DJIA 9794.77 +8.61 (+0.09%) S&P 500 1286.78 +0.41 (+0.03%) Nasdaq 2470.48 +9.08 (+0.37%) Russell 2000 397.36 -0.27 (-0.07%) 30-Year Bond 93 29/32 -24/32 5.67 Yield
FOOL PLATE SPECIAL
An Investment Opinion
by Louis Corrigan
Yahoo Leverages Into Broadcast
Shares of Internet portal giant Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> and online streaming media company broadcast.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BCST)") else Response.Write("(Nasdaq: BCST)") end if %> were relatively subdued this morning after the companies announced a merger that will further solidify Yahoo!'s position as a new media powerhouse. Broadcast.com shares rose $8 1/2 to $126 11/16, roughly in line with Wednesday's after-hours trading, while Yahoo! rose $4 15/16 to $173 5/16.
The deal calls for 0.7722 shares of Yahoo! to be exchanged for each share of broadcast.com. So the 36.692 million outstanding broadcast.com shares will become 28.334 million Yahoo! shares. In addition, options for 7.131 million broadcast.com shares will be exchanged for 5.507 million shares of Yahoo!. On a fully diluted basis, this $5.7 billion deal means broadcast.com shareholders will own 11% of the new company. While the price represents merely a 10% premium over broadcast.com's close Wednesday, it's a 40% premium over the 30-day average trading price and a 53% premium to the stock's $85 price tag on March 13, when Business Week reported that the companies were in merger talks. The deal includes no collar. Yahoo! also has an option to acquire 19.9% of broadcast.com, and would receive a break-up fee if the deals fall apart, suggesting that competing bids are unlikely to emerge. America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> was one other player said to be interested in broadcast.com.
In today's conference call, Yahoo!'s management stated that the deal, set to close in the third quarter, will be slightly dilutive to earnings in its first year but add to earnings by Q3 FY2000. Management remains comfortable with long-term operating margins in the 30% to 36% range for the new Yahoo!. That includes community website GeoCities <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GCTY)") else Response.Write("(Nasdaq: GCTY)") end if %>, which Yahoo! is in the process of acquiring.
As the leading aggregator of streaming audio and video content, broadcast.com reaches some one million customers a day with everything from corporate conference calls to Internet broadcasts of programming from the BBC and Major League Baseball. Although this audience will boost Yahoo!'s online reach by 3% to 63% of all online users, the deal is really more about leveraging broadcast.com's content and relationships by means of Yahoo!'s huge distribution platform, which serves 50 million unique users each month. With a global reach, Yahoo can simply make broadcast.com's relationships with its 5,000 corporate clients more productive and, hopefully, profitable. At the same time, Yahoo! plans to use broadcast.com's managerial expertise to integrate multimedia content throughout its own current offerings.
The real question, though, is how this takes Yahoo! and the Internet generally another step closer to the concept of portals as new age media networks a la the television networks. A couple of analysts wondered if the combined company would become more interested in signing up content on an exclusive basis, as broadcast.com recently did with film distributor Trimark Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TMRK)") else Response.Write("(Nasdaq: TMRK)") end if %>, or in actually acquiring content companies. That doesn't seem to be in the cards for now. Still, Yahoo! appears so well positioned as a content distributor/aggregator that it's natural to wonder if the real leverage in this deal will be seen years down the line with Yahoo! finagling equity stakes in the leading content creators. The question is who will have the power in a broadband world.
Contact lenses direct marketer 1-800 CONTACTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTAC)") else Response.Write("(Nasdaq: CTAC)") end if %> cleared up $3 7/8 to $16 1/8 after the company said it expects Q1 revenues and EPS to beat current estimates because of Internet sales. "We now believe that higher-than-expected sales combined with lower-than-expected costs could result in earnings that are breakeven or better for the first quarter of 1999," said CEO Jonathan Coon. Two analysts surveyed by First Call currently anticipate a $0.12 loss.
Blood plasma expander and replacement technologies developer BioTime Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BTIM)") else Response.Write("(Nasdaq: BTIM)") end if %> flowed ahead $3 9/16 to $19 9/16 after it said last night that the FDA has approved the company's bid to market Hextend, a blood plasma volume expander used to treat hypovolemia, a condition often associated with injury- or surgery-related blood loss. BioTime's marketing partner for Hextend is Abbott Laboratories <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABT)") else Response.Write("(NYSE: ABT)") end if %>.
Marketing firm Marketing Services Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSGI)") else Response.Write("(Nasdaq: MSGI)") end if %> moved ahead $2 3/8 to $16 7/8 after it said it sold a majority interest in its Metro Fulfillment subsidiary to Crescent Media for an undisclosed sum. "MSGI... sold the majority interest to avoid any future net income erosion related to fulfillment operations," said CEO Jeremy Barbera.
Entertainment superstore retailer Hastings Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HAST)") else Response.Write("(Nasdaq: HAST)") end if %> hurried ahead $1 3/16 to $11 1/2 after it announced plans to launch an e-commerce site offering new and used entertainment products, books, gifts, and toys. The site is expected to go online in the next 45 days.
Meanwhile, West Coast auto retailer Lithia Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LAD)") else Response.Write("(NYSE: LAD)") end if %> drove ahead $1 to $16 7/8 after it announced plans to form an operating division to be known as "Lithia.com -- America's Car and Truck Store on the Internet.'' The company plans to offer new vehicle and parts ordering, product information links, service scheduling, and other services on the site.
Consumer electronics retailer REX Stores Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RSC)") else Response.Write("(NYSE: RSC)") end if %> pocketed $1 7/8 to $13 7/16 after it said it will sell audio and video equipment on Amazon.com's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> auction service. REX Stores is using the Amazon partnership as an initial test of its e-commerce strategy. Online retailer CyberShop <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYSP)") else Response.Write("(Nasdaq: CYSP)") end if %> cyber-bagged $1 1/16 to $15 9/16 after a similar announcement.
Baby Bell SBC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %> rose $1 3/4 to $48 15/16 after J.P. Morgan raised its rating on the company's stock to "buy" from "long-term buy," irrespective of whether the company's merger with Ameritech Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %>, plans for which were announced in May, is approved. Lehman Brothers upgraded the stock to "buy" from "neutral," setting a $60 per share 12-month price target.
Lighting systems designer SLI Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLI)") else Response.Write("(NYSE: SLI)") end if %> brightened $1 1/4 to $22 1/4 after saying it will resume a stock buyback program through open market purchases. No specific number of shares or dollar amounts were mentioned in the company's statement.
ZDNet <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZDZ)") else Response.Write("(NYSE: ZDZ)") end if %>, the tracking stock for the Internet-related businesses of information technology media and marketing company Ziff-Davis <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %>, took $2 7/8 to $38 7/8 after adding $17 yesterday in its first day of trading. Ziff-Davis fell $1 7/16 to $20 1/16 after dropping $7 1/2 yesterday.
Paper, lumber, and other wood products company Mead Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEA)") else Response.Write("(NYSE: MEA)") end if %> recorded gains of $1 11/16 to $32 7/16 after Morgan Stanley Dean Witter boosted its rating on the stock to "strong buy" from "outperform." Analyst Matthew Berler's 12-to-24 month target price is $45 per share.
Visual and high-performance computing systems maker Silicon Graphics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGI)") else Response.Write("(NYSE: SGI)") end if %> sank $3 1/8 to $13 7/16 after warning that delays and problems associated with transitions to new product lines will result in a fiscal Q3 loss $0.20 to $0.25 per share greater than the loss of $0.07 per share previously forecasted by analysts surveyed by First Call. Strangely, Silicon Graphic's shares rose 16% yesterday prior to the announcement, perhaps as traders expected good news for the company.
Integrated oil and gas firm BP Amoco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BPA)") else Response.Write("(NYSE: BPA)") end if %> slipped $3 5/8 to $97 3/8 after ending days of speculation and finally announcing a deal to acquire Atlantic Richfield <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARC)") else Response.Write("(NYSE: ARC)") end if %> for $26.8 billion in stock. BP Amoco CEO John Browne said he expects the combination will yield $1 billion in annualized cost savings by 2001. ARCO edged up $1/8 to $73 1/4 on the news.
Irish enterprise middleware developer IONA Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IONA)") else Response.Write("(Nasdaq: IONA)") end if %> slumped $15 5/8 to $14 3/4 after saying higher expenses and delayed orders will result in Q1 results ranging from a loss of $0.03 per share to breakeven, short of the First Call mean earnings estimate of $0.18 per share.
Enterprise document management systems developer Documentum <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DCTM)") else Response.Write("(Nasdaq: DCTM)") end if %> slowed $6 7/16 to $10 7/8 after saying weak customer demand for its products will result in "substantially" lower Q1 license sales compared to a year ago and a "significant" operating loss for the period. The First Call mean estimate had called for earnings of $0.14 per share.
Branded natural food and beverages maker Balance Bar Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BBAR)") else Response.Write("(Nasdaq: BBAR)") end if %> was knocked off-kilter by a $3 11/32 loss to $6 15/32 after saying higher-than-expected seasonality for its energy bars will lead to Q1 EPS between $0.05 and $0.06, down from last year's $0.11 and roughly half of the First Call mean estimate of $0.12.
Enterprise network security products provider Secure Computing <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SCUR)") else Response.Write("(Nasdaq: SCUR)") end if %> was thrown for a $4 3/4 loss to $5 3/4 after saying seasonality, a lengthening of the sales cycle, and delays in closing "several large transactions" will lead to a roughly 38% year-on-year decline in Q1 revenues and a loss of $0.30 per share (excluding charges). Analysts had been expecting earnings of $0.10 per share in the period.
Pharmaceutical marketing services provider Access Worldwide Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AWWC)") else Response.Write("(Nasdaq: AWWC)") end if %> slid $1 1/2 to $6 1/4 after saying lower-than-expected revenues and operational difficulties at a recently expanded business unit will lead to Q1 EPS between breakeven and $0.03, down from $0.07 a year ago. Access also said it has hired Bear Stearns to explore strategic alternatives, including a possible sale of the company.
Business computer security services firm Axent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AXNT)") else Response.Write("(Nasdaq: AXNT)") end if %> lost another $2 13/16 to $21 1/4 after falling 26% yesterday on announcing a plan to acquire UK-based PassGo Technologies in exchange for approximately 1.5 million shares of company stock, or about $50 million.
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |