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FOOL PLATE SPECIAL
An Investment Opinion
by Louis Corrigan
Yahoo! Storms the Gates of GeoCities
Internet consolidation continued today with the announcement by top Web portal Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> that it will buy GeoCities <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GCTY)") else Response.Write("(Nasdaq: GCTY)") end if %>, the leading webpage hosting community, in a stock deal valued at around $3.6 billion. Shares of GeoCities soared nearly 50% to $112 1/4 a share on the news as the merger calls for a stock swap of 0.3384 shares of Yahoo! for each share of GeoCities. Altogether, Yahoo! will issue about 10.6 million new shares for approximately 31.4 million shares of GeoCities. Yahoo! will also convert 8.9 million shares of GeoCities stock options into more than 3 million Yahoo! options.
Despite this dilution, Yahoo!'s stock also gained $15 1/8 to $351 since the agreement is seen as strengthening the company's overall online offerings as the competitive landscape continues to change rapidly. Rival America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> will soon marry Netscape Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> while number two portal player Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> has agreed to become a part of high-speed Internet access provider @Home <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %>. Meanwhile, Compaq <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> has been beefing up its Alta Vista search site in preparation for a public offering. Also, Disney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %>, which acquired a 43% stake in Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> last June, recently started heavy promotion of its Go portal, and General Electric's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> NBC has been pushing Snap!, a portal produced with partner Cnet <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNET)") else Response.Write("(Nasdaq: CNET)") end if %>.
GeoCities is a community of personal websites with more than 3.5 million "homesteaders" who have put up 33 million content pages. The site attracted 19 million unique visitors last month for a 33.4% reach. While those number pale next to Yahoo!'s 35 million unique registered members, GeoCities claims a 74% broader reach than its closest competitor, according to Media Metrix. Yahoo! says the combined companies will have an unduplicated reach of more than 58%, making it the second-largest network of Web properties. But reach alone doesn't tell the story. By distributing GeoCities' easy to use Web editing tools, Yahoo! should be able to improve customer loyalty. At the same time, cross-marketing opportunities should enhance something like Yahoo! Classifieds, which faces stiff competition from eBay <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EBAY)") else Response.Write("(Nasdaq: EBAY)") end if %>.
Though Yahoo! has focused on internal growth, this acquisition is not a complete shock. Japan's Softbank has roughly a 30% stake in both Yahoo! and GeoCities -- along with stakes in E*Trade <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGRP)") else Response.Write("(Nasdaq: EGRP)") end if %>, Ziff Davis <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %>, and CyberCash <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %>. Yahoo! also paid $5 million for a minority stake in GeoCities last year. Still, the move suggests that the leading Internet brands, like Yahoo!, may increasingly use their stock to enhance their competitive positions. Indeed, it seems likely that no Internet company with a unique or meaningful product offering will escape being gobbled up by the major players whose stock appears so richly valued by traditional metrics. Compaq's recent move to acquire Shopping.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IBUY)") else Response.Write("(Nasdaq: IBUY)") end if %> suggests that even issues of dubious value may become takeover fodder. That's one reason a host of Web issues rose this morning, with TheGlobe.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TGLO)") else Response.Write("(Nasdaq: TGLO)") end if %> up $9 3/8 to $48 7/8 and Xoom.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XMCM)") else Response.Write("(Nasdaq: XMCM)") end if %> up $10 1/8 to $49 11/16.
Check out the Fool's StockTalk interview earlier this month with GeoCities President and CEO Tom Evans.
Online services conglomerate America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> gained $7 15/16 to $172 13/16 after late yesterday reporting fiscal second quarter earnings of $0.17 per share, up from $0.04 per share last year and ahead of the First Call mean estimate of $0.14 per share. The company also said it will split its stock 2-for-1 effective February 22. Merger mate Netscape Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> added $4 5/16 to $73 9/16.
Media giant Walt Disney Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> picked up $15/16 to $33 7/8 after Morgan Stanley Dean Witter raised its rating to "strong buy" from "outperform" with a 12-month price target of $42 per share. The gain erased much of yesterday's 4.7% drop after the company posted fiscal Q1 EPS of $0.23 (excluding benefits), a penny short of analysts' estimates.
Live entertainment events promoter and venue operator SFX Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFXE)") else Response.Write("(Nasdaq: SFXE)") end if %> rocked its way $4 1/2 higher to $61 7/8 after agreeing to acquire privately held sports marketing firm Integrated Sports International for $14.1 million in cash and 60,000 SFX shares. Integrated Sports has a stable of corporate and sports team clients as well as athletes such as Hakeem Olajuwon and Steve Young.
Number 2 U.S. automaker Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> put it in gear and drove $7/8 higher to $61 3/16 after agreeing to acquire the automobile-related assets of Sweden's Volvo <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VOLVY)") else Response.Write("(Nasdaq: VOLVY)") end if %> for $6.45 billion. The deal is expected to add to earnings within the first year, Ford reportedly said at a news conference. Volvo will focus on its highly profitable heavy-duty truck, bus, and construction equipment operations. For more details on the deal, see this morning's Breakfast With the Fool.
Chip giant Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> moved up $3 25/32 to $136 17/32 after setting a two-for-one stock split effective April 11. The company also said it will boost its quarterly dividend to $0.03 per share from $0.02 per share.
Semiconductor etch and chemical mechanical planarization equipment maker LAM Research <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LRCX)") else Response.Write("(Nasdaq: LRCX)") end if %> rose $2 1/8 to $32 13/16 thanks to a Needham & Co. upgrade to "buy" from "hold."
Swedish mobile phone supplier Ericsson AB <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ERICY)") else Response.Write("(Nasdaq: ERICY)") end if %> rang up $1 15/16 to $27 1/8 after reporting that its Q4 net income dropped by 3% year-over-year in local currency terms, which was not quite as bad as analysts had been expecting.
Internet services company Exodus Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EXDS)") else Response.Write("(Nasdaq: EXDS)") end if %> journeyed $8 5/16 higher to $94 3/8 after reporting a Q4 loss of $1.00 per share (excluding acquisition charges), which was in line with the Zacks mean estimate. The company also announced a two-for-one stock split and the acquisition of privately held co-location and web hosting services firm American Information Systems Inc. for undisclosed terms.
British aerospace and auto parts maker LucasVarity <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LVA)") else Response.Write("(NYSE: LVA)") end if %> gained $1 1/16 to $47 3/4 after the company agreed to merge with airbag and seatbelt maker TRW Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRW)") else Response.Write("(NYSE: TRW)") end if %> for $7 billion in cash. TRW rose $1 3/16 to $52 5/16 on the news. Fellow auto parts maker Federal-Mogul <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FMO)") else Response.Write("(NYSE: FMO)") end if %>, which offered about $500 million less for the company and was rebuked earlier this week, fell $1 3/8 to $58 13/16.
Fort Wayne, Indiana-based flat-rolled steel minimill operator Steel Dynamics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STLD)") else Response.Write("(Nasdaq: STLD)") end if %> tacked on $1 5/8 to $15 3/8 after Salomon Smith Barney raised its rating to "buy" from "neutral." Minimill originator Nucor Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NUE)") else Response.Write("(NYSE: NUE)") end if %>, which received an identical upgrade from the brokerage, rose $2 1/8 to $48 7/8.
Earnings Movers
Allegheny Teledyne <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALT)") else Response.Write("(NYSE: ALT)") end if %> up $7/8 to $20 7/16; Q4 EPS: $0.39 (before one-time items) vs. $0.42 last year; estimate: $0.35
Convergys Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVG)") else Response.Write("(NYSE: CVG)") end if %> up $1 15/16 to $18 1/8; Q4 EPS: $0.22 vs. $0.21 (excluding charges) last year; estimate: $0.19
Deltek Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLTK)") else Response.Write("(Nasdaq: DLTK)") end if %> up $1 7/8 to $19 1/8; Q4 EPS: $0.24 (excluding charges) vs. $0.18 last year; estimate: $0.23
Gilead Sciences <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GILD)") else Response.Write("(Nasdaq: GILD)") end if %> up $1 3/4 to $41 3/8; Q4 EPS: loss of $0.53 vs. loss of $0.42 last year; estimate: loss of $0.59
Greg Manning Auctions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GMAI)") else Response.Write("(Nasdaq: GMAI)") end if %> up $1 13/16 to $13 5/16; Q4 EPS: profit of $0.04 vs. loss of $0.14 last year; no estimates
New Era of Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NEON)") else Response.Write("(Nasdaq: NEON)") end if %> up $6 to $61; Q4 EPS: $0.15 (excluding charges) vs. $0.03 last year; estimate: $0.08
Revlon Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: REV)") else Response.Write("(NYSE: REV)") end if %> up $15/16 to $17 1/8; Q4 EPS: $0.13 (before charges) vs. $0.71 last year; estimate: $0.10
Ryland Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RYL)") else Response.Write("(NYSE: RYL)") end if %> up $1 7/16 to $25; Q4 EPS: $1.12 vs. $0.62 last year; estimate: $0.98
Stryker Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SYK)") else Response.Write("(NYSE: SYK)") end if %> up $7 7/8 to $59 3/8; Q4 EPS: $0.45 (excluding acquisition charges) vs. $0.38 last year; estimate: $0.43
Ticketmaster Online-CitySearch <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TMCS)") else Response.Write("(Nasdaq: TMCS)") end if %> up $4 5/16 to $63 1/8; Q4 EPS: loss of $0.26 vs. loss of $0.35 last year; estimate: loss of $0.31
Optical products and services retailer U.S. Vision <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USVI)") else Response.Write("(Nasdaq: USVI)") end if %> blurred $1 1/16 to $6 7/8 on last night's news that it expects Q4 EPS of between $0.04 and $0.06, down from last year's dime profit and the four-analyst $0.14 projection reported by First Call. The company blamed reduced traffic in its J.C. Penney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JCP)") else Response.Write("(NYSE: JCP)") end if %> locations, among other factors, for the shortfall but said sales have begun to recover in late January.
Property and casualty reinsurer and specialty insurer Centris Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CGE)") else Response.Write("(NYSE: CGE)") end if %> fell $2 to $12 1/16 after HCC Insurance Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HCC)") else Response.Write("(NYSE: HCC)") end if %> withdrew its unsolicited bid to buy the 92.2% of Centris it doesn't own for $13.25 per share. Earlier yesterday, Centris CEO David Cargile called the bid "grossly inadequate."
Database technology developer Informix Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IFMX)") else Response.Write("(Nasdaq: IFMX)") end if %> lost $1 1/2 to $11 13/16 despite reporting Q4 EPS of $0.13, ahead of last year's $0.05 mark and $0.03 above estimates even after a penny per share charge for December's acquisition of Red Brick Systems. Informix plans to ship the next generation of its Dynamic Server database engine in 1999.
Integrated circuit maker Maxim Integrated Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MXIM)") else Response.Write("(Nasdaq: MXIM)") end if %> dropped $3 9/16 to $49 7/16 as it turned in fiscal Q2 EPS of $0.31, ahead of the year-ago $0.29 mark but flat with market projections. "Although bookings in Q2 did grow substantially over Q1 (which now looks like the low point)," said CEO Jack Gifford in a statement, "Q3's growth (or lack of it) should indicate whether we are just bouncing off the bottom, or whether a growth trend has resumed.''
HA-LO Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMK)") else Response.Write("(NYSE: HMK)") end if %> tumbled $12 15/16 to $22 1/2 after Credit Suisse First Boston downgraded the promotional products distributor and telemarketing services company's stock to "buy" from "strong buy." On Monday, HA-LO announced plans for a 3-for-2 stock split effective Feb. 5.
Self-service solutions software company Edify Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EDFY)") else Response.Write("(Nasdaq: EDFY)") end if %> lost $1 3/8 to $8 1/2 on news of Q4 EPS of $0.01, missing last year's $0.08 mark and coming in a penny below market projections. The company also said it will sell privately held RightPoint's one-to-one marketing software products, taking an equity stake in the company.
Front-office automation software developer Vantive Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VNTV)") else Response.Write("(Nasdaq: VNTV)") end if %> backed down $1 7/8 to $12 3/4 as the company said recent interaction with the SEC may result in the restatement of earnings for 1998 and the second half of 1997, leading to non-cash charges. Vantive reported Q4 EPS of $0.08, down from $0.17 a year ago but a penny above analysts' consensus, after yesterday's close.
Enterprise software provider Inprise Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INPR)") else Response.Write("(Nasdaq: INPR)") end if %> slumped $7/8 to $5 3/8 after turning in Q4 EPS that, at $0.06, beat last year's figure by a nickel and Street estimates by $0.02. The company said it is forming two divisions, Inprise and borland.com, and the restructuring is expected to result in a 20% job cut.
Earnings Movers
Barnes Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: B)") else Response.Write("(NYSE: B)") end if %> down $1 5/16 to $25 1/8; Q4 EPS $0.37 vs. $0.47 last year; estimate $0.53 (one analyst)
BroadVision <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BVSN)") else Response.Write("(Nasdaq: BVSN)") end if %> down $2 3/4 to $42 3/8; Q4 EPS $0.08 vs. $0.05 loss last year; estimate: profit of $0.08
Callaway Golf Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELY)") else Response.Write("(NYSE: ELY)") end if %> down $1 1/8 to $10 1/8; Q4 EPS loss of $0.93 vs. $0.34 profit last year; estimate: loss of $0.08
Excel Switching <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XLSW)") else Response.Write("(Nasdaq: XLSW)") end if %> down $4 5/8 to $29 3/8; Q4 EPS $0.21 (before charges) vs. $0.16 last year; estimate: $0.20
ILOG SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ILOGY)") else Response.Write("(Nasdaq: ILOGY)") end if %> down $1 3/8 to $10; fiscal Q2 EPS $0.09 vs. $0.10 last year; estimate: $0.12
Mapics Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAPX)") else Response.Write("(Nasdaq: MAPX)") end if %> down $1 1/8 to $10 13/16; fiscal Q1 EPS $0.26 vs. $0.21 last year; estimate $0.25
Mindspring Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSPG)") else Response.Write("(Nasdaq: MSPG)") end if %> down $2 3/8 to $107 3/8; Q4 EPS $0.07 (before tax benefit) vs. $0.02 last year; estimate: $0.07
PairGain Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAIR)") else Response.Write("(Nasdaq: PAIR)") end if %> -- down $5/8 to $9 13/16; Q4 EPS: $0.07 (before valuation adjustment) vs. $0.17 last year; estimate: $0.08
Sunstone Hotel Investors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SSI)") else Response.Write("(NYSE: SSI)") end if %> down $1 1/8 to $8 13/16; Q4 FFO $0.27 vs. $0.32 last year; estimate: $0.31
The Stanley Works <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWK)") else Response.Write("(NYSE: SWK)") end if %> down $3/8 to $25 13/16; Q4 EPS $0.29 vs. $0.29 last year; estimate: $0.53
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |