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Wall Street Beat: Merger mania continues
By Marc Ferranti

March is turning out to be merger mania month. Acquisitions and takeover battles are providing excitement in a technology investment market that has been depressed by news about modest corporate IT spending plans and general economic concerns about rising oil prices and interest rates.

A good first quarter revenue forecast from Intel Corp. last week failed to set the stage for a generally upbeat tech trading week or even sustained higher share prices for Intel itself. Some analysts suggested that global economic concerns played a part in dampening enthusiasm for all industrial sectors. Though Intel raised the low end of its first quarter forecast, from US$8.8 billion to $9.2 billion, oil prices during the week, for example, played out to traders' concerns, hitting record levels Thursday, when quotes for April oil futures prices went over $57.60 a barrel. On Thursday Intel (trading symbol: INTC) closed at $23.41, down 5.79 percent for the week.

Trader interest was sparked, on the other hand, by the Monday announcement that IBM Corp. would buy data integration software maker Ascential Software Corp. for $1.1 billion in cash. The acquisition is expected to bolster IBM's middleware and information integration products. Ascential (ASCL) shares rose by $2.59 to $18.29 while IBM (IBM) shares ticked upward by $0.39 to $91.90 Monday. Though IBM gradually settled down over the week, Ascential shares closed Thursday at $18.35, up 18.23 percent for the week.

The business software arena saw a continued battle over retail-management application company Retek Inc., which is being wooed by SAP AG and Oracle Corp. On Thursday, hours after Retek accepted a new, $11-per-share bid from SAP, Oracle again raised the stakes by offering $11.25 per share. SAP and Oracle are archrivals in the ERP (enterprise resource planning) market, and Oracle proved its mettle as a mergers-and-acquisition combatant last year when it successfully completed a $10.3 billion hostile takeover of PeopleSoft Inc. Before Oracle's after-market offer Thursday, Retek (RETK) shares rose by $1.13 to close at $11.65, up 10.95 percent for the week. Oracle (ORCL) shares closed up $0.17, at $40.25, while SAP (SAP) closed down by $0.02, at $40.25.

In the telecommunications sector, the war of words and dollars surrounding competing bids for MCI Inc. continued. Thursday, Qwest Communications International Inc. made an expected increase in its offer to acquire MCI, in a bid to edge out Verizon Communications Inc. MCI and Verizon announced an acquisition deal last month.

Qwest is now offering to pay about $26 in cash and stock for each share of MCI, up from its previous counteroffer of $24.60 per share. That brings the total value of the deal up to about $8.5 billion, topping Verizon's package, worth about $6.7 billion. MCI, which was going to decide on the earlier offer by the end of the week, now says it will make a decision on March 28.

Verizon executives suggest the Qwest offer is a desperate gamble from a smaller company with weak finances. Qwest officials claim that, due to common assets, a merger with MCI would eliminate expenditures and ongoing operational costs.

MCI (MCIP) shares were buffeted by the news, closing at $23.30 Thursday, down 1.81 percent for the week but still up by 11.61 for the month. Also on Thursday, Qwest (Q) shares closed at $3.74, down 2.60 percent for the week and 5.79 percent for the month, while Verizon (VZN) shares closed at $35.21, down 2.65 percent for the week and 2.51 percent for the month.

In other tech market news:

--Shares of Research In Motion Ltd. (RIMM), maker of the BlackBerry, Wednesday jumped $11.87 to $78.96 on the announcement that the company will pay $450 million to NTP Inc. to resolve patent litigation.

--Shares of Cray Inc. (CRAY) dropped by $0.78 to close at $2.23 Thursday after the company said it would delay its annual report to gain time to review its internal controls. The company indicated that auditing was crimped by insufficient review of third-party contracts.

Posted March 18, 2005 04:30 PM |