Wall Street loves the Internet, and nothing gets the market's juices flowing like a whopping deal involving a couple of the best-known names in the business. Lots of investors think Yahoo's US$5.7 purchase of broadcast.com got the second quarter going on a suitably upbeat note.
Enthusiasm for this and a pair of other big-ticket mergers helped traders shake off another drop in bond prices (and fears of higher inflation), not to mention a lingering sense of fatigue from blue-chip stocks sprinting to a record close earlier in the week.
The Dow Jones Industrial Average rose 46.35 points to close at 9832.51, and the Wired Index was 10.41 higher at 640.54. The Nasdaq Composite Index gained 32.32 to 2493.72, and the S&P 500 was up 7.40 at 1293.77.
Volume was fairly light as traders packed their bags and split town for a long holiday weekend. Many made their exit with the arrival of Passover at sundown Wednesday, and others are looking ahead to Easter. US financial markets will be closed Friday.
Broadcast.com (BCST) advanced $11.81 to $130 as its acquisition, the object of much speculation in recent days, became official. Yahoo (YHOO) was $11.38 higher at $179.75.
The deal values broadcast.com at about $130 a share, or a 10 percent premium over its closing price Wednesday. Broadcast.com shareholders will receive 0.77 of a Yahoo share for each Broadcast stock in their possession. The two companies expect the deal to close either this summer or fall.
"It certainly demonstrates that broadband is the wave of the future," said Art Russell, an analyst with the Edward Jones brokerage. "Yahoo is filling in the pieces."
That's putting it mildly. By scooping up broadcast.com, Yahoo is positioning itself to be the leading provider of audio and video content on the Web. It's getting a headstart on rivals as broadband Net access gradually makes its way out of the workplace and into homes.
"We consider the deal highly strategic," said Paul Noglows, an analyst with Hambrecht & Quist. He noted that purchasing broadcast.com not only will make Yahoo "the leading aggregator and distributor of streaming audio and video on the Internet," but also will help it play "a defining role" in shaping future broadband content.
But still, should Yahoo pay nearly $6 billion for such a role? Russell at Edward Jones said the price is "hard to justify," but he noted that Yahoo is making the deal "in inflated stock, not hard currency. I couldn't imagine them paying this much in cash."
Russell also observed that broadcast.com's sky-high price tag was almost certainly intended to keep rival suitors at bay (America Online was thought to be another possible Romeo). "Yahoo was trying to avoid a bidding war," Russell said. "It made sense to offer enough to get the deal done."
With streaming media in the spotlight, RealNetworks (RNWK) attracted considerable attention from traders, climbing 29 percent to $157.88. The force behind RealAudio and RealVideo received a boost as well from "buy" ratings handed out by Lehman Brothers and Thomas Weisel Partners.
Investors grew somewhat skittish in the late afternoon when the Fed released minutes from a February meeting of its policy-making committee. Although Greenspan & Co. opted at the time to leave interest rates intact, some committee members were pushing for a "bias" toward higher rates in the future.
The Fed's official stance toward rates, at least for the present, appears to be neutral. But the latest insights into the Fed's thinking suggest that if rates are going to go anywhere in months ahead, it's upward.
In other market action, Atlantic Richfield (ARC) eased 19 cents to $72.94 after agreeing to be purchased by BP Amoco for nearly $27 billion, creating the largest oil producer in the United States. Arco's management now will fully relinquish control of the company to its new owner, which expects to cut about 2,000 jobs from the newly merged workforce of 115,000. BP Amoco (BPA) was down $5.19 at $95.81.
Similarly, CBS (CBS) slid 75 cents to $40.06 after confirming it will acquire TV-syndication firm King World Productions (KWP) for more than $2.5 billion. King World, the producer of "Jeopardy," was 56 cents higher at $31.13.
Some fresh profit warnings raised red flags on the tech side of the fence. Silicon Graphics (SGI) dropped 21 percent to $13.06 after saying it expects a loss of as much as 32 cents a share for the quarter ended 31 March. This is significantly worse than analysts' anticipated 7-cent setback. Silicon Graphics blamed the shortfall on production delays for its workstations.
Irish software developer Iona Technologies (IONA), meanwhile, tumbled 51 percent to $14.94 as it put its quarterly results at anywhere from beak-even to a loss of 3 cents a share. Profit of 18 cents had been estimated. Iona said a number of orders expected in the last three months never closed.
Is there a merger in Lam Research's (LRCX) future? Investors suspect as much, and drove the chip-equipment maker's stock up 17 percent to $33.81. The most likely buyer is Novellus Systems, which recently sought new financing. Novellus (NVLS) was up $3.50 at $58.63.
A nasty cat-fight over in telecom. Cable & Wireless is suing MCI WorldCom for allegedly having violated the terms of its agreement to sell C&W its complete Internet operations. MCI is charged with failing to "effectively" hand over its online customers, thus hindering C&W's ability to make full use of the acquisition.
C&W (CWP) slipped 19 cents to $36.75, while MCI (WCOM) was up 69 cents at $89.25.
Lastly, Hewlett-Packard (HWP) rose 19 cents to $68 after apologizing to the good and industrious people of Baltimore for casting the city in a negative light in a newspaper ad this week. "You're dying in Baltimore," the ad said in large print before going on to observe how products that don't sell in one place can find customers elsewhere.
A Baltimore business group called the ad misleading and difficult to understand, and several local business leaders said they might cancel existing contracts with Hewlett-Packard. "We think Baltimore is a wonderful city," the company responded, "and we regret any offense the ad may have caused unintentionally."
Bygones.
