Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
Dennis Kneale, managing editor: IBM (IBM) maybe isn't as healthy as it looks. The head of IBM, Lou Gertsner managed the greatest corporate turn-around in history. Since 1995, IBM has hired at least 100,000 more employees but it's expenses are 8% lower than in 1995. How'd they do it?
David Asman, host: Is this another Enron?
Dennis Kneale: No, it's not another Enron, this is all perfectly legal, but it is a little shrewd. They did with the magic of accounting. They sold off a whole bunch of plants. They never told the public about it. They took that money and booked it as a reduction of cost.
Bruce Upbin, senior editor: Even if they were caught doing that stuff, they're not overpaying for it. As a tech stock it's relatively cheap.
Dennis Kneale: The stock is relatively cheap but now that Gerstner's gone, the stock is going to get worse.
David Asman: Okay, bottom-line pay attention to the numbers. Bruce Upbin, you've got credit card debt information, right?
Bruce Upbin: Yes, you want to bet on consumer finance companies. Companies like Capital One (COF), Metris (MXT), and MBNA (KRB). There are still delinquencies and bankruptcies but the growth in bankruptcies is slowing.
David Asman: Okay, let's move on to Chana Schoenberger. You've got data Storage. They've been hit hard by the dot com demise, right?
Chana Schoenberger, staff writer: Yes. Companies need more storage because they're keeping more data on their customers and their inventories. In the long term this will be great for storage companies, but right now CIO's just don't have the money to spend. But we think that those stocks may have bottomed out. Stocks like EMC (EMC), IBM (IBM), Compaq (CPQ).
Dennis Kneale: A year ago, the typical EMC storage was only 35% full. A year later it's a lot bigger and the order is going to come in by the second half.
David Asman: Let's move on Pete. Bill Gates has his eye on music?
Pete Newcomb, senior editor: Bill Gates of Microsoft (MSFT) is said to be sniffing around EMI (EMIPY), the big British music company. We have a reporter out in Los Angeles who said that Bill Gates may be considering buying EMI.
David Asman: EMI owns one million musical compositions. Could Bill Gates be wanting to start another Napster with all these one million songs?
Pete Newcomb: EMI is a huge publishing house. It would make a perfect foundation for something like that.
Bruce Upbin: So is Bill going to be hanging with the Stones?
Pete Newcomb: Well, what song did they use to launch Windows 95? Start Me Up.
Dennis Kneale: This is a terrible, terrible idea. This company does not know how to entertain. They should leave EMI alone.
David Asman: What if they just use these songs and put it on a Napster-like server?
Dennis Kneale: Yeah, they'll put it with an interface like Windows and then no one will know how to use it.
Chana Schoenberger: But how does that fit in with their whole dot net idea?
Pete Newcomb: They'd shut down the labels and hand the songs over to the marketing guys.
Makers and Breakers
Sprint PCS (PCS)
Henry Cavanna, JP Morgan Fleming Asset Mgmt: MAKER
I like Sprint PCS because this company has a great national digital network. It has very good growth. Once it gets over this funding gap, this too much debt hump, it'll be a growth stock again.
Jim Michaels, editorial vice president: MAKER
That's a big hump but never the less I like this stock. This is a great company. They've got the best technology. They've got beyond national coverage. The price is right for this stock.
Bob Lenzner, national editor: BREAKER
I couldn't buy a stock that has $17 of debt for every dollar of equity.
David Asman: Okay, let's move on to your second pick Henry, Cigna Corporation (CI).
Cigna Corp (CI)
Henry Cavanna, JP Morgan Fleming Asset Mgmt: MAKER
Cigna Corp is a company that is principally health insurance. It generates good growth, maybe 10% a year in earnings. It sells at 12 times those earnings. It generates $5, 6 hundred million in cash flow.
Bob Lenzner: BREAKER
It's a cheap stock statistically, but if you look at its growth over the last five years its revenues have not grown hardly at all. Its earnings have grown single digits. If medical costs are going to go up, I don't quite see how you're going to get an increased multiple on this stock.
Jim Michaels: BREAKER
I don't like this stock for this reason: their net profits are no higher than they were 5 years ago. They've used smoke and mirrors to get their earnings up by buying into their own stock.
Henry Cavanna, JP Morgan Fleming Asset Mgmt: I don't think the past is necessarily indicative of the future. They've got a strong position in this business. It's very cheap and they've invested in the business to better improve the growth of the company. There's no financial risk here.
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