<BREAKFAST WITH THE FOOL>
Thursday, November 19, 1998
"If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train -- and succumbing to the social pressure, often buys." -- Peter Lynch
RealNetworks Dumped
RealNetworks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RNWK)") else Response.Write("(Nasdaq: RNWK)") end if %> may be hit hard today after Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> announced after yesterday's close that it will begin selling its roughly 10% non-voting stake in the developer of Internet audio and video streaming software today on the open market. RealNetworks dropped 14% to $36.75 in after-hours trading after Microsoft said the two partners couldn't agree to the terms of a joint secondary offering despite months of talks, and that "the rapid pace of innovation and our competing visions for streaming media means our investment in RealNetworks no longer makes sense."
RealNetworks' CEO Rob Glaser said the divestiture would have no impact on his company, which has an 85% share in the Web streaming media market. Glaser joked in an interview with The Wall Street Journal that Microsoft stands to make more profit on RealNetworks than on its own Internet ventures. "We're proud to be one of Microsoft's most profitable Internet activities to date," he said.
The divestiture doesn't come as a total surprise. In its last 10-K filing in March, RealNetworks said, "Although Microsoft is a shareholder of the Company, it is also a competitor and its interests may not always be aligned with those of the Company," adding that Microsoft is "likely to re-evaluate its investment" in the company should their relationship become more competitive. Another hint came when RealNetworks' CEO Rob Glaser, a former Microsoft programmer, testified this summer before the Senate Judiciary Committee that Microsoft had engaged in anticompetitive behavior by deliberately causing incompatibilities with RealNetworks technology. He claimed that its RealVideo software wouldn't work anymore after users downloaded Microsoft's rival Windows Media Player.
Microsoft bought nearly 3.34 million shares in RealNetworks in July 1997 for $30 million, or $8.99 a share, after entering into a strategic agreement granting Microsoft a nonexclusive license to RealNetwork's standard code. Microsoft would make a nice profit of $113 million based on yesterday's closing price of $42 7/8 ($42.875). In a statement released late yesterday, RealNetworks said it will continue to make its products work well with Microsoft's Windows 95, Windows 98, Windows 2000, Windows NT, and Internet Explorer. For a timeline of the relationship between the two companies, click here.
News to Go
Biotech company Amgen <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMGN)") else Response.Write("(Nasdaq: AMGN)") end if %> told Bloomberg it may stop developing a once-a-week version of its blockbuster anemia drug Epogen if it loses a battle with drug and healthcare products maker Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> over rights to the treatment. The companies are awaiting the outcome of arbitration.
Heavyweight manufacturer of printers, workstations, PCs, and medical and industrial metrology equipment Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> said it's cutting prices by up to 12% on three of its workstations amid falling chip prices.
Telecommunications giant MCI WorldCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> yesterday announced at the Comdex computer industry trade show in Las Vegas that it will launch a nationwide, ultrafast Internet access service via traditional copper phone lines. Digital Subscriber Line, or DSL, will allow Internet access at speeds several times faster than conventional modems. MCI WorldCom plans to sell the service directly to small businesses and Internet service providers, which in turn will sell the product to consumers.
Satellite communications company PanAmSat Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPOT)") else Response.Write("(Nasdaq: SPOT)") end if %> disclosed in a SEC filing that battery problems caused temporary service disruptions at another one of its satellites and said that possible future interruptions "could result in a claim by affected customers for termination of their transponder agreements." PanAmSat is 81% owned by Hughes Electronics Corp., a subsidiary of General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>.
Men's business attire retailer Men's Wearhouse <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUIT)") else Response.Write("(Nasdaq: SUIT)") end if %> announced it has agreed to acquire Moores Retail Group, a privately held retailer that operates 115 men's apparel stores under the name "Moores The Suit People," for between 2.5 and 2.75 million Men's Warehouse shares and assumption of debt (C$90 million). Moores has 107 stores in Canada and eight in the U.S., plus a manufacturing facility in Montreal, Canada.
Casual apparel retailer American Eagle Outfitters <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AEOS)") else Response.Write("(Nasdaq: AEOS)") end if %> reported fiscal third quarter earnings of $0.58 a share, up from $0.27 in the same year-earlier period and ahead of analysts' expectations of $0.50.
Waste disposal services company Waste Management <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMI)") else Response.Write("(NYSE: WMI)") end if %> said its CEO, John Drury, is scheduled to undergo surgery Friday to remove a small, localized mass on his brain. Drury is expected to be able to resume normal activities about a week after the operation.
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
</BREAKFAST WITH THE FOOL>