2,000 jobs in the next year as it integrates Schneider Worldwide and streamlines its manufacturing operations. Boston Scientific acquired Schneider last September but has fallen roughly 25% since closing the deal due in part to concerns that the two companies are having trouble meshing their operations. The company estimates its "rationalization plan" will cost around $62 million, $26 million of which ($17 million after tax) has been charged in the fourth quarter.
Foot Locker and Champs Sports parent Venator Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: Z)") else Response.Write("(NYSE: Z)") end if %> ran ahead $3/16 to $4 11/16 after saying it has reached an agreement to become the National Football League's official catalog and e-commerce retailer. The catalog, which will be renamed NFL Shop, and the website, which will be linked to NFL.com, are both slated to launch this summer.
Pharmaceutical developer Alpharma <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALO)") else Response.Write("(NYSE: ALO)") end if %> picked up $1 1/16 to $32 1/16 after Bear Stearns started coverage with a "buy" rating and a 12- to 24-month price target of $50 per share.
Database marketing software developer Group 1 Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GSOF)") else Response.Write("(Nasdaq: GSOF)") end if %> moved up $3 1/2 to $11 after posting fiscal Q3 EPS of $0.22, nearly doubling the $0.12 earned a year ago. Revenues rose 13% year-on-year in the quarter to $18 million.
Internet service provider Prodigy Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRGY)") else Response.Write("(Nasdaq: PRGY)") end if %> added another $6 7/8 to $35 this morning after rising more than 87% yesterday on its first day of trading.
European cable-based communications network operator United Pan-Europe Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UPCOY)") else Response.Write("(Nasdaq: UPCOY)") end if %> advanced $8 3/4 to $40 3/4 from an initial public offering price of $32.78 per American depositary share this morning.
International computer products marketer Programmer's Paradise <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PROG)") else Response.Write("(Nasdaq: PROG)") end if %> rose $1 3/4 to $16 1/2 after saying first quarter sales at its www.pparadise.com webstore are currently up 43% from last quarter's levels.
Enterprise software developer Project Software & Development <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSDI)") else Response.Write("(Nasdaq: PSDI)") end if %> tacked on $2 1/8 to $26 after Bear Stearns started coverage of the stock with a "buy" rating and a 12-month price target of $36 per share.
Internet venture capital firm CMGI Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMGI)") else Response.Write("(Nasdaq: CMGI)") end if %> lost $4 3/8 to $107 5/8 this morning after saying it is "generally supportive" of the planned deal between Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> and USA Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USAI)") else Response.Write("(Nasdaq: USAI)") end if %>. Shares of CMGI and Lycos advanced yesterday on reports that CMG didn't back the deal; a 20% Lycos shareholder, CMGI "reserves the right to reassess its position as developments unfold."
Internet portal company Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>, started by ING Baring Furman Selz with a "buy" rating today, fell $6 to $152 1/2. The brokerage opened coverage on several portals today: Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> lost $7 1/4 to $98 despite earning a "buy" rating, and Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> dropped $2 3/4 to $62 13/16 following a new "hold."
Telecommunications switching and access products maker World Access <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WAXS)") else Response.Write("(Nasdaq: WAXS)") end if %> hung up $3 7/16 to $8 1/16 after saying it expects full-year 1999 EPS of $0.75, well short of First Call's current $1.57 estimate. The company turned in Q4 1998 EPS of $0.08 before charges, down from the year-ago $0.11 figure and Wall Street's $0.15 projection. Prudential Securities downgraded the stock to "hold" from "accumulate" this morning.
Enterprise resource planning (ERP) software firm J.D. Edwards & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JDEC)") else Response.Write("(Nasdaq: JDEC)") end if %> dropped $4 3/8 to $14 1/2 after saying it expects fiscal Q1 EPS of between $0.02 and $0.04, missing the analysts' $0.09 consensus estimate. The company said license fee growth was slower than anticipated because of "external market and competitive factors as well as the slower than expected realization of benefits from internal operational changes."
Customer service management systems developer TeleTech Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TTEC)") else Response.Write("(Nasdaq: TTEC)") end if %> fell $2 3/16 to $7 1/4 after it said it expects full-year 1999 operating margins to be flat with 1998 numbers. The company said Q4 EPS was $0.09, a penny above year-ago levels but a penny off estimates. Full-year EPS was about 11% below last year's mark in part because of lower volumes in two major accounts.
Cable-based information services provider Source Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SRCM)") else Response.Write("(Nasdaq: SRCM)") end if %> slid $3 15/16 to $20 on news that United Video Satellite Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UVSGA)") else Response.Write("(Nasdaq: UVSGA)") end if %> will buy 842,000 shares of Source Media for about $14.25 each -- a 40% discount to yesterday's closing price -- as one of the terms of a joint venture between the companies developing content for cable and satellite television.
Level 8 Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LVEL)") else Response.Write("(Nasdaq: LVEL)") end if %>, a provider of middleware software products and services utilizing messaging, slipped $15/16 to $10 9/16 as the company said it expects to restate 1998 financial statements because of a new SEC policy affecting a $6.5 million charge in connection with an acquisition. Level 8 expects "to reduce the valuation substantially."
Shares of VerticalNet <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VERT)") else Response.Write("(Nasdaq: VERT)") end if %>, the operator of business-to-business community websites that picked up $29 3/8 on its IPO yesterday, returned $3 1/4 to $42 1/8 this morning.
Earnings Movers
Brooktrout <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRKT)") else Response.Write("(Nasdaq: BRKT)") end if %> down $1 5/8 to $11 1/2; Q4 EPS $0.16 vs. $0.15 last year; estimate: $0.18
Sola International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOL)") else Response.Write("(NYSE: SOL)") end if %> down $1 3/4 to $10 15/16; Q3 EPS $0.25 (excluding charges) vs. $0.44 last year; estimate: $0.39
Spacehab <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPAB)") else Response.Write("(Nasdaq: SPAB)") end if %> down $3/8 to $8 7/8; fiscal Q2 EPS loss of $0.17 vs. $0.43 profit last year; estimate: $0.31
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |