Good morning EL..This is today's WSJ article.
Cheap PCs, Recent Deals
Cited for Lexmark's Gains
By LISA BRANSTEN
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Plunging personal computer prices may mean
tighter profit margins for PC makers, but it has been a boon for
computer-printer firms -- and investors are clearly beginning to recognize
that trend.
Shares of Lexmark International Group gained 1 3/4 to close at 62 3/4,
above their 52-week high, in composite trading Monday on the New
York Stock Exchange. That rise came in the wake of news that the printer
company had extended its agreement to provide supplies for high-end
International Business Machines hardware until 2002.
Meanwhile, the Nasdaq Composite Index dropped 16.30 to 1848.07,
while Morgan Stanley's high-tech 35 index lost 9.85 to 580.54.
While the IBM deal was good news for Lexington, Ky.-based Lexmark,
analysts were hesitant to cite it as the driving factor behind Monday's
gains, noting that business with former parent IBM isn't a growth area.
They instead site an increasingly bullish outlook for the company's business
at large.
Recent growth in PC sales, driven in part by sub-$1,000 machines, has
been positive for Lexmark because "there is one universal truth -- and that
is that new computer buyers generally buy new printers," said George
Elling, an analyst with Lehman Brothers Inc.
Although he has a positive outlook for the company, he has the stock
rated at "outperform" rather than "buy" because of its rapid runup.
Shares of Lexmark had been rising steadily for about a year and surged
24% on April 20 after the company reported earnings that were well
above analysts' expectations. For 1998, Lexmark shares are up 61%.
Supplies for IBM products may account for as much as 15% of
Lexmark's profit and a bigger chunk of its revenue, said Richard Schutte,
an analyst at Goldman, Sachs & Co.
He has a "buy" rating on the stock because it continues to gain market
share on its biggest competitors, especially printer giant Hewlett-Packard.
And Lexmark's agreement to ship three types of inkjet printers under the
Compaq Computer brand name, should help them in that effort, he said.
Lexmark runs a distant second to H-P in the laser-printer arena and is the
fourth biggest supplier of inkjet printers. But analysts at market-research
firm International Data Corp., Framingham, Mass., expect the company to
continue to gain market share.
"The deal with Compaq is going to put [Lexmark] in a situation where it
will have access to more customers, many of whom they wouldn't
probably be able to reach otherwise," said Keith Waryas, an analyst at
IDC. "This is a move that is going to make them much more competitive
with the top three" inkjet companies.
Lexmark was the printer division of IBM until it was sold to investment
firm Clayton, Dubilier & Rice in 1991. Shares were offered to the public in
1995.
Monday's Market Activity
Elsewhere in the tech sector Monday, SBC Communications fell 3 9/16 to
38 13/16, while Ameritech jumped 2 1/8 to 46, both on the New York
Stock Exchange. SBC announced a bid to acquire fellow Baby Bell
Ameritech in a stock swap valued at $61.8 billion, the largest ever in the
telecommunications industry (see article).
Excite fell 5 1/2 to 58 1/2 on Nasdaq. BT Alex. Brown cut its rating on
the stock of the Internet portal site to "buy" from "strong buy" Also,
OfficeMax said it will become the main on-line retailer of office products
throughout several areas of Excite's site through a two-year sponsorship
and marketing agreement. OfficeMax slipped 1/8 to 18 1/4 on the Big
Board.
Apple Computer rose 1/2 to 30 15/16 on Nasdaq. The computer maker
said it will ship Mac operating-system version 10 in the third quarter of
fiscal 1999, and interim chief executive Steve Jobs said the company is
"back of track." (See article.)
Seec fell 1 3/8 to 13 on Nasdaq. The software maker posted a profit of
$961,884, or 17 cents a share, for its fourth quarter, reversing a year-ago
loss of $383,065, or 12 cents a share. Revenue soared to $4.2 million
from $819,830 a year ago, and Seec said it would use $1 million of that to
purchase the assets of its affiliate and distributor in India. Seec, which
makes software and systems used to maintain and redevelop computer
programs written in the COBOL language, attributed the revenue surge to
an 800% increase in software license and maintenance fees led to the
revenue increase in the latest fourth quarter.
Steve |
