<BREAKFAST WITH THE FOOL>
Monday, December 14, 1998
"You can't do good business with bad people." -- Warren Buffett
Duo to Take On Microsoft
Dealing a potential blow to rival Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, Oracle <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> and Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> reportedly will announce a cross-licensing agreement to create network servers from which desktop users can access the programs they need, lessening businesses' reliance on the Windows NT operating systems. Oracle, the largest database software developer, will provide the software, while Sun, the world's biggest computer workstations maker and developer of the Java programming language, will contribute the hardware side of the equation.
For years, Oracle Chairman Larry Ellison has pushed the idea of network computers, simple terminals with no hard drives that would derive programs they needed from a central corporate computer. Although Ellison has had the support of a number of Microsoft rivals, network computers have failed to take off due to the sharp drop in personal computer prices and the lack of commercially viable computer systems. This latest incarnation of Ellison's idea would centralize nearly all computing tasks at network servers, reducing costs and simplifying computer management. The downside, of course, is that computing then becomes somewhat bureaucratic and users will have less freedom than they're used to on PCs.
Separately, Microsoft announced it will invest $200 million in Qwest Communications International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QWST)") else Response.Write("(Nasdaq: QWST)") end if %> and license a wide range of software to the long-distance phone company to offer a high-speed, secure, and scalable network for Internet services built on Microsoft platforms. Microsoft is buying $200 million in Qwest shares at $45 a share -- a 3.7% premium to Qwest's last closing price. Qwest expects the new service to generate around $150 million in revenues during the first two years, most of it in 2000. It also anticipates earnings before income taxes plus depreciation and amortization (EBITDA) for the new business will be "slightly negative" next year and "slightly positive" in 2000.
News to Go
The world's largest toymaker Mattel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAT)") else Response.Write("(NYSE: MAT)") end if %> warned that fewer re-orders from retailers will hurt sales and earnings for the fourth quarter and full year 1998. Retailers' decision to "drastically reduce" inventory levels and adopt "just in time" inventory management will cut Mattel sales this year by $500 million. The company expects revenue to be flat compared with last year and now forecasts earnings of $1.20 a share, 33% less than its previous estimate before a charge related to its Power Wheels recall. Separately, Mattel said it will acquire educational software maker The Learning Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLC)") else Response.Write("(NYSE: TLC)") end if %> in a stock swap valued at about $3.8 billion, or $33 a share -- a 16.6% premium to The Learning Co.'s closing price Friday of $28 5/16. The deal is expected to be accretive to Mattel's 1999 earnings.
Elsewhere in toyland, toymaker Hasbro Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HAS)") else Response.Write("(Nasdaq: HAS)") end if %> has ended the nearly year-long search for a new president and chief operating officer (COO) by naming Quaker State Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KSF)") else Response.Write("(NYSE: KSF)") end if %> Chairman and CEO Herbert Baum, 62, to the posts, according to The Wall Street Journal. The appointment takes effect next month, after the completion of the planned merger between the motor oil maker and rival Pennzoil Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PZL)") else Response.Write("(NYSE: PZL)") end if %>. Separately, Hasbro and Sony Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNE)") else Response.Write("(NYSE: SNE)") end if %> are teaming up to put Trivial Pursuit on the Internet by mid-1999.
The mother of all banks Citigroup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> plans to announce as early as this week an estimated $1 billion in restructuring charges to cut costs by $500 million to $1 billion, The Wall Street Journal reported, citing "people familiar with the situation." While the company has said it expects synergies and reduced costs from the recent mega-merger between Citicorp and Travelers to add $1 billion in earnings over a number of years, analysts now expect up to $1 billion in cost reductions alone. Citigroup is expected to cut more than 5% of its workforce in face of continuing turmoil in global markets.
Telecommunications giant MCI WorldCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> announced it has acquired about 21.9 newly issued ordinary shares, or a 14.9% stake, in OzEmail Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OZEMY)") else Response.Write("(Nasdaq: OZEMY)") end if %>, at $2 per share, and plans to make a cash offer for all ordinary shares of the Australian Internet service provider for $2.20 per share and American depositary shares for $22 a share -- a 5.4% premium to OzEmail's Friday close of $20 7/8. The deal is valued at $322.8 million.
Gold mining company Placer Dome Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDG)") else Response.Write("(NYSE: PDG)") end if %> announced it will acquire Getchell Gold Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GGO)") else Response.Write("(AMEX: GGO)") end if %> of Denver in an all-stock deal valued at around $1.085 billion, or $34.45 a share -- a 113% premium to Getchell's close Friday of $16 3/16.
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
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