AOL Deal Making article...
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The tech issues managed to keep in positive territory even after breaking news from Washington: Treasury Secretary Robert Rubin will resign, to be replaced by Deputy Treasury Secretary Lawrence Summers. The changing of the guard in the nation's capitol was expected, especially since Rubin has hinted on his resignation for over a year and most recently has been seen more often than usual with Summers in public appearances. Investors fearing instability in Washington, and those who may be unfamiliar with Summers (or loved the idea of a formed head of Goldman Sachs acting as Treasury Secretary as Rubin did), led the markets lower once the news arrived. Nevertheless, most major indices made a late day recovery after an initial sell-off on the news. The Dow Jones Industrial Average finished down 25.78 to 11000.37, the Nasdaq was higher by 39.31 to 2605.99 and the S&P 500 was higher by 8.31 to 1363.92.
Wednesday brought the long-awaited news that Lycos and USA networks had decided to abandon their previously announced merger in the face of strong shareholder opposition. CMGI (Nasdaq:CMGI), one of Lycos' major shareholders had lead the charge against the merger. It should be noted that USA Networks had trouble garnering support because of the lack of large institutional positions in Lycos, thereby leaving most shares in the hands of either CMGI or individual investors. Given the small float and high volatility in Lycos, it was also unlikely that these individual investors would vote on the deal because the stock changed ownership several times a day. Thus the advent of day trading is now becoming a factor in merger negotiations. David Wetherell, Chairman and CEO of CMGI, reflected on the move, stating that "We are gratified that Lycos shareholders will now have new avenues to realize appropriate value for their shares." CMGI finished the day down 4 15/16 to 239 3/4; Lycos was up 8 3/4 to 107
America Online (NYSE:AOL) and Microsoft (Nasdaq:MSFT) led the charge early in the week, both announcing deals to expand the reach of their respective empires. On Tuesday, AOL announced the highly anticipated details of its developing AOL TV initiative. AOL announced contracts with 4 separate companies including DirecTV, Hughes Network Systems, Philips Electronics, and Network Computer. These contracts will allow AOL to deliver its interactive content via the television medium
Expanding on the new direction, Steve Case, Chairman and CEO of AOL, stated: "This is about a belief that we've had for more than a decade that we're trying to build a new medium. In order to achieve our objective, we need to provide an anywhere kind of access." Also, earlier in the week, AOL announced a multi-year agreement with five leading banks for its Banking Center. This agreement will allow AOL subscribers to do all of their online banking via AOL's Personal Finance Channel. AOL ended the day down 2 15/16 to 138 1/2, but was up strongly on Tuesday after Mary Meeker of Morgan Stanley raised her rating on the stock to "strong-buy."
Microsoft continues to buy its way into virtually every new promising technology that is being developed. On Monday, we saw the software giant purchase a $600 million stake in Nextel (Nasdaq:NXTL) to facilitate the development of a wireless version of its Microsoft's MSN internet portal. "Microsoft and Nextel will deliver the next generation of wireless services to enable people everywhere to stay in touch with the information they need, regardless of location," stated Microsoft Chairman and CEO Bill Gates. In addition, news surfaced on Wednesday that Microsoft was in talks to buy a 30% equity stake in Cable and Wireless Communications. This move, similar to Microsoft's investment in AT&T (NYSE:T), would help solidify Microsoft's position as a leading software developer for cable set top boxes. MSFT was up 5/8 to 80 1/2, Nextel was up 1 5/8 (4.38%) to 38 3/4, and AT&T was up 1 13/16 to 60 1/8.
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