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FOOL PLATE SPECIAL
An Investment Opinion
by Louis Corrigan
CNET Soars on E-Commerce Profits
Shares of new media company CNET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNET)") else Response.Write("(Nasdaq: CNET)") end if %> soared $18 1/16 to $109 3/8 today, rebounding from the recent Internet sell-off, after announcing better-than-expected fourth quarter profits and a crowd-pleasing 2-for-1 stock split, payable March 8. The San Francisco company said Q4 revenues jumped 86% to $19.2 million, driving earnings per share to $0.18 (excluding a one-time gain), sharply ahead of last year's loss of $0.62 per share and well ahead of Wall Street's $0.10 per share consensus estimate. Enjoying a third straight quarter of profits, CNET's FY98 results showed a 68% ramp in revenues to $56.4 million that produced net income of $2.6 million, or $0.15 per share, versus a loss of $1.16 per share in the prior year.
As a new wave of Internet mania hit the market in recent weeks, CNET shares had tripled from a 1998 close of $54 to an all-time high of $154. Investors saw the premium @Home <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> paid for Web portal Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> and the premium Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> paid for community portal GeoCities <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GCTY)") else Response.Write("(Nasdaq: GCTY)") end if %> and figured that CNET was worth a pretty penny thanks to its technology-oriented news sites like News.com and its 40% stake in fledgling Web portal Snap!, a joint venture with NBC. While NBC's firepower may yet make something of Snap!, the portal currently reaches just 5.4 million Websters, for a measly 10% audience share. That compares to the 46.5% reach of Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %>, whose disappointing deal with USA Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USAI)") else Response.Write("(Nasdaq: USAI)") end if %> jarred the Internet sector this week. While it's not yet obvious that CNET deserves a $2 billion market cap, these Q4 results at least suggest the company may finally be finding a workable business model.
CNET's core business, its technology-oriented Web sites, saw Q4 revenues vault 123% to $17.6 million as traffic increased 20% to 8.2 million average daily page views from 6.8 million in Q3 and 6.4 million in Q2. Meanwhile, CNET has increasingly positioned itself as a company leveraging content in the service of commerce. Its shopping sites reportedly produced 90,000 leads per day in December, up from 70,000 per day in September. CNET thus claims to have generated $80 million in Q4 sales for its 70 participating merchants, with the company pocketing a flat fee for each referral.
To boost this transaction-oriented revenue, the company recently acquired NetVentures, operator of ShopBuilder, which helps companies create online stores. CNET plans to help no-name "white box" PC makers (30% of the PC market) go online. Also, CNET announced Tuesday that it will pay America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> $14.5 million over the next two and a half years to become AOL's exclusive provider of computer hardware and software buying guides. By tapping AOL's 16 million customers, CNET clearly hopes to take its brand mainstream in a way that will enhance its e-commerce revenues.
Even so, insiders such as Chair/CEO Halsey Minor and outside investors such as Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> and Paul Allen's Vulcan Ventures have been active sellers of CNET shares at nearly half the current price. Granted, Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> co-founder Allen doesn't have a pristine investment record, especially for timing sales. But it's worth noting that he's recently been boosting his stake in CNET's main competitor, Ziff-Davis <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %>, which has filed to issue a tracking stock linked to its ZDNet.com online operations.
Direct marketer Fingerhut Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FHT)") else Response.Write("(NYSE: FHT)") end if %> jumped ahead $5 11/16 to $24 1/2 after Macy's and Bloomingdale's parent Federated Department Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FD)") else Response.Write("(NYSE: FD)") end if %> announced plans to buy the company for $25 per share in cash. That represents a 33% premium to Fingerhut's closing price yesterday of $18 13/16. Federated expects the acquisition to be dilutive initially but anticipates that the deal will accelerate growth and increase its return on investment.
Online brokerage firm E*Trade Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGRP)") else Response.Write("(Nasdaq: EGRP)") end if %> was bid up $4 5/16 to $47 1/16 after it said it completed its initial investment in E*Offering, its Internet-based investment bank. The company said E*Offering is accelerating its technology infrastructure work and is actively recruiting staff for the division.
Information services provider Electronic Data Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EDS)") else Response.Write("(NYSE: EDS)") end if %> rose $2 7/16 to $48 5/16 on news that it will acquire MCI WorldCom's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> information technology services unit MCI Systemhouse for $1.65 billion in cash. In return, MCI WorldCom will outsource to EDS significant applications development and maintenance services and virtually all of its infrastructure services, representing $5 billion to $7 billion in revenues over 10 years for EDS. For more on this development, revisit this morning's Breakfast With the Fool. MCI WorldCom improved $3 1/4 to $79 1/2.
Year 2000 solutions company Keane <% if gsSubBrand = "aolsnapshot" then Response.Write("(Amex: KEA)") else Response.Write("(Amex: KEA)") end if %> recovered $4 7/16 to $31 7/16 today after issuing a statement clarifying a Dow Jones news story yesterday that said the company overstated Q3 backlog by $83 million. President Brian Keane said the backlog figure has "no impact on our outlook for the future.'' Goldman, Sachs & Co. upgraded the stock to "trading buy" from "market outperform" today.
PC maker Compaq <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> moved ahead $1 1/2 to $43 7/8 after a regional executive told reporters the company expects to become a $50 billion business in 2000. Revenues were $31.17 billion in 1998, up from $24.58 billion in 1997. The executive, Asia Pacific Regional Vice President Paul Chan, said he expects to pick up share in his market in 1999.
Investment banking and securities company Eastbrokers International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EAST)") else Response.Write("(Nasdaq: EAST)") end if %> won $5 1/2 to $10 7/8 after the company said Wolfgang Kossner, its largest shareholder, boosted his stake in the company to 33% after buying 526,884 shares from former Chairman and CEO Peter Schmid in a private transaction at $15 per share. "In my opinion, the true value of Eastbrokers International has not developed," said Kossner.
Technology media and marketing firm CMP Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMPX)") else Response.Write("(Nasdaq: CMPX)") end if %> took $7 to $26 after the company said it retained Lazard Freres & Co. to help examine strategic alternatives including a sale or merger. The company also announced Q4 EPS of $0.20, a penny ahead of Street projections.
Online services provider America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>, which saw its CompuServe division announce plans for a finance channel using content from MarketWatch.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MKTW)") else Response.Write("(Nasdaq: MKTW)") end if %>, gained $6 5/16 to $157 3/16 this morning.
Semiconductor packaging and testing services provider Amkor Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMKR)") else Response.Write("(Nasdaq: AMKR)") end if %> moved up $1 3/4 to $10 3/4 after reporting Q4 EPS of $0.16, down from pro forma EPS of $0.25 a year ago but $0.02 better than Wall Street's consensus estimate. "While we continued to experience softness in our packaging and test business during the fourth quarter," said President John Boruch, "we believe we may have reached the bottom of the cycle."
Internet sports media company SportsLine USA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLN)") else Response.Write("(Nasdaq: SPLN)") end if %> dunked $5 1/8 to $40 after extending its partnership with CBS Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBS)") else Response.Write("(NYSE: CBS)") end if %> through 2006. CBS will receive additional equity in SportsLine USA -- its stake increases from 12.5% to 18% with the potential for more -- in exchange for providing additional promotional and sales opportunities.
Applications software company Mapics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAPX)") else Response.Write("(Nasdaq: MAPX)") end if %> added $1 1/8 to $11 1/16 after announcing last night that it authorized a plan to buy back up to 1.8 million shares of common stock on the open market, about 7.7% of the total outstanding.
Web-based network reporting and analysis tools maker Concord Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCRD)") else Response.Write("(Nasdaq: CCRD)") end if %> squeezed out gains of $4 3/4 to $48 1/2 after BancBoston Robertson Stephens upgraded the stock to "buy" from "long-term attractive." Analyst John Powers believes over the next six to nine months, the stock can trade at 60 times his fiscal 2000 EPS estimate of $0.99 and hit $60 per share.
Maryland-based biotechnology firm EntreMed <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENMD)") else Response.Write("(Nasdaq: ENMD)") end if %> reclaimed $3 1/4 to $16 1/8 after losing $11 5/8 yesterday on news that drug and personal care products maker Bristol-Myers Squibb <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMY)") else Response.Write("(NYSE: BMY)") end if %> relinquished responsibility for all future development of EntreMed's angiostatin protein as a potential cancer therapy.
Earnings Movers
Brite Voice Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BVSI)") else Response.Write("(Nasdaq: BVSI)") end if %> up $13/16 to $10 3/8; Q4 EPS $0.14 (before charges) vs. $0.04 last year; estimate: $0.12
British Telecommunications plc <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTY)") else Response.Write("(NYSE: BTY)") end if %> up $15 11/16 to $163 15/16; fiscal Q3 EPS $1.55 vs. $1.53 last year; estimate: $1.47
Fox Entertainment Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FOX)") else Response.Write("(NYSE: FOX)") end if %> up $1 1/2 to $26 11/16; fiscal Q2 EPS: $0.17 vs. $0.13 last year; estimate: $0.13
Friede Goldman International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FGI)") else Response.Write("(NYSE: FGI)") end if %> up $11/16 to $12 9/16; Q4 EPS $0.51 vs. $0.19 last year; estimate: $0.40
MarketWatch.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MKTW)") else Response.Write("(Nasdaq: MKTW)") end if %> up $4 7/8 to $70 3/8; Q4 EPS: loss of $0.47 vs. Q3 EPS of $0.40
News Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %> up $15/16 to $29 5/16; fiscal Q2 EPS $0.34 vs. $0.41 last year; estimate: $0.33
Cigarette and packaged food products company Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> was burned $3/4 to $40 11/16 after a California jury awarded a cancer-stricken ex-smoker $1.5 million in compensatory damages and $50 million in punitive damages in a liability suit against the company. Philip Morris said it will appeal the judgement, calling the punitive damages "absurd and grossly disproportionate to the compensatory damage award."
Hotel owner and operator Patriot American Hospitality <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAH)") else Response.Write("(NYSE: PAH)") end if %> slipped $7/16 to $6 1/16 after The Wall Street Journal reported that the company may ditch its real estate investment trust (REIT) status and reorganize as a corporation. The REIT will possibly also discontinue its dividend as requested by Hilton Hotels Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HLT)") else Response.Write("(NYSE: HLT)") end if %> and Apollo Real Estate Advisors, which are both bidding to make a large investment in the company.
Fiber-optic transmission products maker Ortel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORTL)") else Response.Write("(Nasdaq: ORTL)") end if %> slid $1 13/16 to $7 3/16 after pre-announcing a fiscal Q3 loss of $0.09 per share, below the First Call mean estimate for earnings of $0.03 per share in the quarter. A slower than expected ramp-up of an enhanced product will cause revenues from Ortel's core broadband products segment to drop 10% sequentially. Sales of satellite and communications products are also down 27% sequentially. If the sales slump persists, the company said it could report a loss in Q4 as well.
Gallium arsenide integrated circuits maker TriQuint Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TQNT)") else Response.Write("(Nasdaq: TQNT)") end if %> fell $2 1/2 to $19 5/8 after reporting Q4 operating earnings of $0.25 per share, missing the Zacks mean estimate of $0.32 per share. The results exclude $1 million in "other income" on the company's income statement, including a $313,000 gain from the sale of used equipment and $182,000 in other non-operating income. The remaining $507,000 in "other income" was not itemized by the company.
Global telecommunications services firm Teleglobe Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TGO)") else Response.Write("(NYSE: TGO)") end if %> dropped $4 5/8 to $32 3/16 despite reporting Q4 EPS of $0.31 (excluding charges related to its recent merger with Excel Communications), coming in a nickel ahead of the First Call mean estimate. However, system implementation costs and product delays at Excel and lower wholesale prices and Canadian currency effects at Teleglobe resulted in a 9% decline in revenues in the period to $809.6 million.
Pacemaker and cardiovascular medical device maker St. Jude Medical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STJ)") else Response.Write("(NYSE: STJ)") end if %> was zapped $1 15/16 to $26 5/16 after reporting Q4 EPS of $0.36, up from $0.30 (excluding charges) a year ago and in line with the Zacks mean estimate. However, the company reportedly said on its conference call that it sees Q1 EPS toward the low end of the $0.38 to $0.45 range currently expected by analysts. Raymond James lowered its rating this morning to "neutral" from "accumulate."
Luxury goods maker Gucci Group N.V. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GUC)") else Response.Write("(NYSE: GUC)") end if %> was tarnished by a $3 loss to $65 5/16 after announcing that 34.4% stakeholder LVMH Moet Hennessy Louis Vuitton <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LVMHY)") else Response.Write("(Nasdaq: LVMHY)") end if %> has requested a special meeting for Gucci shareholders to vote on a proposal to add a LVMH-backed member to the Gucci board. The move creates uncertainty about Gucci's ability to operate as an independent entity, given the size of LVMH's stake. LVMH fell $2 1/2 to $45 3/4 this morning as well.
International integrated oil and gas company Royal Dutch Petroleum <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RD)") else Response.Write("(NYSE: RD)") end if %> lost $1 3/16 to $43 3/4 after reporting that its Q4 operating profits fell 52% in U.S. dollar terms due to low oil and gas prices, which was a bigger slide than most analysts reportedly had been expecting. Shell Transport & Trading <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SC)") else Response.Write("(NYSE: SC)") end if %>, the other member of the Royal Dutch/Shell Group, fell $1 1/4 to $32 7/8. Several other companies in the oil patch also lost ground this morning. Conoco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COC)") else Response.Write("(NYSE: COC)") end if %> shed $1 9/16 to $20 1/8, Unocal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UCL)") else Response.Write("(NYSE: UCL)") end if %> slipped $1 11/16 to $30 1/16, and refiner and marketer Sunoco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SUN)") else Response.Write("(NYSE: SUN)") end if %> moved down $1 11/16 to $34 3/16.
Aerospace and defense components supplier HEICO Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HEI)") else Response.Write("(NYSE: HEI)") end if %> slumped $1 15/16 to $20 15/16 after the company's primary offering of 3.2 million Class A shares for new financing was priced at $20 per share, which was below the $22 7/8 per share closing price of the company's regular common shares yesterday.
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |