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FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay
EchoStar Booms
<% ' AvantGo:FoolPlate %>After moving up 10.89% yesterday, digital broadcast satellite firm EchoStar Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DISH)") else Response.Write("(Nasdaq: DISH)") end if %> launched $2 3/4 higher to $41 9/16 this morning on the heels of its announcement that it will buy the satellite television assets of News Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %> and MCI WorldCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> for $1.108 billion in stock, or a 37% stake in the firm (24 million newly issued class A shares to News Corp. and 5.97 million to MCI Worldcom with a $37 collar). News Corp. and MCI Worldcom will hand over the transmission licenses for 28 satellite frequencies (bought for $682.5 million, not including capitalized interest), two satellites worth $450 million, and a satellite uplink center worth $100 million, as well as other assorted assets. Worldcom and News Corp. had laid plans to build a satellite TV company, but ditched the effort after assessing the lead already garnered by the major operators in the segment.
The deal seems to be a good one all around, as News Corp. gets the $5 billion lawsuit filed against it by EchoStar dropped -- brought against News Corp. for failure to go through with plans to purchase 50% of EchoStar -- as well as a vehicle for capturing some of the satellite growth that it had hoped to gain by building a business from scratch. EchoStar also will carry Fox News on its network and gain the rights to retransmit the content of all Fox-owned stations for three years.
EchoStar Communications was one of only two direct broadcast satellite (DBS) companies in the U.S. with the capacity to provide comprehensive nationwide DBS programming service in 1996. EchoStar's DBS service commenced operations in March 1996 after the successful launch of its first satellite (EchoStar I) in December 1995. The company launched its second satellite (EchoStar II) in September of 1996 and significantly increased the channel capacity and programming offerings of the DISH Network when that satellite became fully operational in November 1996. However, now with the new licenses, EchoStar will be able to carry over 500 channels of programming -- the magic number in the DBS world.
EchoStar is adding 100 thousand subscribers per month, and with a 1.7 million customer base hopes to eclipse Primestar's 2.2 million subscribers by year-end 1999. This move will put the firm on better competitive footing when facing industry heavyweight DirecTV, which has 4.1 million subscribers, and gives EchoStar the necessary video package at a price that can compete with cable -- the ultimate market that DBS is seeking to erode. Even though EchoStar may control 2 orbital slots (the 110 and 119 orbital locations), the FCC issued a statement this morning that it likes the deal in terms of providing competition with cable.<% ' AvantGo:End %>
<% ' AvantGo:Ups %>Although overshadowed by the Exxon-Mobil merger news, there was plenty more brewing in the oilfields today. This morning, Paris-based Total SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOT)") else Response.Write("(NYSE: TOT)") end if %>, the world's ninth-largest publicly traded oil concern, said it agreed to buy a 41% interest in Belgium refiner Petrofina SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FIN)") else Response.Write("(NYSE: FIN)") end if %> for close to $13 billion, making the new company, Total Fina, the sixth largest in the world. Petrofina's American depositary receipts shot up $8 1/16 to $48 3/4 on the news. Total fell $6 5/8 to $54 1/2 this morning.
Coffee roaster and retailer Starbucks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBUX)") else Response.Write("(Nasdaq: SBUX)") end if %> bounced up $2 11/16 to $48 13/16 after reporting a 6% increase in November same-store sales. Monthly revenues rose 30% to $117 million from $91 million the year before.
Computer workstations and Java programming language developer Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> rose $1 3/8 to $75 7/16 after it introduced a 360MHz UltraSPARC IIi processor into its Ultra AXi motherboard family and cut prices on its SPARCEngine Ultra AXi motherboards by up to 22%.
Online discount apparel retailer Bluefly <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BFLY)") else Response.Write("(Nasdaq: BFLY)") end if %> shooed up $6 13/16 to $21 5/8 after announced a co-branded version of its online store on Yahoo's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> Yahoo! Shopping service.
Online data broadcasting firm WavePhore <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WAVO)") else Response.Write("(Nasdaq: WAVO)") end if %> rushed ahead $5 5/8 to $13 3/8 after announcing a deal with Wave Systems Corp. (OTC: WAVX) to use Wave Systems' e-commerce content and payment system for its digital data broadcast network.
4Front Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FFTI)") else Response.Write("(Nasdaq: FFTI)") end if %> jumped $1 1/2 to $9 1/2 after the provider of enterprise help desk support and computer network services said it agreed to buy I-NEA SA, the computer on-site service delivery unit of French company Siemens Nixdorf, for $4.1 million in cash. 4Front expects the deal to be accretive to earnings in calendar 1999.
Biotechnology firm Organogenesis Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ORG)") else Response.Write("(AMEX: ORG)") end if %> ran ahead $2 to $15 9/16 this morning on news that it will replace DeKalb Genetics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DKB)") else Response.Write("(NYSE: DKB)") end if %>, which is being acquired by Monsanto <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MTC)") else Response.Write("(NYSE: MTC)") end if %>, in the Standard & Poor's SmallCap 600 Index after today's close.
Independent music company Platinum Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTET)") else Response.Write("(Nasdaq: PTET)") end if %> rose $3 15/32 to $9 7/8 following the news that 1.5 million people visited its retail website last month, crushing the 13,500 figure for October, which was its first month of operation. "The most significant aspect of this traffic increase is that it was achieved without spending anything on web advertising,'' gushed President and CEO Steve Devick.
Uniform rental services company Unitog Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UTOG)") else Response.Write("(Nasdaq: UTOG)") end if %> leaped ahead $4 5/8 to $26 3/8 after it said it hired two investment banking firms to advise it on "strategic alternatives for enhancing shareholder value," including selling the company or merging with another company.
HF Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HEMT)") else Response.Write("(Nasdaq: HEMT)") end if %>, the holding company for California's Hemet Federal Savings & Loan, advanced $1 1/4 to $17 after it said it reached an agreement with a customer involved in a $2.9 million check kite -- depositing a check from one account into another without having the money to cover it -- that requires repayment by Feb. 6. The company doesn't expect a charge in connection with the matter since the value of the collateral sealing the deal is greater than the outstanding debt.<% ' AvantGo:End %>
<% ' AvantGo:Downs %>Investment bank Morgan Stanley Dean Witter <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MWD)") else Response.Write("(NYSE: MWD)") end if %> slid $2 11/16 to $66 15/16 after Merrill Lynch cut the company's near-term rating to "accumulate" from "neutral," citing valuation and the fact that major brokerages may not be "out of the woods" after suffering trading losses this summer due to global financial turmoil. Other Wall Street houses fell as well, as PaineWebber <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PWJ)") else Response.Write("(NYSE: PWJ)") end if %> shed $2 5/16 to $38 9/16, Lehman Brothers <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEH)") else Response.Write("(NYSE: LEH)") end if %> slipped $1 5/8 to $48 3/8, and Donaldson, Lufkin & Jenrette <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLJ)") else Response.Write("(NYSE: DLJ)") end if %> sank $1 7/8 to $38 5/16. Even Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> itself dropped $3 1/4 to $71 3/4.
Young adult fashion retailer Pacific Sunwear of California <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSUN)") else Response.Write("(Nasdaq: PSUN)") end if %> was burned $1 15/16 to $12 7/8 after reporting a 1.6% drop in November same-store sales compared to a year ago. The company said it is refocusing its men's pants offerings for the spring, which will include garments with "narrower leg openings." A plan to buy back up to 1 million outstanding shares was also announced, but BancBoston Robertson Stephens gave more weight to the same-store sales slide and lowered its rating to "long-term attractive" from "buy."
Integrated oil and gas giant Exxon Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XON)") else Response.Write("(NYSE: XON)") end if %> dropped $3 5/16 to $71 11/16 after putting days of speculation to rest by agreeing to acquire rival Mobil Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOB)") else Response.Write("(NYSE: MOB)") end if %> in a stock swap valuing Mobil at about $99 per share. The purchase price represents a 32% premium to Mobil's closing price of $74 15/16 per share last Wednesday, before the companies confirmed reports that they were in merger talks on Friday. A press conference concerning the merger will be carried live on the Internet at 2 p.m. EST at www.jpmorgan.com/Visitors/news.html.
Vitamins and nutritional products firm Twinlab Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TWLB)") else Response.Write("(Nasdaq: TWLB)") end if %> dissolved for a $3 5/16 loss to $13 5/16 after saying Q4 EPS will come in between $0.23 and $0.26, missing the First Call mean estimate of $0.41, due to "excess levels of inventory" in the retail channel. Looking ahead, the company expects sales and earnings in fiscal Q1 to be "relatively" flat with last year's results. Other recently beaten-down vitamin firms also fell on the news, as Rexall Sundown <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RXSD)") else Response.Write("(Nasdaq: RXSD)") end if %> dropped $1 3/16 to $12 3/16 and General Nutrition Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GNCI)") else Response.Write("(Nasdaq: GNCI)") end if %> slid $1 1/8 to $16 5/8.
Retailer Sears, Roebuck & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> slumped $2 5/16 to $45 1/8 after Bear Stearns slapped the 112-year-old company with a downgrade to "attractive" from "buy" and lowered its fiscal 1998 earnings estimate to $3.49 per share from $3.55 per share. The fiscal 1999 forecast was trimmed to $4.00 per share from $4.25 per share.
Bookseller Barnes & Noble <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BKS)") else Response.Write("(NYSE: BKS)") end if %> was tossed for a $1 15/16 loss to $31 3/16 after Brown Brothers Harriman cuts its long-term rating to "neutral" from "buy" and Fahnestock & Co. lowered its opinion to "hold" from "buy."
Radio Shack operator Tandy Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TAN)") else Response.Write("(NYSE: TAN)") end if %> moved down $5 3/8 to $39 11/16 on concerns raised by analysts that the company's November same-store sales may have been lower than expected due in part to Radio Shack's lack of a PC priced below $1000 to peddle to customers.
Online auctioneer and retailer Onsale Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONSL)") else Response.Write("(Nasdaq: ONSL)") end if %> was marked down $5 1/2 to $56 after Needham & Co. lowered its rating to "buy" from "strong buy" and Everen Securities cut its short-term rating to "market perform" from "outperform."
Digital imaging software tools maker MetaCreations Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCRE)") else Response.Write("(Nasdaq: MCRE)") end if %> gave back $1 15/16 to $6 1/8 after rising 111% yesterday on word that software giant Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> may distribute its MetaStream graphics product with the Microsoft Windows 98 operating system. This morning, CIBC Oppenheimer lowered its rating on the stock to "hold" from "buy."<% ' AvantGo:End %>
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), another Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |