September 7, 2001

Open Source stock report: Expected but not welcome

Author: JT Smith

- By Dan Berkes -
The markets are in free-fall, but those plummeting numbers are nothing to be surprised about, really. After all, analysts told us to expect this to happen once we passed the Labor Day mark. This week's items: HP to "merge" with Compaq, Apple gets sued, and Caldera delivers some unpleasant news.Analysts said the darkest days of the market would happen in the week after Labor Day, and from the looks of the mess that is Wall Street, they were right on target. The bruised and battered Nasdaq closed at 1687.70, down 118 from last week, hitting its lowest point since April 3. The Dow Jones Industrial Average wheezed and sputtered to a Friday close of 9605.85, down 392 since Monday, the first time the index has visited that neighborhood since late March.

The markets tumbled at the end of the week over higher-than-expected jobless numbers from the U.S. Department of Labor. With business letting go of another 113,000 workers during the month of August, the national unemployment rate jumped from 4.5 to 4.9 percent, its highest rate since 1997, and analysts warned that the worst is yet to come. Most of the sell-offs affected the retail sector, as investors figured a continued slowdown would eventually affect consumer spending and confidence.

Hewlett-Packard to buy, er, merge with Compaq
Whatever they want to call it, Hewlett-Packard is dishing out quite a bit of money to make this deal happen. On Monday evening, the two companies announced the, uh, merger and said that HP would give Compaq shareholders 0.6325 of an HP share for every one share of Compaq they own. The new company hopes to generate annual revenues of $84 billion.

The new company will be named Hewlett-Packard, and at least 15,000 employees will be laid off during and immediately after the merger. It sounds like there won't be much left of Compaq other than some IP and old employee identification badges once everything has been said and done. But remember, it's a merger and not a purchase.

Maybe I'm being too hard on them. Obviously HP honcho Carly Fiorina and Compaq chief Michael Capellas worked hard to put this whole thing together. But my words can't possibly be quite as harsh as what the investors did to the two companies in the days after the announcement: Since last Friday, Compaq shares have dropped 49 cents to 10.59; and HP shares have gone from Tuesday's even $19 down to $18.08.

Caldera runs the numbers
Caldera International released its third quarter results on Thursday, reporting revenue of $18.9 million for the quarter ending July 31. The company reported a net loss of $18.8 million, or 34 cents per share. Caldera expects to see $15 million to $20 million in net revenue for the fourth quarter of this year, with losses in the range of $20 to $24 million. Also, the company will lay off workers and will soon do a reverse stock split to increase its per-share value and avoid being delisted by Nasdaq.

Apple in patent infringement case
Colorado-based BIAX Corp. is suing Apple Computer for patent infringement, claiming the Cupertino computer maker has infringed upon two of its patents, covering enhancements made to parallel processing that takes place in a computer's central processing unit. BIAX may be a corporation in name, but not in size -- in fact, the company doesn't even have a telephone number. The lawyer representing BIAX said the company is actually a father and son who live in different parts of the country.

In somewhat more positive news, Apple on Thursday said that its retail division should break even on the final quarter of this year, and turn a profit sometime next year. Apple CFO Fred Anderson declined to say whether the company as a whole would be profitable next year, but said that no news should be good news. If we don't hear any profit warnings, then that should be a good sign. Thanks for the advice, Fred.

Here's how selected stocks ended the week:

Company Name Symbol 09/07 Close 8/31 Close
Apple AAPL 17.28 18.57
Borland Software Int'l BORL 9.88 12.70
Caldera International CALD 0.46 0.65
EBIZ Enterprises EBIZ.OB 0.045 0.09
Hewlett Packard HWP 18.08 25.13
IBM IBM 96.59 106.99
MandrakeSoft 4477.PA e5.99 e6.19
Merlin Software Tech. MLSW.OB 0.24 0.15
Red Hat RHAT 3.32 3.70
Sun Microsystems SUNW 10.59 14.97
TiVo TIVO 4.56 5.28
VA Linux Systems LNUX 1.07 1.60
Wind River Systems WIND 13.25 15.10

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