To: ~IQBAL LATIF
From: ~IQBAL LATIF
Saturday, Sep 11 1999 5:30AM ET Reply # of 28791
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.
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