U.S. Stocks rose on Tuesday despite a sales warning from Nokia. The S&P 500 gained 8 points (+0.9%) to 984. The DJIA climbed 74 points (+0.8%) to 9054 and the Nasdaq added 23 points (+1.5%) to 1627. The S&P has surged 23 percent from this year's low on March 11 amid optimism an economic rebound will drive profit growth. The world's largest economy is forecast to expand 2.4 percent this year, up from May's estimate of 2.3 percent, based on the consensus of 53 economists surveyed this month by Blue Chip Economic Indicators, a Kansas City, Missouri-based publication. Bonds jumped while gold slumped. Former Imclone CEO Sam Waksal was sentenced to seven years in prison for insider trading. Comments from Federal Reserve Governor Donald Kohn, who said inflation is falling slightly faster than the central bank had expected, prompted investor speculation that the Fed is ready to cut interest rates to prevent the economy's recovery from being derailed by slowing inflation.
Top Stories . . . U.S. economic growth forecasts for 2003 were raised for the first time in a year after revised government statistics showed a stronger first-quarter economy, a private survey found.
ImClone Systems founder Samuel Waksal was sentenced to more than 7 years in prison and ordered to pay $4.3 million, becoming the first U.S. chief executive officer punished in the corporate frauds that surfaced after Enron Corp. collapsed in 2001.
U.S. Treasuries rose in New York trading on speculation Federal Reserve policy makers will signal today they are ready to cut interest rates to prevent the economy's recovery from being derailed by slowing inflation.
The U.S. deficit reached a record $291 billion last month, and a slowing economy coupled with new tax cuts will send the 2003 deficit to $400 billion, the Congressional Budget Office reported.
JetBlue Airways, a discount carrier that almost doubled sales last year, ordered 100 of Empresa Brasileira de Aeronautica SA's new Embraer 190 jet aircraft with a value of $3 billion.
Freddie Mac and Fannie Mae, which own or guarantee 42 percent of the $7 trillion U.S. mortgage market, may be forced to disclose more financial information after Freddie Mac's top three executives were ousted, lawmakers said.
Brazil sold $1.25 billion of 10-year bonds, taking advantage of low yields abroad and rising confidence that the government will repay its debts to tap international markets a second time this year.
Quote of Note . . . ``There's confidence the economy has bottomed,'' said John Piccard, who manages $2 billion for J.P. Morgan Fleming Asset Management. ``It looks as if the market on an overall basis is attractively valued with good prospects behind it.''
Technical Gurus . . . Francoise Skelley, technical analyst at CS First Boston, said a topping formation has been completed in the Nasdaq 100 Index given that support at the 1,196 to 1,206 area has been broken. "This suggests a deeper retracement lower should be seen following the strong rally of the past month," Skelley said. At Friday's intraday high of 1,266, the index had appreciated 33 percent since its Feb. 13 closing price (952). Skelley believes resistance at 1,205 to 1,215 will cap rallies, the index will dip first to support at 1,188. If support at 1,180 is broken, she said the 1,166 to 1,165 level could be tested.
Eco Gurus . . . Economists are sticking to their forecasts for stronger economic growth in the second half of the year, according to a monthly survey published by Blue Chip Economic Indicators. The 53 economists polled say the economy will grow 2.4 percent from the fourth quarter of 2002 to the fourth quarter of 2003 and 2.8 percent from 2002 to 2003, a modest improvement from last month's forecast. Growth should accelerate to 3.5 percent in the third quarter and 3.7 percent in the fourth. The group sees 3.6 percent growth in 2004. They lowered their expectations for 2003 business investment by a third to 1 percent. Nearly half of the economists expect the Federal Reserve to cut rates again this year and almost as many expect the guard against deflation
Fed Governor Donald Kohn said there's likely more scope for studying behavior rather than simply relying on models when setting monetary policy. Kohn was taking part in a Boston Fed panel and did not directly address the short-term U.S. economic outlook. "Much more can probably be done to work in those micro level insights of behavorial economics that can be shown to have macroeconomic importance," he said, noting however that some Fed models already do try to measure consumer and business behavior. Kohn said that sometimes necessary short-term jolts to output are sacrificed for longer-term policy goals. He also said the U.S. central bank's committee method in determining policy decisions limits some of the volatility from individual policymaker behavior.
Financials . . . Raymond James raised its earnings estimates for E-Trade and Ameritrade, citing recent strength in trading volumes. Michael Vinciquerra now expects E-Trade to earn 14 cents a share in the second quarter and Ameritrade to earn 9 cents a share in its fiscal third quarter, up from 10 cents and 6 cents, respectively. "While volumes on the NYSE and Nasdaq were down slightly in April on a sequential basis, volumes rose 20 percent for both indices in May," Vinciquerra said in a note.
Chubb was cut to Underperform from Market Perform at Wachovia. The firm believes that stock will once again be under pressure due to "headline" risk related to 1) additional potential management changes, 2) 2nd quarter charges to earnings, 3) company's need to raise a significant amount of equity near-term, 4) potential reserving inadequacies on casualty business written in the late '90s. Firm expects stock to trade in a range of $51-$53.
Freddie Mac's reaudit/restatement, which was supposed to be completed by the end of 2nd quarter may not be finished until the end of 3rd quarter now, which makes us uncomfortable about what else may be discovered and our ability to evaluate future results. The promotions of Greg Parseghian and Paul Peterson to CEO and COO, respectively, are positive; but analysts are still
very troubled because it seems the reaudit process uncovered serious problems which prompted this change. Unfortunately, Freddie Mac failed to adequately address these on the conference call it hosted following its news announcement. Anaysts remain optimistic that the company is well positioned to benefit from the solid growth of mortgage debt outstanding we expect this decade and its ability to gain share relative to other investors; however, near-term it appears disadvantaged given the performance of its PCs and debt, high liquidations, and continued demand for MBS by banks.
Countrywide Financial is saying its mortgage loan pipeline closed May 31 at $74 billion, an increase of $15 billion from its March 31 finish, a jump the company believes indicates "significant near-term production opportunities." Loan fundings approached $40 billion for the month, bringing year-to-date fundings above $184 billion. Average daily applications totaled $3.2 billion, a sequential increase of 40 percent. Countrywide's loan servicing portfolio rose more than $17 billion in the month to $537 billion.
Scottrade said it logged record volume of 105,813 trades on Friday, June 6, vs. an average of 88,000 trades per day for the week. Before the recent increase in trading volume, the firm's record stood at 64,000 trades, which was set in early April 2000. "The incredible trading records we have been setting over the past few weeks speaks volumes about investor confidence and the market's health," Scottrade President Rodger Riney said. Scottrade is a privately-held online broker based in St. Louis.
Metals . . . J.P. Morgan Chase lowered its rating on Newmont Mining to "neutral" from "overweight." The firm said the move is primarily based on valuation.
Defense& Aerospace . . . Bombardier said it's selling for $90 million its Military Aviation Services unit to Spar Aerospace Limited, a subsidiary of New York-based L-3 Communications.
Nick Fothergill at Banc of America upgraded Boeing to "buy" from "neutral," citing a less than expected downside for its commercial airplane business. Fothergill said his research indicates that new aircraft deliveries for 2004 are already 70 percent placed, despite expectations of a "slew" of deferrals. He increased his 2004 production forecast to 265 aircraft from 230. Fothergill added that news that United Airlines was close to coming out of bankruptcy was also a positive. He upped his earnings projections to $1.85 for 2003 and $2.20 for 2004, from $1.80 and $2, respectively.
Transports . . . John Barnes III at Deutsche Bank said there is "favorable evidence" suggesting second quarter traffic has been strong for railroad companies Norfolk Southern and CSX Corp. Barnes found that export coal traffic appears to have accelerated significantly in the east over the past 2 months, and intermodal traffic continues to be strong, if not getting stronger. He left his earnings estimates unchanged, but believes there is potential for upside surprises for both the second quarter and the full year. Barnes also reiterated his "buy" ratings on the stocks and price targets of $26 and $36, respectively.
UTi Worldwide reported net income of $8 million, or 26 cents a share, up from 18 cents a share in the year-earlier period, and above the average analyst estimate of 23 cents a share. Revenue for the quarter ending April rose 39 percent to $326.8 million amid strength in airfreight forwarding volumes, primarily in the Asia Pacific region. Analyst had been forecasting revenue of $321.5 million.
SkyWest signed a memorandum of understanding for a new 11-year contract with United Airlines (to expand United's regional carrier service, United Express. As part of the agreement, SkyWest will operate a fleet of 140 aircraft, which will, or are currently serving, the United Express fleet. SkyWest will be reimbursed for its costs, and will receive a base margin and performance incentives.
JetBlue Airways ordered 100 jets from Brazil's Embraer in a $3 billion deal; options for another 100 aircraft would push its value to $6 billion.
United Airlines warned that its equity securities "have little or no value" and that it's "highly likely" they will be cancelled under any plan of reorganization. The SEC filing comes as UAL Corp. begins to present an updated business plan to its board as well as the company's creditors' committee and potential sources of exit financing. UAL said it's concluded that its assets "will be insufficient to permit any meaningful distribution" to stockholders.
Death . . . Stewart Enterprises reported second-quarter net income of $9.5 million, or 9 cents per share, compared to $12.9 million, or 12 cents per share, in the year-ago period. The figure of 9 cents per share matched the forecast in a survey of analysts by Thomson First Call. The company said it received $23 million in tax refund proceeds related to the sale of its foreign operations. The company used the proceeds along with cash on hand to reduce its debt to $517 million as of June 4. Revenue dipped to $133.4 million from $151 million. The funeral services company also said its COO Brian J. Marlowe, has stepped down, "to pursue personal interests."
Consumer Products . . . Merrill Lynch downgraded Colgate, Gillette, and Alberto-Culver to "neutral" from "buy," but it maintained its "buy" ratings on Avon, Procter & Gamble, Estee Lauder and Newell. The moves came as Merrill reviewed its ratings on the household products sector. Analyst Carol Warner Wilke noted the sector has outperfomred the broader market for nearly 3.5 years. "Recently, however, the group's appreciation has lagged that of the broader market, as interests seem to have shifted away from more defensive names," she said in a note to clients. She said fundamentals in the group are strong, but with the appreciation that many stocks have had year-to-date, additional double digit appreciation over the next 12 months "may not be realistic." Colgate, Gillette, and Alberto-Culver are "on track with their business plans," she said.
Retail . . . Retail chain-store sales fell 0.3 percent in the week ending June 7, according to the Bank of Tokyo-Mitsubishi/UBS index released Tuesday. Sales were up just 1 percent year-over-year, down from 3 percent a week earlier. While customer traffic improved, sales were hurt by cool temperatures that cut into sales of high-margin goods. At the same time, retailers were discounting their remaining spring merchandise, BTM said. For June, BTM expects another relatively tepid showing, with year-over-year same-store sales rising about 2 percent, "ever-so-modestly" higher than the pace seen in the past 10 months. Sales rose 1.9 percent in May.
Rite Aid said total drugstore sales for its fiscal first quarter increased 3.1 percent over the same period a year ago to $4.03 billion, just shy of the average analyst forecast of $4.1 billion. Same-store sales for the quarter ending May increased 4.3 percent, with pharmacy same-store sales rising 5.7 percent and front-end sales increasing 1.8 percent. For the month of May, total drugstore sales rose 3.5 percent to $1.57 billion, and same-store sales increased 4.5 percent.
Guitar Center expects to use the net proceeds from the offering to redeem all of its outstanding 11% Senior Notes due 2006 and to reduce the amount outstanding under its credit agreement.
Merrill Lynch raised Jones Apparel to "buy" from "neutral." The firm believes news flow, sentiment and earnings will improve from this point forward, and it set a 12-month price target of $34.
Kmart Holding said its common stock would begin trading on the Nasdaq National Market under the symbol "KMRT." The discount retailer emerged from bankruptcy on May 6. "This listing is another important milestone in Kmart's recovery," said Julian Day, Kmart's chief executive. The stock was previously trading on the OTC Bulletin Board under the symbol "KMRTQ."
Books-A-Million was upped to Equal Weight at SunTrust as the sector appears to have firmed in recent weeks. Also believes that current book by Hillary Clinton and the next installment of Harry Potter should give visibility to the top-line over the next several quarters.
Part of the secret of Coach’s success has been the adept evolution of its design aesthetic, which draws inspiration from the company’s roster of classic silhouettes. Consistent with its strategy to appeal to a broader customer demographic, the company has begun to layer in a wider range of price points in some key product categories, most notably small leather goods and women’s accessories. Wristlets provide the perfect case in point. First introduced in September 2001, COH expects to sell some 600,000 units this year. While most of the wristlet business has been done in the $42-$48 price range, and has predominantly consisted of all leather and Signature pattern models, this fall, COH will introduce a much wider array of designs and price points. In fact, all of COH’s big handbag ideas will be accompanied by a coordinating wristlet. With this additional scope, price points for the wristlets are now expected to range from $42-$148. At the high end of the spectrum is a colorful suede wristlet collection with patterns inspired by American artists. Given the relatively simple design of the wristlet, it is a highly profitable product category. An ingenious evolution of the wristlet is the wristlet clutch, which is somewhat longer than a normal wristlet. Some wristlet clutches also have additional functionality by way of an external pouch pocket. Prices on the wristlet clutches are in the $118-$168 range (a $168 vaqueta leather clutch sold out). expect to see a lot more in the way of clutches at COH as the year progresses, especially since they are a key focus for the holiday season.
Restaurants . . . Banc of America raised its price target on McDonald's to $26 from $26. Analyst Andrew Barish believes the company is in the early stages of a turnaround that could drive solid earnings growth in 2004 and beyond. "We came away from our meeting with McDonald's management more convinced that the course is set, potentially permanently, for controlled new unit growth, accelerating free cash flows and improving margins and returns," Barish said. USB Piper Jaffray also upped its price target on the stock, moving to $21 from $15, citing "healthy" May same-store sales growth.
Healthcare . . . Curative Health acquires Prescription City’s specialty pharmacy business for $17.5 million, expects acquisition to add $0.03 in 2nd half 2003. CURE raises pro forma 2003 EPS guidance to $1.46-1.52 versus consensus of $1.44.
Piper Jaffray upgraded Caremark, AdvancePCS, Express Scripts. Piper Jaffray upgraded CMX to Strong Buy from Outperform and upgrades ADVP and ESRX to Outperform from Market Perform. The upgrades are based on their belief that chatter about a Senior Drug Benefit as well as overall improved sentiment on the PBM group will continue to move the stocks higher.
Drugs . . . GlaxoSmithKline's antidepressant should only be given to adults. The British government's drug regulatory agency warned that GlaxoSmithKline's top-selling antidepressant Seroxat should not be used to treat depression in people under 18. Seroxat generated global sales of $3.40 billion in 2002, of which about $100 million came from Britain.
Biotech . . . Regeneron Pharmaceuticals is saying that preclinical studies have found the company's VEGF trap product "caused shrinkage of established, growing tumors and their metastases in a mouse model of anaplastic Wilms Tumor," a kidney tumor that commonly affects children. The firm said the study showed tumor shrinkage seemed to be caused by the "collapse and eventual elimination of blood vessels within the tumors."
UBS Investment Research cut its rating on Biogen to "reduce" from "neutral." UBS analyst Meirav Chovav cited concerns about the stock's valuation and sales of the biotech firm's drugs to treat multiple sclerosis and psoriasis. The firm believes that recently published data on the long-term efficacy of PFE/SRA's Rebif and PFE's increased emphasis on its sales force will further erode Avonex's market share. The firm thinks that Street estimates for Amevive are overly optimistic, the recent disappointment of IC747 resulted in a further hit to BGEN's pipeline. The firm thinks that royalty revs will further decline due to lower sales of Intron A, a lower royalty rate from SGP, and European patent expirations. Target is $35.
Cell Therapeutics will advance to Phase II trials following a review of initial phase I clinical trial safety and pharmacokinetic data at pre-specified doses in an ongoing clinical trial. The company is advancing the clinical development of its novel camptothecin polymer conjugate (CT-2106).
Geron said it was granted a U.S. patent pluripotent stem cells modified for therapeutic applications. The company said the technology could provide an additional level of safety for cell therapies made from human embryonic stem cells.
Vaxgen was awarded a phase 2 Small Business Innovation Research grant from the National Institute of Allergy and Infectious Diseases, a part of the U.S. National Institutes of Health (NIH), to identify novel antigens for potential use in future HIV vaccine candidates. The SBIR grant provides up to $2 million for the program and is in addition to the $210,000 that VaxGen received late last year through phase 1 of the grant.
Media . . . Lamar Advertising plans to begin a public offering of $250 million worth of convertible notes. The company plans to use the proceeds to redeem all or a portion of its 5 1/4 percent convertible notes due 2006. The firm expects to grant underwriters an option to purchase an additional $37.5 million worth of notes.
Netflix updated 2nd quarter revenue guidance to the range of $62 to $64 million, from $60 to $64 million versus consensus estimate is for revenues of $63.5 million. The company revised Non-GAAP net income guidance to $4.4 to $5.9 million, from prior guidance of $0.5 to $3.0 million. It would be the first profitable quarter for the online movie rental service. Netflixsaid it will also adopt the fair value based method of recording stock options. The company said it expects no material financial impact in the quarter from the move, but does expect to incur additional expense in futures quarters from the change in accounting.
Wal-Mart is rolling out an online DVD rental plan with unlimited rentals for $15.54 per month. This plan allows subscribers to have two DVDs out at once. Plans that allow three and four DVDs at once cost $18.76 and $21.94 per month, respectively. The retailing behemoth has added 1,000 more titles, and opened new distribution points. In October, Wal-Mart announced an initial price point for monthly plans of $18.86.
USB Piper Jaffray believes that Netflix is unlikely to see a major impact from Wal-Mart's DVD service. Notes that the much more serious and brand-name co in this space, Blockbuster, launched its online service last year, and still has not been able to take customers away from Netflix. Firm would be aggressive buyers of NFLX on this weakness.
RealNetworks and ABC News expanded relationship. The pact makes RealNetworks the only premium content subscription service to offer ABC News Live, ABC News' 24-hour live news service, which launched in March.
Hotel & Leisure . . . Penn National Gaming announced 2nd quarter operating results are pacing "better than projected", revises guidance. The company’s revised 2nd quarter projections also include charges resulting from recent cost cutting plan, so it is not clear if revised guidance is comparable to consensus. The company raised 2nd quarter EPS guidance (including Shrevport Casino operations) from $0.33 to $0.38, Reuters consensus is $0.34. For Y03, PENN reduces EPS guidance (including Shrevport) from $1.34 to $1.32, consensus $1.25, yearly guidance includes $1 million charge, as well as $6.3 million in Illinois tax increases.
Telecom . . . Bernard Ebbers, WorldCom's former chief executive, knew the bankrupt telecom provider improperly inflated revenue and Worldcom's board rubber stamped the activities of its top executives, according to two special investigative reports released Monday. "Ebbers was aware, at a minimum, that WorldCom was meeting revenue expectations through financial gimmickry," said an independent report commissioned by the company's board. "Yet he kept making unrealistic promises and failed to disclose the existence of these devices or their magnitude." So far, the fraud perpetrated by former managers of WorldCom, now named MCI, has officially reached $9 billion and could reportedly top $11 billion.
Morgan Stanley downgraded Vodafone to equal-weight. The broker said further upgrades to forecasts are "high risk" given concerns in the U.K., Japan and longer-term from Wi-Fi, and without earnings upgrades the valuation is not compelling.
Network Equipment . . . Lucent said it has won a contract worth "tens of millions of U.S. dollars" to help construct an optical network for a subsidiary of China Netcom, Beijing Communication Corp., to connect Beijing's suburbs. Lucent will deploy systems and software to build optical rings for Beijing Communication and will allow BCC to increase its network capacity and enable the transition from a traditional voice network to a multi-service transport network.
Nokia, the world's largest mobile phone handset maker, expects earnings per share in the June quarter to meet its guidance of 13-16 euro cents a share. It said it sees mobile phone sales growth "positive but at the low end or below the guided range of 4-12 percent year on year." Nokia had set expectations for 4-12 percent growth over the second quarter last year in handset revenue. On profits, Nokia set expectations for earnings per share of 13-16 euro cents, including a charge of 5-6 euro cents a share for a 350-400 million euro restructuring in the infrastructure business. Nokia said the slower-than-expected sales in handsets in the second quarter resulted from economic weakness in Europe and the U.S., the impact of the weaker dollar and "the effect of SARS on consumer behavior especially in China." Handset market share for the second quarter, it said, is estimated to be higher than the first quarter.
Nikos Theodosopoulos at UBS lowered his ratings on communications equipment makers Ciena and Tellabs to "reduce" from "neutral," due primarily to valuation. "We do not believe that fundamentals for the companies have improved in the wake of recent share price appreciation," Theodosopoulos said in a note to clients. Both company's: 1) derive a significant portion of revs from optical systems sales, which should be the last telecom equipment mkt to recover, 2) face risks in entering the IP/MPLS space due to lack of experience and strong competition from Cisco, Juniper, and Alcatel, and 3) face lack of visibility on potential optical contract wins.
Motorola pre-announced a revenue shortfall, citing issues in the Chinese handset market, including SARS and excess inventory from local manufacturers. Sales guidance revised to a range of $6.0-$6.2 billion versus prior guidance of $6.4-$6.6 billion. EPS guidance, excluding special items, revised to approximately breakeven versus prior guidance of $.03 to $.05. Full year guidance will also be revised downward at a later date as these issues are expected to impact 3rd quarter and 4th quarter also. MOT has the greatest exposure to the Chinese handset market with approx. 25% share and 19% of its handset revenues coming from China (Nokia's concentration is less at approx. 10%). PCS results in North America, Latin America and Europe are meeting original expectations for 2nd quarter. Qualcomm concern that SARS was more than a temporary issue was part of our heightened concern in downgrading QCOM. Mainly, excess inventory in 1st quarter needed to be cleared for the new handset cycle for 3rd quarter. Due to SARS, vendors could not clear out the handset inventory and are forced to cut prices or do write-offs to reduce inventory, impacting 2nd quarter/3rd quarter. While QCOM recently reiterated its outlook for the June Quarter, we believe continued negative datapoints from the food chain (MOT is a 11% QCOM customer) could increase the risk to the September and December quarters for QCOM.
LM Ericsson was cut to Sell from Hold at Wells Fargo Securities citing concerns prospect of continued losses from operations and uncertain pricing and demand trends. The analyst believes the company should trade at approximately its book value of $5.13. Specific risks associated with owning the shares are its pure play on infrastructure, the co has to stay abreast of rapidly changing technologies, pricing falling and not being able to procure top talent.
Thomas Weisel resumes coverage of Corvis with an Outperform rating, given that: 1) it is now clear that Broadwing will be consolidated, possibly as early as their June qtr, 2) GIG-BE opportunity is promising, and 3) the potential for equipment contract wins with other carriers in 2004.
Wells Fargo Securities downgraded Nokia from Hold to Sell citing downside risk as significant and establishing a $12 price target. The analyst believes the company is appropriately valued at 16.0x FY04 EPS estimate of $0.75 per share or $12.00 with no positive catalysts for the co in the foreseeable future. Specific risks in owning the shares are described as financial risks of new mobile system orders being pushed out or if customers become insolvent, the costs associated with leading edge R&D and being able to recruit top talent.
Semiconductor Equipment . . . Mark Fitzgerald at Banc of America downgraded a number of chip equipment makers, saying he was not optimistic that the companies' earnings power into 2004 could sustain the current rally in the sector. He cut Applied Materials, KLA-Tencor, Novellus Systems and Lam Research to "neutral" from "buy," and Credence Systems to "sell" from "neutral." "The rally in the semi-equipment space over the last several months is probably anticipating an industry recovery fueled by a turn in the economy," Fitzgerald said. "Slower growth, heightened competition and a lack of new applications suggest to us that industry profitability will fall short of the 1990s cycles."
Semiconductors . . . Infineon and IBM said they have jointly developed "the most advanced Magnetic Random Access Memory technology (MRAM) to date." The companies said they integrated magnetic memory components into a high-performance logic base, and that this progress could speed up commercialization of MRAM, which may begin replacing some memory technologies by as early as 2005.
CIBC is pulling its price target and retracting its positive tilt toward Broadcom in light of recent 75% run since 4/1. While still expects a strong June Quarter and positive outlook, believes valuation is getting a bit stretched.
Motorola extended cable set-top box relationship with Broadcom. The company announced its extension of a supply agreement with Motorola to be a primary chip supplier of its cable set-top box technology through 2004. MOT's digital set-top box portfolio include services such as video-on-demand, interactive television and HDTV.
Boxmakers . . . Dell and EMC extend reselling agreement until which allows Dell to resell EMC products by two years in light of market share gains. The new agreement now runs through December 2008 with the company's adding that more than 4,100 customers have bought the bundled systems.
Software . . . Microsoft signed an agreement to acquire the intellectual property and technology assets of GeCAD Software Srl., a provider of antivirus technology based in Bucharest, Romania. Microsoft's acquisition of GeCAD's technology will help secure customers by providing antivirus solutions for Microsoft products and services. In addition to developing new solutions, Microsoft will use the GeCAD engineering expertise and technology to enhance the Windows platform and extend support for third-party antivirus vendors so they can provide customers with increasingly secure and comprehensive levels of virus protection.
The Wall Street Journal said Siebel Systems, the world's biggest maker of customer- service software, may be a takeover target. Following Oracle's $5.1 billion bid for PeopleSoft Inc., the days of independent, niche software companies are numbered, the newspaper said. Thomas Siebel, founder and CEO, and a company spokesman declined to comment yesterday about the possibility of a takeover, the Journal said.
SAP was upraded to "Neutral 2" from "Reduce 2" at UBS Warburg. The broker said rivals Oracle, PeopleSoft and JD Edwards sales forces will be focused on various acquisition scenarios. It added that SAP should benefit if PeopleSoft's product line is replaced by Oracle's, as proposed by Oracle in its hostile bid, due to SAP's superiority over Oracle's products.
While the Oracle/Peoplesoft/JD Edwards outcome is uncertain, a clear winner whatever happens will be SAP. This will increase positive US momentum. 2003 US rev forecasts could prove to be too cautious. If ORCL buys PSFT, ORCL has said that it will migrate PSFT’s clients onto its own platform for free. As SAP is the only ERP vendor with positive momentum in the US, it should be able to acquire disillusioned ex-PSFT clients. Thus, SAP gains market share for ‘free’. If ORCL doesn’t acquire PSFT, US market turbulance will benefit SAP given that it is the only ERP vendor gaining market share and will be seen as reliable and safe. Believe SAP’s valuation is fair, however, in the N-T SAP could continue to outperform as it has broken through its resistance levels and will continue to benefit from positive news flow.
Mercury Interactive agreed to buy privately held Kintana in a deal valued at $225 million. The firm said the purchase will enhance its "position as the leading software company in the business technology optimization industry." The deal consists of $100 million of Mercury Interactive stock and $125 million in cash. Mercury Interactive will assume all of Kintana's outstanding unvested options. The transaction is expected to close in the third quarter of 2003 and is subject to antitrust clearance and Kintana stockholder approval.
Roxio was higher amid takeover chatter that Apple may be interested in a bid for the CD-burning software company in order to secure Napster, which was recently acquired by ROXI.
Internet . . . Register.com to distribute $120 million to shareholders by September 1, by means of a dividend, a repurchase of shares, or a combination. Additionally, by its 2003 annual stockholders meeting, the company will announce key terms of a business plan designed to improve the Company's operations and guidance for the Company's future operating performance.
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