<BREAKFAST WITH THE FOOL>
Wednesday, December 2, 1998
"Anyone who invests in the stock market over a short-term period is doing the investment equivalent of spinning a Vegas roulette wheel." -- David and Tom Gardner, You Have More Than You Think
More Turbulence for Boeing
The world's largest aircraft maker Boeing Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> late yesterday announced that due to the impact of the Asian economic crisis on air travel, it will cut production rates on some commercial plane models and eliminate an additional 20,000 jobs through the year 2000 on top of the previously announced 28,000, for a total of roughly 20% of its workforce. As a result, the company now anticipates 1999 earnings of $1.5 billion to $1.8 billion -- compared with previous projections of $2 billion -- as well as operating margins in 2000 to be "somewhat lower" than 1999. Before yesterday, the company had generally characterized lost Asian orders as a short-term problem.
Boeing is now slated to make two 747 airplanes per month by late next year and maybe just one a month in early 2000 if market conditions don't improve. That's down from a monthly production rate of 3.5 planes. Similarly, in early 2000, the company will scale back its 757 program from five to four planes per month and its 767 program from four to 3.5 planes per month. It now expects to produce five 777s a month in 2000, down from seven, continuing a rate reduction already scheduled for the fourth quarter of next year.
The Seattle-based Dow component said several airline customers have delayed deliveries for 1999 and 2000, reflecting the slowdown in worldwide air passenger traffic, which is projected to rise just 2% this year compared with more than 6% last year. Boeing expects to deliver 550, 620, and 490 commercial aircraft in 1998, 1999, and 2000, respectively, and consolidated revenue of about $56 billion, $58 billion, and $50 billion. Meanwhile, it anticipates cash flow will remain strong over the next few years, "well in excess of our operating requirements." The additional job cuts surprised Boeing's largest union, the International Association of Machinists, and could hurt next year's contract negotiations.
News to Go
Executives and directors at Internet companies have been more willing to sell their shares in the past three months -- and especially in the past 15 days -- than earlier this year, which may suggest they believe the stocks are overvalued, The Wall Street Journal reported. Insiders at Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %>, CNET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNWK)") else Response.Write("(Nasdaq: CNWK)") end if %>, EarthLink Network <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELNK)") else Response.Write("(Nasdaq: ELNK)") end if %>, Spyglass <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPYG)") else Response.Write("(Nasdaq: SPYG)") end if %>, Broadcom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRCM)") else Response.Write("(Nasdaq: BRCM)") end if %>, RealNetworks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RNWK)") else Response.Write("(Nasdaq: RNWK)") end if %>, and Books-A-Million <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAMM)") else Response.Write("(Nasdaq: BAMM)") end if %> have been taking advantage of the high prices of Internet stocks to take profits.
Today network gear maker 3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> will introduce a new version of its popular PalmPilot handheld computer that is expected to feature wireless access to the Internet, according to The Wall Street Journal. The new-and-improved model is reportedly only slightly bigger than the current Palm III device.
Cereal giant Kellogg <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: K)") else Response.Write("(NYSE: K)") end if %> is reportedly poised to announce it will cut up to 20% to 30%, or about 400 to 600, of the salaried workforce at its headquarters in Battle Creek, Mich. The company, which first hinted at job cuts in September, is scheduled to hold a press conference today.
Tech Data <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TECD)") else Response.Write("(Nasdaq: TECD)") end if %> reported after yesterday's close fiscal third quarter earnings of $0.63 a share, up from $0.51 in the same year-ago period and beating analysts' expectations by a penny. The technology products distributor saw sales increase 62.2% to $3.28 billion, with strong sales in all of its product divisions.
Speech technology company Lernout & Hauspie <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LHSPF)") else Response.Write("(Nasdaq: LHSPF)") end if %> said it might have to reduce its in-process research and development write-offs for acquisitions dating back to November 1996 in light of recently published SEC guidelines. Such a reduction could result in a corresponding increase in the amount of goodwill and amortization expense associated with these acquisitions.
Restaurant operator Shoney's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHN)") else Response.Write("(NYSE: SHN)") end if %> reported a 3.5% drop in comparable store sales for its fiscal fourth quarter (ended October 25). The result included the effect of a 2.9% increase in menu prices. The company closed 62 restaurants during the quarter, incurring a charge of around $5 million and bringing the year's total to 104. In fiscal Q1, the company plans to shut down another 24 restaurants, as previously disclosed.
More Foolishness
It's the Fool's second annual holiday charity drive! David Gardner explains. We also have a new initiative this year called "Here's My Two Cents," where in addition to an initial $5,000 donation, the Fool pledges to give $0.02 for every message posted on our Web message boards from now through December 31. So post away, Fools, for a Foolish cause and also make a personal contribution today!
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
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