Actually everyone, what happened was that Dow Jones News Wire hit the tape around 3 pm with this headline:
"On-line chatter has it that Apple Computer is poised to bid for Global Village Communication,"
Article follows:
Off line, analysts don't buy it.
Shares of Global, based in Sunnyvale, Calif., have climbed to their highest level in months in response to the rumors, which have spread on-line via bulletin board services, such as those run by Yahoo! (quote.yahoo.com) and America Online, and on Web sites dedicated to Apple Computer, including one called Mac OS Rumors (www.macosrumors.com).
Reflecting Global Village's recent troubles -- it is unprofitable and isn't expected to move out of the red this year or next -- its shares remain far below their all-time high of about $24, hit in late 1995. But the rumors have lifted the stock above $2 for the first time since late last year. On Thursday, the stock climbed 12.5 cents to $2.25 on the Nasdaq Stock Market.
On-line chatter says more gains are coming. "An unknown source says a buyout is just around the corner, as in next week. Price is expected to be in the $5 to $6 range," wrote one person in a posting on a Yahoo bulletin board on March 20. Wrote another person this week on an America Online bulletin board: "What I heard is that within a week the tender offer and price will be announced."
Not so fast, say analysts who follow both companies. Apple Computer watchers say this is the wrong time for the Cupertino, Calif., company to make an acquisition. And even if the company were willing to take on the difficulties that come with a purchase, observers believe it isn't likely to buy a maker of modems, which offer slim profit margins.
"It's hard to envision why Apple would want to buy them. It seems like Apple has enough execution issues now," says Jeff Lipton, an analyst at Hambrecht & Quist who follows Global Village. "[Apple is] trying to engineer a turnaround; the last thing [they would] want to do is deal with an integration and manage a different market," he says. "Also, modems are a commodity, they're getting cheaper, so why bother doing it?" Mr. Lipton has a "hold" rating on Global Village shares.
Officials of Apple and Global Village declined to comment on the rumors.
Andy Gore, editor in chief of Macworld, a San Francisco magazine, says a deal for Global Village doesn't make sense at a time when Apple is attempting to focus on its core operations. "Why would they buy a modem business when they just unloaded the Newton business?" he says, in reference to the hand-held computer business -- once a major new initiative at Apple -- that the company recently moved to abandon.
The takeover buzz started in early March, when Mac OS Rumors, one of several web sites devoted to rumors and news about Apple and its Macintosh products, reported that "some speculation suggests that Apple may be pursuing a buyout of GV." Word quickly trickled into on-line message boards, and on March 6, Global Village shares closed up 37%, to $1.28.
As the shares rose, MacInTouch, another Mac web site, (www.macintouch.com) wrote that "Global Village's stock price has jumped, and there apparently is a rumor of an Apple buyout." A few days later, O'Grady's PowerPage (ogrady.com) jumped on the bandwagon, adding that "signs are pointing to an Apple purchase of Global Village. Recent high level meetings in Sunnyvale between Apple and GV suggest that a deal may be imminent."
A Global Village official cautions against reading too much into meetings between that company and Apple: "We're over there often. We're strategic partners." Global Village provides Apple with the majority of the modems used in Apple desktop systems, and some Global Village managers are Apple alumni.
But Wall Street analysts who follow Apple say the close relationship between the two companies doesn't mean that Apple is looking for a deal. John T. Rossi, an analyst at BancAmerica Robertson Stephens, says a takeover "seems to go against the Apple initiative to slenderize operations. They've been focusing on their core business and focusing on G3." G3 refers to Apple's new highly touted high-speed computers. "Strategically it could make sense, but it would mark a departure for the phase of getting down to brass tacks."
Adds Daniel Kunstler, an analyst at J.P. Morgan Securities: "In terms of where [Apple executives] see their immediate market opportunity, their strongest defense is with the Mac operating system."
Still, some observers believe a deal is coming. Pejman Hamidi, a participant in the on-line discussions says a takeover "absolutely makes sense." Mr. Hamidi, who is also an official of Polar Trading, a Mt. Clemens, Mich., trading firm, says, "At the price level Global Village is, they would be getting a bargain and it would give Apple an integrated product that is already established."
He says the timing could be right because Apple "is just starting to get their head above water. Now Apple can focus on other things besides their survival."
But Global Village is still losing money. Its revenue rose 54% to $16.2 million in the last three months of 1997, its fiscal third quarter, but the company posted a loss of two cents a share, and its loss from continuing operations was wider, at nine cents a share. A Global Village official declined to say when the company expects to post a profit. But Nelson Information of Port Chester, N.Y., estimates Global Village will post a loss of 30 cents for fiscal 1998 and a loss of 51 cents for 1999.
The company has said publicly that its return to profitability depends in part on the success of new product developments, and one piece of speculation suggests the company will reinvent itself with a focus on telephone services. In reference to the rumor, a spokesman says, "We are always looking at new technologies. Communications is an area we are focusing on. But I don't know of anything that will take us into another realm." |
