The electronic superhighway led to Wall Street Wednesday, sending shares of cable, telephone and entertainment firms surging in the wake of Bell Atlantic’s breakthrough announcement of a merger with cable-giant Tele-Communications.
Nobody can exactly describe the electronic superhighway, but after Bell’s announcement traders knew they wanted to be on it, preferably in the fast lane.
“It is something that never existed before,” Furman Selz analyst Ron Altman said. “It is a cable company; it is a phone company. It is a media and entertainment company. It is everything.”
The Dow Jones industrial average closed up 10.06 points to 3603.19. Much of that gain came from Disney stock, a play on the entertainment side of the communications revolution. It rose $4.75 to $44.50 and was No. 3 on the 10 most-active list, right behind Bell.
Considering that most high-tech stocks trade on the Nasdaq, that index was more indicative of the day’s activity. The Nasdaq set its third record in a row, rising 6.51 points to close at 778.97. It also set a new volume record by an enormous margin.
The Nasdaq traded more than 415 million shares, surpassing by far the previous record of 343.2 million set on May 20.
For once, the stocks of all the companies involved in a merger deal rose, including the one footing the bill. Bell climbed $5.87 to $65.87. TCI rose $3 to $31.37. And Liberty Media, which is part of the deal, rose $2.62 to $29.25.
But traders also complained that the exchange of stock between Bell and the other companies is described in such a complex and obscure way, they cannot evaluate how much the shares of TCI and Liberty will be worth, virtually guaranteeing the prices will fluctuate in the days ahead.
Giving an indication of how confused things are, all the stocks of companies involved in the attempted buyout of Paramount also rose on the news, which cannot be good news for everyone.
Paramount was up 62 cents at $77.37, QVC was up $2.50 at $57.50 and Viacom soared, with its class B shares up $4.75 at $57 and class A shares up $5.62 at $62.25.
The frenzy over the Bell-TCI deal overshadowed another terrible day for semiconductor stocks after the industry reported a decline in September chip orders.
Texas Instruments fell $4.25 to $62.25; Intel shed $1.50 to $63.50; VLSI Technologies lost $2.37 to $14.62; and National Semiconductor lost $1.62 to $16.87.
Generic drugs, Monday’s darling, lost across the board after several analysts said they had become overpriced. Biocraft Laboratories declined $1.62 to $33.25, Mylan Laboratories lost 37 cents to $31.87, and Zenith Laboratories lost 12 cents to close at $80.
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The stock of General Instrument, which supplies equipment and technologies for video programming, rose $2.75 to $58.87, a new 52-week high. It participated in the Bell-TCI upswing.
“This market is so significant and we are so early in the cycle that there is room for multiple vendors to be successful,” said Clifford Friedman, an analyst at Bear Stearns.
SPS Transaction Services stock rose $3.12 to $62.50 a day after making a presentation before about 1,200 financial managers in Baltimore. The company also reported better than expected earnings Monday.
“Our earnings report was positive, but the meeting generated some awareness that wasn’t there before,” said Larry H. Myatt, vice president for business development. SPS provides processing of point-of-sale transactions and develops private-label credit-card operations.
The company also announced an agreement with PCS Health Systems to provide processing services to help distribute a new drug for multiple sclerosis.
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Myatt said the agreement opens a new channel of business for the company, but will not be adding much to income in the immediate future.
Walgreen increased its quarterly dividend to 17 cents a share from 15 cents, and the stock rose 62 cents to close at $41.25.