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Business Briefs

Reported by Star-Bulletin staff & wire

Monday, August 7, 2000

Influential analyst cuts 11 'Net ratings

NEW YORK, -- Merrill Lynch & Co.'s Henry Blodget, one of the early bulls on Internet stocks, said he cut his ratings on eBay Inc. and 10 other online companies because growth in the industry is slowing and competition is picking up.

Blodget also downgraded Barnes & Noble.com Inc., DoubleClick Inc., eToys Inc., Safeguard Scientifics Inc., 24/7 Media Inc., Buy.com Inc., iVillage Inc., Pets.com Inc., Quokka Sports Inc. and Webvan Group Inc.

"The tide is no longer rising fast enough to lift all boats," Blodget said in a note to clients. As growth in the industry slows, "this transition, combined with a substantial increase in competition, likely will continue to cause a shakeout and consolidation."

Blodget made his reputation in 1998 with a prediction that Amazon.com Inc. shares would rise 60 percent in 12 months.

The shares reached that level in three weeks.

Verizon strike puts customers on hold

WASHINGTON -- Verizon Communications entered the busy workweek today with thousands of operators and technicians still on strike in a dozen Eastern states. Consumers faced delays in reaching directory operators and getting phone repairs.

Negotiators for the telecommunications giant and two unions representing 87,200 workers tried to sort through thorny contract issues involving working conditions and union representation for employees in the fast-growing wireless field.

Talks lasted more than 16 hours yesterday, after the unions' contract expired. The parties returned to the table about 8 a.m. Eastern Time today.

Today, Verizon's 30,000 management employees were on the job, ready to work 12-hour shifts, while about 14,000 employees took to the picket lines throughout the region, company officials said.

The contract expired at 12:01 a.m. ET yesterday, affecting operations from Maine to Virginia and in the District of Columbia. Hawaii company and union officials said the strike should have no affect on the Hawaii operations.

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Of Mutual Concern

News for mutual fund investors

Experts: Investors facing losing year

BOSTON -- Most U.S. mutual funds lost ground in July, leaving many barely in positive territory for the year and causing some industry executives to openly discuss the possibility that the average investor will lose money in 2000.

"It's a more conceivable possibility than we've seen in several years," said Don Cassidy, senior research analyst with fund-tracking firm Lipper Inc. "Here we are seven months through (the year) and the major indices are sideways."

In four of the seven months of 2000, the average U.S. diversified equity fund lost money and through July it returned a scant 1.85 percent, according to figures released by Lipper, a unit of Reuters Group Plc.

Sector portfolios did nearly as poorly in July and while the average sector fund returned a healthy 8.16 percent through the first seven months, without biotechnology and real estate funds -- the two strongest sectors -- the average sector portfolio gained less than one percent.

"A lot of equity funds are going to come in in negative territory unless there is a big rally in the stock market before the end of the year," said fund industry consultant Burton Greenwald.

"That is going to be a watershed event for investors, who have been fat, dumb and happy in recent years," he added.

The poor results so far this year, and the increasingly real prospect of disappointing returns or even losses for many fund investors, is a far cry from the heady days of 1998 and 1999 when double-digit returns were routine and triple-digit results were not uncommon.

"We would be very lucky to see a low double-digit return for equity for the year. It's more likely that we have a single-digit return," said Craig Litman, whose Litman/Gregory oversees the Master's Select funds.

Litman said that after several years of eye-popping returns this should be no surprise, but noted that it was not clear the public had awakened to the possibility of losses.

"Investors should begin to realize that equity returns cannot be expected to replicate what we have experienced over the past few years," he said.

He noted that the sources of the stock market's climb in recent years -- higher dividends, expanding price-to-earnings ratios and earnings growth -- were running dry.

But, he said, the public was so used to a strong stock market, they might not be prepared for a sustained downturn.

Mobius getting pressure to better Templeton fund

LONDON -- Mark Mobius, the Franklin Resources Inc. money manager who popularized emerging market investing, is facing pressure from shareholders to improve the performance of one of his funds.

Mobius, who boasts one of the best long-term track records for emerging markets investing and manages $10 billion for Franklin, has lost his footing recently as the expensive Internet and telecommunications stocks he eschews have taken off and the cheap shares he favors have tumbled.

The $1.2 billion Templeton Emerging Markets Investment Trust Plc fell almost 6 percent over the past 12 months. That's worse than any of its U.K.-based rivals, which boast an average rise of 13 percent, according to Standard & Poor's Micropal.

The losses have Franklin scrambling. "We're going to take action but we can't say what action," said Vanessa Colhoun, a Franklin spokeswoman.