<BREAKFAST WITH THE FOOL>
Tuesday, September 29, 1998
"'Wall Street,' reads the sinister old gag, 'is a street with a river at one end and a graveyard at the other.' This is striking, but incomplete. It omits the kindergarten in the middle." -- Frederick Schwed, Jr.
Razorburn at Gillette
Well, it's definitely not the best a man can get. Gillette <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: G)") else Response.Write("(NYSE: G)") end if %> said late yesterday that the recent economic troubles in the world's emerging markets and the massive roll-out of its new Mach3 razor will take a nasty chunk out of its Q3 profits, resulting in the first decrease in quarterly profits for the consumer products giant in eight years.
To stop the bleeding from its large international business exposure, Gillette said it will let go of about 4,700 employees (or 11% of its global workforce), close 14 factories and 12 warehouses, and close or consolidate 30 other offices around the world. The restructuring, which will be conducted over the next 18 months, will result in a fiscal Q3 charge of $0.30 per share. The charge will wipe out the company's expected operating earnings of around $0.30 per share, down from the $0.38 per share earned last year and below the First Call mean estimate of $0.40.
The international financial problems were bound to catch up with Gillette, which received 63% of its total revenues and 62% of its total profits in fiscal 1997 from overseas. The company told analysts on Sept. 16 to reduce their Q3 earnings estimates, but the Street had been expecting a smaller international hit than the 15% sales drop CEO Alfred Zeien forecasted in a conference call last night. Zeien also said sales of the new Mach3 razor are "going gangbusters," but then admitted that the expected "one-time start up costs" for the new product were taking their toll. Still, the company is upbeat about its prospects down the road, with Zeien predicting that Gillette will emerge from the current global economic cold shower "in great shape."
News to Go
Will he or won't he? Alan Greenspan and his pals at the Federal Open Market Committee meet today to decide whether or not to adjust interest rates. Expect an announcement around 2:15 p.m. Eastern time.
The Wall Street Journal reported that the Federal Communications Commission struck down a marketing alliance between fiber optic network operator Qwest Communications International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QWST)") else Response.Write("(Nasdaq: QWST)") end if %> and Ameritech <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATI)") else Response.Write("(NYSE: ATI)") end if %>, as well as a similar alliance between Qwest and U.S. West <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USW)") else Response.Write("(NYSE: USW)") end if %>, on the grounds that the arrangements violated the Telecommunications Act of 1996. The two Baby Bells had hoped the Feds would sign off on the deals, which would have allowed them to offer long-distance phone service without first opening up their local markets to competitors.
Dynamic random access memory (DRAM) chip maker Micron Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> reported a fiscal Q4 loss of $0.42 per share, which was not quite as bad as the $0.54 per share loss expected by the Street. Meanwhile, Micron Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %>, the PC direct marketer that is 60% owned by Micron Technology, posted Q4 earnings (excluding a $15 million gain) of $0.08 per share, beating estimates by $0.06.
Satellite manufacturer and services firm Loral Space & Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOR)") else Response.Write("(NYSE: LOR)") end if %> said it is delaying the scheduled Oct. 15 launch of its Telstar 6 broadcast video and data communications satellite until the end of November after German components supplier AEG notified the company that problems could crop up with the satellite's traveling wave tubes.
Fidelity Financial of Ohio <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FFOH)") else Response.Write("(Nasdaq: FFOH)") end if %> and Glenway Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GFCO)") else Response.Write("(Nasdaq: GFCO)") end if %> said they will merge in a $48 million stock swap, forming a savings bank in southwestern Ohio with total assets of $835 million. The deal comes a day after Cincinnati-based Fifth Third Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FITB)") else Response.Write("(Nasdaq: FITB)") end if %> announced plans to acquire thrift Enterprise Federal Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EFBI)") else Response.Write("(Nasdaq: EFBI)") end if %> for $96.4 million in stock.
Motley Fool co-founder David Gardner treks to Capitol Hill today to testify about mutual fund fees before the House Commerce Subcommittee on Finance and Hazardous Materials (aka, "Cash &Trash"). The festivities are scheduled to start at 9:30 a.m. Eastern time.
More Foolishness
Alex Schay continues his look at the wonderful world of the balance sheet in last night's Fool on the Hill... Not making the stock-picking grade? Get a free tutorial courtesy of the Fool's School... Read about Serologicals bloody good stock performance in the Daily Double... Share the wealth (and your latest stock ideas) with others on the Fool's message boards...
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Brian Graney (TMF Panic), Writer
Brian Bauer(TMF Hoops), Editor
</BREAKFAST WITH THE FOOL>