The End of Sanity
By Ed Robinson
Remember when every other non-fiction book that hit
the shelves declared "The End of... something"? There
was even "The End of Sanity," which was my
favorite. Well, given today's benign Producer Price
Index report, I wouldn't be surprised to see "The End
of Inflation." Every time the Street gets really anxious
that inflation is rearing its head, data come along to
soothe the nerves. The pleasant surprise spurred the
Nasdaq to a record high at 2887.03, a tidy 1.23%
jump. But the Dow saw it wasn't really all that
titillating and slid almost 51 points, to close at
11,028.43. The 30-year Treasury bond settled in at
6.034%, off 0.059%. Here's what we've been
following today:
INFLATION.... So, why isn't this latest good news on
the inflation front less than titillating? Easy. Today's
report also showed that prices received by producers
of intermediate goods rose 0.8% in August, following
a 0.6% jump in July, and crude goods index advanced
4.6% in the wake of a 0.2% decrease the month
before. Still not sure? Well, if a loaf of bread is a
"finished product" then flour is an "intermediate" one
and wheat is a "crude" product. Richard Berner,
Morgan Stanley Dean Witter's chief U.S. economist,
told me after the market closed today that these
increases at the intermediate and crude levels show
that inflation is waxing, not waning. Indeed, while
investors can rest assured that today's data did little to
boost the chances of another interest rate hike from
the Fed this year, next year is another story. "We are
seeing signs of rising prices at the crude level, and
globally growth could reach 4% next year and the
dollar has started to depreciate," says Berner. "All of
this could act as an inflation tailwind." Indeed, Berner
forecasts inflation in the U.S. economy to approach
3% by year's end 2000. But he hastens to add that the
Fed has plenty of time to act next year to check
inflation with rate increases. So, like Serwer said
yesterday, enjoy the fall!
MEMO FROM UPGRADE CITY.... Talk about The
End of Sanity: Mark Wolfenberger, an e-commerce
analyst at CS First Boston, bumped Net service
companies AppNet (Nasdaq:APNT) and Viant
(Nasdaq: VIAN) up to "strong buys" from "buys"
today, and the stocks went nuts. AppNet shot nearly
113%, to $33, while Viant posted a relatively modest
26.5% jump, to close at $50. Both firms use resident
brainpower to help companies sculpt themselves a
presence on the Web and then turn it into new revenue
generators via e-commerce. And Wolfenberger says
both have warmed the hearts of investors by honing
creative business models. Well, as self-described Web
Lords they should be creative, right?
APPNET.... Its specialty is providing the whole ball of
wax to customers, from designing the Website to
measuring the impact on "legacy" business to
processing electronic sales to even measuring the
effectiveness of the hits on the site. Wolfenberger
loves how AppNet reaps a little revenue every time a
visitor to its clients' Websites transact business. "That
back-end revenue adds some nice luster to this stock,"
he says. AppNet, based in Bethesda, Maryland,
recorded almost $48 million in revenues for the first
half of the year, with a $40 million loss, much of
which is related to acquisitions in the last year. Profits
are on the way, though, according to the analyst.
Today Wolfenberger erased his cash EPS projection
of a $0.01 loss for fiscal 1999 and replaced it with a
profit of $0.01. For 2000, he now predicts EPS of
$0.20 instead of $0.17.
VIANT.... The Boston firm notched almost $19
million in sales during the first two 1999 quarters with
a $4 million loss in tow, has come up with its own
novel business plan. It offers clients a fixed price for
its Web expertise and pledges to deliver whatever on-
line project the customer wants by a set deadline. You
can imagine how attractive that level of predictability
is to nervous executives shopping for Web solutions.
fast. "If this model is conducted correctly it can reap
huge profitability," says Wolfenberger, who estimates
that the company's loss-per-share for 1999 will come
in at $0.25 instead of $0.35.
DEPARTMENT OF RESURRECTIONS.... This is no
voodoo, but National Semiconductor (NYSE: NSM)
looks very much alive these days. After delivering
EPS of $0.25 -- according to First Call, the Street
expected the chipmaker to lose $0.14 a share -- the
stock climbed 8.2% to close at $34 5/8. (That's a
sweet 365% increase in the last 52 weeks, by the
way.) Merrill Lynch's chipmeister, John Osha, raised
his May 2000 earnings estimate from $0.62 to $1.21 --
that's, ah, rather hefty, isn't it?. He stopped short of an
upgrade, however, reiterating an intermediate and a
long term accumulate rating. His counterparts over at
Josephal. Lyons & Ross, however, did upgrade, from
"hold" to "buy." Osha chalked up NSM's surprising
profit picture to a broad recovery in the
semiconductor industry, strong demand in the wireless
and PC markets and the company's ongoing
restructuring.
Loose Change:
Call 911: HealthSouth Corp. of Birmingham,
Alabama, the largest provider of outpatient surgery
and rehabilitation centers, announced 1) it would take
a charge of up to $300 million to pay for
restructuring; 2) it has suspended spinning off its in-
patient unit and 3) its operating margins in the third
quarter are running in the 27% to 29% range instead
of the targeted 30% level. Seven analysts downgraded
the stock today, which closed at $5 11/16, some 74%
below its 52 week-high. Is it just me, or do you find it
especially dismaying when a health care company
goes, umm, south like this?.... Marc Andreesen, the
mastermind behind Netscape, is stepping out of his
CTO gig at AOL to become a part-time strategic
adviser to start-ups. William Raduchel, a wizard from
Sun Microsystems, is replacing the Boy Wonder....
Give it up for sister publication Entertainment
Weekly. Even if I didn't collect my checks from the
same master I couldn't make my Friday commute
without an EW fix. Well, today I snuck a peek early
and was horrified to see a piece that reported on how
the studios are readying a slew of new movies based
on cheese-whiz TV shows from the '60s and '70s.
Movies based on "I Dream of Jeanie," "Family
Affair," "Charlie's Angels" and even "Josie and the
Pussycats" (an old Saturday morning cartoon) are
reportedly in the works. Whoa! If Hollywood is going
to continue to gorge itself with such regurgitation then
I want a place at the trough. How about: "Mannix"
with Fred Savage in the Mike Connors title role?
"Land of the Lost" with Vince Vaughn as the friendly
Sleestak? (Am I spelling that right, Pylon fans?) and
"To Catch a Thief" with Robert Wagner reprising his
lead role as said thief, who would, of course be
dragged out of retirement for one final caper. I like
that last one best because it would be a movie version
of a TV show based on the Hitchcock film with Cary
Grant and Grace Kelly. That clever loop should
intrigue Hollywood's High Concept warlords. After
all, it's quite clear original ideas and stories aren't. |
