<BREAKFAST WITH THE FOOL>
Thursday, December 10, 1998
"Spend at least as much time researching a stock as you would choosing a refrigerator." -- Peter Lynch
Tuning in to Radio
The signal from radio broadcasters is coming in loud and clear, as the nation's largest player anticipates strong fourth quarter results while a rival raises close to $3 billion in one of the biggest U.S. initial public offerings (IPOs) this decade.
CBS Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBS)") else Response.Write("(NYSE: CBS)") end if %> subsidiary Infinity Broadcasting Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: INF)") else Response.Write("(NYSE: INF)") end if %> begins trading today after raising $2.87 billion, edging out Fox Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FOX)") else Response.Write("(NYSE: FOX)") end if %>, which raised $2.81 billion in its IPO a month ago, as the third biggest offering this decade behind Conoco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COC)") else Response.Write("(NYSE: COC)") end if %> and Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>. Infinity sold a higher-than-expected 140 million shares, a 17% stake, at $20.50 each, right in the middle of the previously estimated range of $19 to $22. Proceeds of the sale will go toward paying $2.5 billion to CBS as a dividend.
Infinity owns 161 radio stations in 34 markets that carry the popular though politically incorrect Howard Stern and Don Imus shows. The stations rank first or second in 28 of the 34 markets and took in 11% of the nation's total radio advertising revenue last year. The company also owns one of the largest U.S. outdoor advertising companies, TDI Worldwide.
Meanwhile, Chancellor Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMFM)") else Response.Write("(Nasdaq: AMFM)") end if %>, the country's leading radio broadcaster with some 476 stations in 105 markets -- counting the ones it will get with its pending acquisition of Capstar Broadcasting <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRB)") else Response.Write("(NYSE: CRB)") end if %> -- said it expects to beat analysts' Q4 earnings expectations. It also anticipates pro forma revenue of about $1.6 billion this year with broadcast cash flow (earnings before interest, taxes depreciation, amortization, and corporate overhead) increasing around 41% and revenue growing 25% next year.
Chancellor Media CEO Jeffrey Marcus said that although the company might make some small purchases, it won't be looking for any major acquisitions in the near future. Instead, the company will focus on internal growth and paying down debt.
News to Go
Insurance giant Aetna <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AET)") else Response.Write("(NYSE: AET)") end if %> this morning announced it will acquire the Prudential HealthCare business from Prudential Insurance Co. of America for $1 billion. The purchase will give Aetna an additional 6.6 million health members, making it the nation's largest provider of health benefits, with approximately 22.4 million members, and the nation's top managed care company, with 18.4 million managed care members.
Stockholm, Sweden-based telecom equipment maker Ericsson <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ERICY)") else Response.Write("(Nasdaq: ERICY)") end if %> said it anticipates full year 1998 revenues and earnings to be "somewhat below market expectations." The company blamed the expected shortfall on the continued impact of the global financial crisis and said it plans to make "substantial reductions" in its workforce, the details of which will be disclosed when it reports year-end results in late January.
Telecommunications giant MCI WorldCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> reportedly plans to slash billions of dollars in costs by cutting 3% to 5% of its workforce of 75,000, combining the MCI and WorldCom networks, and reducing general expenses, including executive perks and travel expenses, according to The Wall Street Journal. The paper cited unnamed company executives and "people close to the situation."
A consortium led by Computer Sciences Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSC)") else Response.Write("(NYSE: CSC)") end if %> won a 15-year, $3 billion contract from the Internal Revenue Service to modernize the tax agency's computer system, beating out a team led by Lockheed Martin <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LMT)") else Response.Write("(NYSE: LMT)") end if %>.
Drug maker Eli Lilly & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LLY)") else Response.Write("(NYSE: LLY)") end if %> said it is halting worldwide human tests of an experimental drug to treat osteoporosis called PTH after eight rats given the drug were found to have bone cancer. None of the more than 2,000 women and 400 men who have taken the drug have shown any health or safety problems, the company said.
Speaking of drugs, Schering-Plough <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGP)") else Response.Write("(NYSE: SGP)") end if %> and ICN Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICN)") else Response.Write("(NYSE: ICN)") end if %> announced that the U.S. Food and Drug Administration has granted them expanded marketing approval for their combination hepatitis C treatment.
More Foolishness
Get the latest update on the Fool's second annual holiday charity drive. 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!
-- Wednesday's Evening News
-- Fool Community
-- This Day in Wall Street History
Also, check out the Lunchtime News at 12:30 p.m. for updates on the top stories of the day, and remember to start each business day with Breakfast With the Fool at 9 a.m.
Let us know what you think of this feature. Send all comments and suggestions (including Foolish quotes) to the Breakfast Fools.
Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
</BREAKFAST WITH THE FOOL>