BW Online | March 19, 2001 | Apple and EarthLink

U.S. EDITION
Full Table of Contents
Cover Story
Up Front
Readers Report
Corrections & Clarifications
Books
Technology & You
Economic Viewpoint
Economic Trends
Industry Monitor
Business Outlook

News: Analysis & Commentary
In Business This Week
Washington Outlook
International Business
International Outlook
Economics
Government
The Corporation
Finance
Industry Insider

Industrial Management
Science & Technology
Information Technology
BusinessWeek Lifestyle
BusinessWeek Investor
The Barker Portfolio
Inside Wall Street
Figures of the Week
Editorials

E.BIZ SUPPLEMENT March 19 Table of Contents

INTERNATIONAL EDITIONS
International -- Int'l Cover Story
International -- Letter From Virginia
International -- Spotlight on Italy
International -- Readers Report
International -- Asian Business
International -- European Business
International -- Latin America
International -- Finance
International -- Int'l Figures of the Week
International -- Editorials

PREMIUM CONTENT MBA Insider

BW MAGAZINE Get Four Free Issues Register Subscribe Customer Service

ONLINE FEATURES Book Reviews BW Video Columnists Interactive Gallery Newsletters Past Covers Philanthropy Podcasts Special Reports BLOGS Auto Beat Bangalore Tigers Blogspotting Brand New Day Byte of the Apple Economics Unbound Eye on Asia Fine On Media Green Biz Hot Property Investing Insights Management IQ NEXT: Innovation NussbaumOnDesign Tech Beat Working Parents TECHNOLOGY J.D. Power Ratings Product Reviews Tech Stats Wildstrom: Tech Maven AUTOS Home Page Auto Reviews Classic Cars Car Care & Safety Hybrids INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads

BW EXTRAS BW Digital BW Mobile BW Online Alerts Dashboard Widgets Podcasts RSS

RSS Feeds

Reprints/ Permissions Conferences Research Services

MARCH 19, 2001

INSIDE WALL STREET

Apple and EarthLink

Gene G. Marcial

STORY TOOLS

Printer-Friendly Version

E-Mail This Story

INSIDE WALL STREET

Apple and EarthLink

NCO Group Is All Set to Collect

Is Ikon in Canon's Sights?

Money pro Charles Lemonides isn't averse to buying shares of out-of-favor companies. Of particular allure are those with short-term woes whose assets he sees growing in value. "We buy value stocks at depressed multiples and sell at growth prices--when their price-earnings ratios are flying," says the chief investment officer of ValueWorks@M&R Capital Management. In 2000, ValueWorks' portfolio gained 6.3%, following a 39% gain in 1999. (The Nasdaq fell 39% in 2000 but gained 86% in 1999.)

Two value stocks that Lemonides thinks have strong growth prospects: Apple Computer (AAPL ) and EarthLink (ELNK ), the No. 2 U.S. Internet service provider. Their shares have fallen off a cliff: Apple dropped from 75 a year ago to 21 on Mar. 7, and EarthLink from 25 to 10.

Lemonides argues that Apple is a bargain and figures it's worth 45. He values Apple's operating assets at $30 a share and its cash and marketable securities at nearly $15. He thinks Apple will break even in 2001 ending Sept. 30 and earn $1.50 a share in 2002, as the economy stabilizes and new products kick in. Apple has done well with new products in recent years, says Lemonides, but the PC sales slump hurt earnings.

EarthLink is a value play--and a takeover target--now that it has amended a three-year pact with Sprint, which owns 27% of EarthLink. The revised pact scraps Sprint's right to acquire EarthLink and opens the door for other EarthLink mergers. Analyst Frederick Moran of investment firm Jefferies thinks EarthLink is attractive to an outfit seeking to bulk up its Internet operations to compete with AOL Time Warner. Microsoft's MSN unit is a likely buyer, says Moran, who values EarthLink at 15 based on its some 5 million subscribers. EarthLink declined comment.

By Gene G. Marcial

Get BusinessWeek directly on your desktop with our RSS feeds. XML

Add BusinessWeek news to your Web site with our headline feed.

Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.

To subscribe online to BusinessWeek magazine, please click here.

Learn more, go to the BusinessWeekOnline home page