DJIA 9348.14 +23.36 (+0.25%) S&P 500 1240.81 +4.65 (+0.38%) Nasdaq 2309.30 +14.12 (+0.62%) Russell 2000 397.15 +2.76 (+0.70%) 30-Year Bond 94 12/32 +15/32 5.64 Yield
FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay
Xylan "Switches" to Alcatel
After a run-up of around 40% in the last two weeks, data networking firm Xylan <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XYLN)") else Response.Write("(Nasdaq: XYLN)") end if %> gained $9 1/8 to $36 1/16 this morning on the heels of the announcement that it will be acquired by French telecommunications giant Alcatel SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALA)") else Response.Write("(NYSE: ALA)") end if %> for $37 a share. The $1.9 billion deal comes in at 5 times Xylan's trailing sales, roughly 48 times trailing earnings (35 times forward numbers), and around 34 times trailing cash flow. The deal is hardly a surprise considering Alcatel's oft stated desire to fill in all the gaps in its product portfolio (DSC and Packet Engines). In fact, this morning Alcatel Chairman and CEO Serge Tchuruk announced that a deal to acquire a remote access equipment provider is also in the works and will be formally announced in the next couple of days.
Alcatel owns roughly 6.5% of Xylan already, and the two companies have engaged in numerous joint technology agreements over the last four years -- with Xylan raking in about 12% of its 1998 revenues from Alcatel (Xylan had a 20% revenue target in 1999 for Alcatel and IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> combined). Considering that Xylan is currently working with over 100 carrier customers around the world, it's a natural fit for the firm to become the enterprise data networking hub for Alcatel.
Evidence of the strategic necessity of incorporating "data solutions" into telecommunications' portfolios has already been amply documented over the last two years with Northern Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NT)") else Response.Write("(NYSE: NT)") end if %> purchasing Bay Networks and Lucent <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> recently acquiring Ascend Communications. However, Cisco's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> presence in the game really makes the race -- at least for the moment -- a question of who will come in fourth place. With the European market growing off of a much smaller voice and data base, there is enough room for the major European players -- Alcatel, Ericsson <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ERICY)") else Response.Write("(Nasdaq: ERICY)") end if %> and Siemens AG (OTC: SMAWY) -- to garner a nice share of the pie. However, with Xylan rolling out some interesting products this year -- the OmniStack402G and OmniStack branch switches, plus the OmniCore ATM and gigabit backbone switch -- it looks like a newly reorganized Alcatel might pull ahead going into the first turn.
Large appliances maker Whirlpool Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHR)") else Response.Write("(NYSE: WHR)") end if %> spun ahead $4 5/16 to $45 5/16 after saying it plans to keep its Brazilian compressor-manufacturing unit and expects double-digit earnings growth for the first quarter and for the year. The company added that it will buy back up to $250 million in stock.
Several airline stocks were cleared for takeoff this morning after Goldman Sachs raised its ratings on three of the industry's big players. American Airlines parent AMR Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> gained $2 1/2 to $58 5/8, United Airlines' big daddy UAL Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> was lifted $3 1/4 to $65 1/4, and Continental Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAI.B)") else Response.Write("(NYSE: CAI.B)") end if %> added $15/16 to $37 thanks to upgrades. Tagging along for the ride, US Airways Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: U)") else Response.Write("(NYSE: U)") end if %> advanced $2 5/16 to $51 1/4, Southwest Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LUV)") else Response.Write("(NYSE: LUV)") end if %> moved up $7/8 to $31, Northwest Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NWAC)") else Response.Write("(Nasdaq: NWAC)") end if %> picked up $9/16 to $26, and Trans World Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %> tacked on $3/16 to $6 3/16.
Cable-based Internet services provider @Home Network <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> moved up $9 9/16 to $116 11/16 after setting a two-for-one stock split. Credit Suisse First Boston started coverage of the firm with a "buy" rating today, estimating the company's fiscal 1999 loss at $0.03 per share.
Laser vision correction systems designer VISX Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VISX)") else Response.Write("(Nasdaq: VISX)") end if %> blasted ahead $16 11/16 to $77 3/16 after saying strong demand for its products will lead to Q1 EPS between $0.51 and $0.55, well ahead of the $0.36 the company said analysts had been expecting. BancBoston Robertson Stephens raised its opinion of the company to "buy" from "long-term attractive."
Nuclear medical imaging systems maker Adac Laboratories <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADACE)") else Response.Write("(Nasdaq: ADACE)") end if %> gained $5/8 to $19 after saying it has completed the restatement of its results for fiscal 1996, 1997, and the first three quarters of 1998, which was initially announced in December. The company also reported fiscal Q1 EPS of $0.30 (before charges), up from $0.17 a year ago.
Computer telephony systems components maker Dialogic Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLGC)") else Response.Write("(Nasdaq: DLGC)") end if %> dialed up a $5 11/16 gain to $36 9/16 after software giant Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> agreed to make a $24.2 million equity investment in the company, which works out to a 5% stake. Microsoft also agreed to license Dialogic's CT Media server software and retain the company's development services in exchange for $20 million in payments over the next four years.
Mining and lumber holding company Maxxam Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: MXM)") else Response.Write("(AMEX: MXM)") end if %> logged a $11 3/8 gain to $59 1/4 after its Pacific Lumber Co. subsidiary reached a last-minute agreement with federal and state agencies to preserve thousands of acres of old-growth redwood forests in California. Maxxam will reportedly receive about $480 million for its logging rights under the deal, which will create a public preserve for the ancient redwoods.
Brand name apparel manufacturer Warnaco Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAC)") else Response.Write("(NYSE: WAC)") end if %> climbed $1 7/16 to $22 3/16 after reporting Q4 EPS of $0.78, which was in line with the Zacks mean estimate. The company also said it has acquired the distribution rights for Calvin Klein Jeanswear in Canada and a 70% stake in U.K.-based perfume and soap retailer Penhaligon's.
Speech recognition technologies developer Lernout & Hauspie Speech Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LHSPF)") else Response.Write("(Nasdaq: LHSPF)") end if %> was lifted $2 7/8 to $30 7/16 on news that founders Jo Lernout and Pol Hauspie plan to buy up to an additional $40 million of the firm's stock.
Call center automation systems designer InterVoice <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTV)") else Response.Write("(Nasdaq: INTV)") end if %> gained $1 3/16 to $12 5/8 after saying a strong domestic market for its customer premises equipment will result in fiscal Q4 (ended Feb. 28) EPS between $0.24 and $0.26, topping the $0.19 currently expected by the four analysts surveyed by Zacks.
Online sports information provider SportsLine USA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLN)") else Response.Write("(Nasdaq: SPLN)") end if %> sprinted ahead $3 to $52 5/8 after BT Alex. Brown raised its rating to "strong buy" from "buy" less than two weeks before college basketball's annual tournament is expected to start drawing more eyes to the company's namesake website.
PC direct seller Micron Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %> dropped $2 1/2 to $11 15/16 after warning that its fiscal second quarter (ending March 4) sales will drop 6% to 9% from the $403.5 million it reported in the first quarter. While overall gross margins will be flat compared with the previous quarter, PC gross margins are projected to fall about 1 percentage point from 15% in Q1. The company, scheduled to announce Q2 earnings on March 22, will hold a conference call today at 3:30 p.m. Mountain time. To take part, dial (630) 395-0074. The pass code is "mid market." Majority owner Micron Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> lost $1 11/16 to $55 13/16.
Dutch enterprise software company Baan <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAANF)") else Response.Write("(Nasdaq: BAANF)") end if %> dumped $5/8 to $8 5/8 after reporting a Q4 net loss of $1.45 per share, well off the $0.54 per share loss estimate provided by First Call. The company has concerns about demand in the coming year. "Recently a number of other enterprise application software vendors have warned of slowing market conditions," Baan said in a statement. The company "expects that it will continue to be negatively impacted by these trends during 1999."
Network integrator Pomeroy Computer Resources <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PMRY)") else Response.Write("(Nasdaq: PMRY)") end if %> lost $1 9/16 to $20 3/4 this morning. The company announced a three-year contract to provide computer, software, and peripheral procurement and support services to consumer products giant Procter & Gamble <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %>. The contract is worth approximately $75 million.
Performance Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTIX)") else Response.Write("(Nasdaq: PTIX)") end if %>, which makes communications, networking, and data storage interface systems products, slid $5/8 to $11 1/8 despite turning in Q4 EPS of $0.26, better than last year's $0.18 and First Call's three-analyst $0.22 consensus estimate.
Drug developer Immune Response Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMNR)") else Response.Write("(Nasdaq: IMNR)") end if %>, which appointed Rand Mulford CFO and senior vice president today, shed $11/16 to $8. Mulford was president and CEO of San Diego's World Blood Inc.
Computer products e-commerce technologies provider pcOrder.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCOR)") else Response.Write("(Nasdaq: PCOR)") end if %> continued to slide in its third trading session, losing $1 1/16 to $40 7/8 after giving back $5 3/16 yesterday.
Biopharmaceutical company Hollis-Eden Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HEPH)") else Response.Write("(Nasdaq: HEPH)") end if %> extended yesterday's losses, dropping $7/8 to $17 7/8. The stock fell $2 5/8 yesterday after President and Vice Chairman Terren Peizer resigned. In better news, Hollis-Eden said the FDA gave it the green light to start dosing patients in a Phase I/II clinical trial of its HE2000 HIV and AIDS treatment.
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |