Earnings Reports for Oct. 18

— -- AOL Surpasses Analyst Estimates

America Online Inc., theworld’s largest Internet services provider, said fiscal first quarter earnings doubled from a year earlier assubscriber, advertising and e-commerce revenues drove growth.

Dulles, Va.-based AOL said earnings, excluding items, rose to $340 million, or 14 cents ashare, compared to $182 million, or 7 cents a share, in the same period last year.

Revenue climbed 34 percent to $2 billion, up from $1.5 billion a year earlier. Advertisingand e-commerce revenue rose 80 percent to $649 million, withinanalysts’ estimates. The company added 1.4 million net newsubscribers in the quarter, for a total of 24.6 million membersworldwide.

Wall Street analysts had expected AOL to earn 13 cents ashare, according to First Call/Thomson Financial.

AOL’s merger with media giant Time Warner Inc. is stillawaiting U.S. regulatory approval.

Net income rose to $345 million, or 13 cents a dilutedshare, from $181 million, or 7 cents a diluted share theyear-earlier period.

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Apple Disappoints Wall Street

Apple Computer Inc. reported earnings that fell slightly short of theanalyst forecasts, which had been reduced last month after thecompany warned of a sales shortfall.

Apple said it earned $108 million or 30 cents per dilutedshare in the quarter, excluding certain unusual gains.

Most analysts had been forecasting fourth quarter earningsof 31 cents per share, according to First Call/ThomsonFinancial, which surveys results.

Including all the unusual items, Apple had a net profit of$170 million or 47 cents per diluted share, compared with $111million or 31 cents per diluted share in the year-ago quarter.

Apple said revenues rose to $1.87 billion, up 40 percentfrom the year-ago quarter. Analysts had been forecastingrevenues of $1.87 billion.

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Avon Narrowly Beats Street

Avon Products Inc., the direct seller of beautyproducts, reported a 5 percent rise in third-quarterearnings, narrowly beating Wall Street projections despite weaknessin Europe. Avon also said it will be able to achieve earnings per shareincreases in the range of low -to mid-teens for the year.

The company reported earnings of $93 million, or 39 cents ashare, in the three months, ended Sept. 30, up from $88.2 million,or 34 cents per share, in 1999.

Revenues during the quarter increased 7 percent to $1.34 billionfrom $1.25 billion in the year-ago period.

The results beat Wall Street earnings expectations of 38 cents.

Avon said that sales and profit gains in the U.S., Latin Americaand in the Asia-Pacific region more than offset a 3 percent salesdecline in Europe due to currency weakness.

Avon’s U.S. operations posted a 5 percent sales increase, butstepped up spending on advertising, its e-commerce site and otherbrand-building initiatives. Total beauty sales were up 9 percent,fueled by the successful launch of Retroactive, a skin care productunder the Anew brand. Avon expects Anew to be the best-selling skincare product in the company’s history.

Andrea Jung, Avon’s chief executive, said the company’s launchof a new Internet Web site for its sales representatives, and thedevelopment of a new beauty brand called Becoming to be sold atretail starting mid-2001, should represent “significant growthvectors over the long term.”

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Boeing Soars Above Expectations

Boeing said todayoperating earnings rose 27 percent in the third quarter,beating Wall Street forecasts, as the aerospace giant squeezedmore cash out of its businesses even as revenues shrank.

The world’s biggest plane-maker said it earned $650million, or 74 cents per share, excluding extraordinary items,in the three months ended Sept. 30. In the year-earlier periodBoeing earned $512 million, or 55 cents, excludingextraordinary items.

Revenues at the Seattle company fell to $11.88 billion from$13.28 billion.

Analysts on average had expected a strong quarter fromBoeing amid a string of recent positive news on commercial jetorders and rising cash flow expectations. The consensusearnings forecast among analysts surveyed by First Call/ThomsonFinancial was 67 cents per share.

Boeing also forecast 2001 revenues would reach $57 billion,an increase from the recent 2000 projection of $51 billion butstill below the $58 billion revenues of 1999.

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Profits Slump at Chase Manhattan

Chase Manhattan Corp., said profitsslumped 26 percent in the third quarter, sharply below WallStreet estimates, after losses on investments, sluggish tradingrevenues and higher costs.

The New York-based bank, which recently announced plans tobuy rival J.P. Morgan &Co., earned $884 million, or 66 cents per diluted share,in the third quarter, down from $1.19 billion, or 92 cents ashare, in the year-ago period. The figures for the latestquarter include special items. Without these items, earningswere $905 million, or 68 cents a share.

Chase’s earnings were far below Wall Street’s consensusforecast of 93 cents a share as compiled by First Call/ThomsonFinancial, which tracks analysts’ estimates.

A steep drop in the value of Chase’s investments instart-up companies at its Capital Partners arm, which havebolstered prior quarterly results, hurt the bank’s results inthe third-quarter.

Chase increasingly has looked to securities-typebusinesses, such as investing and advising on mergers, forprofits, rather than to the traditional lending businesses.

Its trading revenues and corporate finance fees were downfrom the second quarter amid lower market volatility andtrading volumes as well as a slowdown in leveraged finance.

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EMC Profits Rise 55 Percent

EMC Corp., the No. 1data-storage company, said third-quarter earningsrose 55 percent, beating estimates, but a components shortagecaused its high-margin software sales to decline from theprevious quarter.

EMC said it earned $458.2million, or 20 cents a diluted share, compared with $295.8million, or 13 cents a share, in the year-ago period. Totalthird-quarter revenues rose 34 percent to $2.28 billion,compared with $1.7 billion in the year-ago period. EMC saidits fastest growing market was the Asia Pacific region, wherestorage revenue grew 130 percent in the third quarter.

In the vital storage sector, total storage revenue in thequarter increased 47 percent to $2.14 billion, the highest rateof growth for EMC in more than five years, the company said.

Analysts surveyed by First Call/Thomson Financial werelooking, on average, for EMC to earn 19 cents a share. EMC President Joe Tucci said the components shortageprevented the company from meeting customer demand for some ofits high-end storage devices that are sold with companysoftware. He said the problem has since been fixed.

“We could not ship all the big boxes that we had demandfor,” Tucci said. “We tweaked our sales force to go after moreupgrades. … In doing that, we don’t sell much software withupgrades.”

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Ford Falls on Recall

Ford Motors’ third-quarter earningsdeclined 7 percent to $888 million, a drop the company blamed oncosts from the recall of 6.5 million Firestone tires, many of whichwere on its Ford Explorers.

“Getting our customers onto good tires has been, and continuesto be, more important than short-term profits,” Ford president andCEO Jacques Nasser said in a statement. “This was a difficult quarterfor our customers, our employees, our dealers and our shareholdersand we are committed to quickly completing the Firestone tirerecall.”

Ford did not give an estimate for the cost of the recall. Nassersaid during an interview with 60 Minutes earlier this monththat the recall would cost in the “neighborhood” of $500 million.

The world’s No. 2 automaker earned 53 cents a share for thethree months ending in September, compared with $989 million, or 78cents a share for the same period of 1999. Last year’s results donot include earnings from Visteon Corp., the parts arm Ford spunoff this year.

The results met Wall Street expectations after adjusting for acomplicated stock swap that changed the number of shares in thecompany during the quarter. Wall Street analysts had expectedearnings of 50 cents a share, according to a survey by FirstCall/Thomson Financial.

Earnings in Ford’s automotive operations totaled $391 million, adrop of 27 percent from $535 million over last year.

North American automotive earnings were down 11 percent, from$880 million to $769 million, despite a 4 percent increase inrevenues. While vehicle sales were up 5 percent, so were U.S.incentives, such as rebates and low-interest rate loans.

The costs to Ford for the tire recall include the temporaryshutdown of three factories to divert tires to consumers, which cutproduction of the Ford Explorer and Mercury Mountaineer by 15,000vehicles. Ford has also said it would share some costs of therecall with Bridgestone/Firestone Inc.

The picture was no better overseas, where Ford’s lossesincreased 38 percent, to $285 million, excluding one-time charges.Losses in Europe increased 42 percent, from $156 million to $221million, while losses in South America decreased 25 percent, from$86 million last year to $64 million this year. Ford broke even inAsia and the rest of the world, compared to a $35 million profitlast year.

Ford Credit earned $386 million in the third quarter, up 22percent from a year ago. Rental car company Hertz Corp. earned $143million in the quarter, up 3 percent over last year; Ford’s shareof Hertz’s earnings was $116 million.

Total revenues were up 7 percent, from $37.2 billion to $40billion.

For the first nine months of 2000 Ford earned $4.3 billion, down9.5 percent from a year ago, excluding Visteon.

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International Paper to Close Plants

International Paper Co. reported that earnings for the third quarter rose to $260 million, or 53 cents per share before special items, compared with $193 million, or 46 cents, before special items, a year earlier. Analysts on average had expected profit of 52 cents a share in the quarter, according to First Call/Thomson Financial, which tracks consensus forecasts. Net sales climbed to $7.8 billion from $6.3 billion in 1999.

The Purchase, N.Y., company also said it plans to cut up to 2,500jobs, or about 2 percent of its work force, and close mills inthree states as part of a restructuring designed to streamlineoperations.

The world’s largest paper and forest products company, whichemploys more than 117,000 people, said it is shuttingmills in Mobile, Ala.; Lock Haven, Penn., and Camden, Ark. Thecompany also said it was planning to idle some machines at itsCourtland, Ala. facility.

“International Paper’s merger and acquisition activities overthe past five years have given us the flexibility and low-costcapacity that allows us to realign production more efficiently andreduce our higher-cost operations,” said chairman and chiefexecutive John Dillon.

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J.P. Morgan’s Profits Rise 16 Percent

J.P. Morgan, theblue-blood New York bank being bought by Chase Manhattan,said today its third-quarter profits rose 16 percent,driven by trading gains.

The No. 5 U.S. bank holding company, which has transformeditself from a commercial into an investment bank, earned $514million or $2.77 a diluted share in the third quarter, comparedwith $442 million, or $2.22 a share, a year before.

Wall Street had expected the bank to earn $2.63 a share,according to First Call/Thomson Financial, which tracksanalysts’ profit forecasts.

Equities trading revenues grew 78 percent to $448 million,driven by gains from trading equities derivatives. Investmentbanking revenues rose $60 million from a year earlier to $426million. Asset management services revenues in the quarter rose11 percent from a year before to $390 million. But creditmarket revenues fell 19 percent to $346 million.

Chase, the country’s third-biggest bank holding company,said last month it would buy J.P. Morgan for about $34 billionin stock, in a bid to join the small number of powerful globalplayers.BACK TO TOP

Microsoft Breezes Past Estimates

Microsoft Corp. posted a quarterly profit that soundly beat Wall Streetestimates before including an accounting change, sayingperformance was solid across all its businesses and that it wasbullish about its key product, Windows 2000.

Microsoft, which makes the Windows operating system thatruns most personal computers, said its net profit in its firstquarter ended Sept. 30 rose to $2.58 billion, or 46 cents ashare, from $2.19 billion, or 40 cents a share, a year earlier.Including a change in how it must account for some hedgingactivities, the profit was 40 cents a share.

The Redmond, Wash.-based company was expected to show aprofit of 41 cents a share, according to estimates compiled byFirst Call/Thomson Financial.

The higher-than expected profit was surprising since mostanalysts had expected the company to at best top estimates by apenny. Microsoft stock has been battered by concerns over aslowing PC market and lackluster sales while it waits for keynew products to gain momentum.

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Nabisco Holdings Beats Street

Nabisco Holdings Corp., the nation’s biggest cookie andcracker maker, said strong sales boosted third-quarter operating earnings by 33 percent, easily beating the average analyst forecast.

The maker of Oreo cookies, Lifesaver candies and Ritzcrackers reported operating earnings of $108 million, or 40cents per share, in the quarter ended Sept. 30, up from $81million, or 30 cents a share, in the same period a year ago.

Analysts on average had expected earnings of 35 cents ashare, according to market researchers First Call/ThomsonFinancial.

Figures for the latest quarter exclude expenses of 11cents per share related to the pending sale of Nabisco.

Nabisco Holdings’ parent, Nabisco Group Holdings Corp., agreed in June to sell the food company to Philip Morris Cos.,which wants to create a snack and food behemoth by combiningNabisco with its Kraft Foods unit.

Nabisco Group Holdings will be sold to R.J. Reynolds TobaccoHoldings Inc.

“We move intothe fourth quarter with considerable momentum,” NabiscoPresident and Chief Executive James Kilts said in a statement.

Nabisco’s sale to Philip Morris is expected to close duringthe fourth quarter, following shareholder approval andregulatory review, the company said.

International sales for the quarter were $537 million, up 4percent, excluding Nabisco’s European businesses, which weretransferred during the current-year quarter to a new venturewith United Biscuits Plc.

For Nabisco Group Holdings, third-quarter net income rose to$82 million, or 25 cents a diluted share, from $63 million, or19 cents a diluted share, in the year-ago period.

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Sabre Rises Above Estimates

Sabre Holdings,a travel marketing and distribution firm, said on todaythat third-quarter earnings excluding one-time charges rose 2.1percent, just beating estimates, and revenues grew about 8percent.

Fort Worth-based Sabre, which owns a 62 percent stake inonline travel services firm Travelocity.com Inc., posted netearnings before special items of $73 million or 57 cents pershare after $72 million or 55 cents a year earlier.

On average, analysts had expected the company to earn 56cents a share in the quarter, according to First Call/ThomsonFinancial. Sabre shares closed on Tuesday at $29-9/16, at thelower end of a 52-week range between $22-5/16 and $56.

Sabre said third-quarter revenues were $667 million, up 8.1from $617 million a year earlier. “The company expects toreturn to double-digit revenue growth in the fourth quarter,primarily driven by an anticipated continuation of travelbookings growth and online travel growth,” it said in astatement.

Sabre said that after special items, mainly related toinvestments in Travelocity.com, Sabre Business Travel Solutionsand Sabre Virtually There, net earnings for the quarter were$44 million or 34 cents per share, down 43.4 percent from $78million or 55 cents in the third quarter 1999.

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Sun Microsystems Posts Solid Profits

First-quarter net income at Sun Microsystems rose 88 percent, easily topping Wall Street expectations, asit continued to benefit from a scramble for equipment to manage andstore Web traffic. Net income for the three months ended Sept. 26 rose to $510million, or 30 cents a share, from $271 million, or asplit-adjusted 16 cents, the comparable period a year ago.

Excluding acquisition-related costs, Sun earned $276 million, or18 cents per share in the year-ago period.

The company had been expected to earn 26 cents a share thisquarter, according to a survey of analysts by First Call/ThomsonFinancial.

“We continue to post the kind of numbers that reflect ourongoing share gains in the market place,” company chief executiveScott McNealy said in a statement. “We’re picking up right wherewe left off last year.”

Revenue soared 60 percent to $5.05 billion from $3.15 billion ascustomers snapped up high-end computers and data-storage equipmentfor managing Internet commerce and serving up Web pages.

The company competes mainly with Hewlett-Packard Co. and IBMCorp. Sun executives predicted they would gain more market shareafter it revamps its product lines in the next year.

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Texas Instruments Meets Estimates

Texas Instruments Inc, the world’s largest maker of computer chips for mobile phones, said third-quarter net income rose 31 percent, meeting expectations, on broad demand for its chips for wireless and Internet communications devices. The company also confirmed reports from other suppliers that worldwide demand for wireless phones appeared to be weakening. Texas Instruments added that it expects lower revenues from its wireless chips as handset makers work through existing inventories. But the company said higher sales of other semiconductor types would yield overall fourth-quarter revenues “about even” with third-quarter revenues.

The Dallas-based manufacturer of the chips used in about two-thirds of the world’s digital cellular phones said pro-forma net income climbed to $591 million, or a diluted 33 cents a share, from $453 million, or 26 cents a share a year ago. The performance matched Wall Street expectations for the company.

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Publishing Unit Lifts Time Warner

Media giant Time Warner said today its third-quarter operating earnings grew 13percent, beating Wall Street estimates, helped by strongearnings from its publishing unit amid advertising growth.

The No. 2 U.S. cable provider and media company, whosemerger with America Online Inc. is awaiting U.S. regulatoryapproval, said earnings before interest, taxes and amortization(EBITA), adjusted for unusual items, rose to $1.273 billion, or7 cents a share, from $1.128 billion, or 7 cents share, in theyear-earlier period.

Wall Street analysts had expected the company to postearnings before items of 4 cents a share this quarter,according to First Call/Thomson Financial.

The operator of HBO, CNN, TBS and Warner Brothers said on aa reported basis, including items, third-quarter net incomefell to $1.276 billion, or 6 cents per diluted share in 2000,from $1.611 billion, or 28 cents per share during the year-agoperiod. Total revenues grew to $6.873 billion from $6.723billion.

Revenues from its cable networks group , which someanalysts had expected to be a weak, grew to $1.56 billion.Revenues from its publishing group fell to $1.08 billion fromadjusted year-ago results. But EBITA for the group climbed to$494 million from $434 million, driven by ad gains atpublications including Fortune and Time.

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U.S. Airways Loses $30 Million in Q3

U.S. Airways, the No.6 U.S. airline, said today it lost $30 million in thethird quarter, more than expected, amid tough competition andfuel costs 75 percent higher than a year earlier.

Arlington, Va.-based US Airways, which has agreed to bebought by United Airlines parent UAL for $4.3 billion,said it lost 45 cents a share, compared with a loss of $85million, or $1.19 a share, in the period a year earlier, whenthe carrier suffered from a high degree of cancellationsbecause of bad weather and a slowdown by mechanics.

Analysts had on average forecast that US Airways would lose19 cents a share in the recent quarter, according to FirstCall/Thomson Financial.

Revenues rose 13 percent, to $2.38 billion from $2.10billion a year earlier.

US Airways shares closed at $32-1/4 on Tuesday, down 9/16,despite the $60 a share offer price in the UAL deal, amidwidespread doubts that regulators will allow the deal to closeas envisioned.

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Wachovia Will Cut JobsSoutheast U.S. regional bankWachovia reported today a 20 percent drop inthird-quarter net income because of merger costs and chargesrelated to a sweeping restructuring plan, but operating resultsmet Wall Street expectations.

Excluding merger costs and restructuring charges, theWinston-Salem, N.C.-based bank’s earnings were up about 4percent to $270.2 million, or $1.32 a share. Including thecharges, Wachovia earned $205.3 million, or $1.00 a dilutedshare, in the third quarter. That compares with reported netincome of $257.5 million, or $1.25 a share, a year ago.

Wall Street was expecting the company to post operatingearnings of $1.32 a share, according to market research firmFirst Call/Thomson Financial. Wachovia, which is the process ofcutting 1,800 jobs as it revamps its operations, said pre-taxrestructuring charges and merger-related costs totalled $99.8million in the third quarter. The bank said the rest of therestructuring charges, about $30 million, will be taken in thenext two quarters.

Wachovia’s provision for loan losses in the third quarterwas $124 million, up from $76.8 million during the same periodlast year. Net interest income, after the provision for loanlosses, fell 6 percent to $506.8 million.

The bank holding company in June warned investors thatrising interest rates would hurt second-quarter and full-yearprofits. In September it said its president and chief operatingofficer, G. Joseph Prendergast, would retire after the end ofthis year.

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