Enron Mail

From:david.morris@lehman.com
To:ordan.larimore@lehman.com
Subject:The Morning Market Call - Friday June 8th, 2001.
Cc:
Bcc:
Date:Fri, 8 Jun 2001 11:15:19 -0700 (PDT)

<<MF June 8th 2001.pdf<<

Good Friday Morning - Comments From The Local Guys!

The following are highlights from Lehman Brothers economists Stephen D.
Slifer and Ethan S. Harris's weekly comments:

"The dichotomy between the near-term and medium-term economic outlook
continues to build. Recent data for capital goods spending and the job
market point to a further deepening of the growth recession. At the same
time, the forces for eventual recovery continue to gather: major tax rebates
are now a done deal, the Fed continues to ease aggressively, the stock
market has begun to recover, and consumer confidence has begun to turn
upward. We remain confident that the economy will recover sharply during the
second half and return to solid trend growth in 2002. However, given the
considerable downward momentum in the economy, the recovery may not be soon
enough to deliver the solid 3% GDP growth we are forecasting in 3Q. Our
current forecast has just one more 25 bp rate cut from the Fed. However, the
odds are growing that the Fed will need to implement a 50 bp cut or two 25
bp cuts."


The 30-year US T-Bond yield is 5.72%.
The 10-year note yield is 5.33%.
The 5-year is trading at 4.87%.
Spot crude oil is trading at $28.04 p/b.
Natural Gas - Henry Hub - is trading at $3.87 p/mcf.

AD Time:

New Federal Insider-Trading Rule (Rule 10b5-1) have been adopted by the SEC
under the Securities Exchange Act of 1934. This rule greatly enhances an
insider's/employee's ability to trade his/her corporate shares during
blackout periods.
Previously, without the protection of this new SEC rule, employees and
insiders could safely trade only outside of designated blackout windows.
Under this new rule, insiders/employees may have the ability to purchase and
sell their corporate shares even during blackout periods if a written plan
was established and in force when the insider/employee was not in possession
of material, non-public information.
The new rule contains other restrictions and should be reviewed carefully.

Lehman Brothers has established a turn-key plan that take into account the
regulatory procedures for establishing such a plan. Please email us or
call us for more information.

Lehman Brothers' Research.

IMPACT CALLS

Washington Mutual(WM) 1 - Strong Buy B. Harting, .212.526.3007
Refi Volumes Fall, Fleet Mortgage Transaction Closed (A)
OLD NEW STREET P/E
Price: $36.2 EPS 2000 N/A $2.35 N/A N/A
52 Wk Ra: $37 - 18 EPS 2001 $3.17E $3.17E $3.17E 11.4
Mkt Cap: $31.1B EPS 2002 $3.58E $3.77E $3.48E 9.6
FY: 12/31 Price Target $43 $45
Rank 1 1
*We reiterate our 1-Strong Buy rating on WaMu in light of recent
developments, including a continued decline in refinance activity
and the closing of the Fleet Mortgage acquisition.
*On June 1st, the company closed its acquisition of Fleet Mortgage. The
transaction has propelled WaMu to the #1 rank in mortgage
servicing and #2 rank in loan originations, based on 2000 volumes.
*Despite a small uptick last week, refinance activity continues to decline.
We believe that ARM lenders like WaMu have weathered
the boom well, and are positioned for additional balance sheet growing
forward.
*The lag effect on ARMs pegged to the COFI index will continue to drive
margin expansion for the next several quarters, as asset
yields remain at high levels.
*We expect significant mortgage banking gains when the company reports 2Q01
results, as the company has been selling 30 year fixed
product.

Medtronic Inc(MDT) 1 - Strong Buy D. Gruber, .212.526.1924
Raising the Price Target to $52 (from $47)
OLD NEW STREET P/E
Price: $44.75 EPS 2001 N/A $1.05 N/A N/A
52 Wk Ra: $62 - 40 EPS 2002 $1.21E $1.21E $1.21E 37.0
Mkt Cap: $54.1B EPS 2003 $1.40E $1.40E $1.41E 32.0
FY: 4/30 Price Target $47 $47
Rank 1 1
*Following its May 23 FY4Q01 conference call, we reduced our FY02
expectations and our price target to a more conservative $47.
We are now raising our target to $52 a figure more in-line with the average
historical (forward twelve-month) S&P premium of 50%
(range: 30-80%). Further analysis suggests that a rebound in the rate of ICD
market growth remains highly plausible by the 1Q02 .
Minimed acquisition adds another sustainable growth platform to cardiac
rhythm management and neuro/spinal and increases the
attainability of 15% sales growth. Other blockbuster opportunities warrant a
higher premium than implied in our existing price target.
*Longer-term growth prospects for ICDs becoming less of a concern.
*Acquisition of Minimed strategically meshes with Medtronic and will help to
ensure 15%+ near-term sales growth. Diabetes is
oftentimes a precedent for heart disease.

INITIATING COVERAGE

Satellite Communications W. Kidd, .212.526.4849
DBS: Good Value Despite Decelerating Growth
*We believe the DBS space as a whole is presently undervalued despite
decelerating growth. Consistent with that view, we have
initiated coverage on Hughes Electronics (GMH) with a 1-Strong Buy, EchoStar
(DISH) with a 2-Buy and Pegasus (PGTV) with a 2-Buy.
*We see a marketplace that still affords considerable room for growth. That
said, near-term growth is likely weak and a risk. Only
Hughes has yet to acknowledge 2Q01 growth issues, a risk. Long-term, the
future is still bright in spite of cable upgrades as satellites
offer a very compelling pay television product.
*Pending consolidation could make for good timing. While we are hopeful that
clarity alone could serve as a catalyst, we believe the
DBS sector will fundamentally benefit from either a Hughes-EchoStar or
Hughes-Sky Global pairing.

Sirius Satellite Radio(SIRI) 1 - Strong Buy W. Kidd, .212.526.4849
At the Cusp of a New Era in Radio (A,C)
OLD NEW STREET P/E
Price: $13.85 EPS 2000 N/A -$4.72 N/A N/A
52 Wk Ra: $60 - 6.12 EPS 2001 N/A -$6.51E -$7.23E N/A
Mkt Cap: $1.3B EPS 2002 N/A -$7.02E -$7.36E N/A
FY: 12/31 Price Target N/A $57
Rank N 1
*Initiating coverage of Sirius Satellite Radio with a 1-Strong Buy rating
and a $57 mid-year 2002 target.
*The opportunity is difficult to match. Satellite radio benefits from both a
sizable addressable market, consisting of approximately 180
million vehicles and 100 million households, and an efficient, low-cost
satellite broadcast network.
*We look positively on the industry's transition to consumer reality from
concept. We believe the transition could help a skeptical
market become believers.
*Only a few steps left. In a relatively short period of time, Sirius has
successfully deployed its satellite network, cemented
programming relationships, forged strategic relationships with automakers as
well as inked distribution alliances with retailers. The
most important item still outstanding is finalizing its receiver chipset and
building production radios. We believe the company is
sufficiently on track with both its discrete and ASIC designs that at least
one of the two will be ready by December.

XM Satellite Radio(XMSR) 1 - Strong Buy W. Kidd, .212.526.4849
Radio Version 3.0 in Stores Soon (C)
OLD NEW STREET P/E
Price: $15.90 EPS 2000 N/A -$1.38 N/A N/A
52 Wk Ra: $47 - 4 EPS 2001 N/A -$5.19E -$5.40E N/A
Mkt Cap: $1.6B EPS 2002 N/A -$5.99E -$6.70E N/A
FY: 12/31 Price Target N/A $40
Rank N 1
*We rate XM Satellite Radio 1-Strong Buy with a year-end 2001 price target
of $40, representing significant appreciation potential
from current levels. XM is one of two FCC licensed providers of satellite
radio, slated to begin offering service at the end of this
summer. The company will provide 100 stations of CD-quality music and talk
with coast-to-coast coverage for a monthly
subscription fee of $10. We feel that strong demand exists for the service
and are excited about its prospects.
*A late summer or early fall service start gets XM to market first, ahead of
competitor Sirius by several months, and a national
advertising campaign, budgeted at $110 million for the first twelve months,
should kick start the service launch nicely, not to mention
drum up additional investor interest.
*XM's strong economic model throws off normalized EBITDA margins of 52.7% in
the out years, demonstrating the leverage possible
under the satellite broadcast model.

Hughes Electronics(GMH) 1 - Strong Buy W. Kidd, .212.526.4849
DBS Leader on Auction Block. We Bid $33
OLD NEW STREET P/E
Price: $23.18 EPS 2000 N/A -$0.43 N/A N/A
52 Wk Ra: $38.00 - 17.50 EPS 2001 N/A -$0.44E N/A N/A
Mkt Cap: $32.2B EPS 2002 N/A -$0.35E $0.00E N/A
FY: 12/31 Price Target N/A $33
Rank N 1
*Initiating coverage with a 1-Strong Buy rating and $33 year-end 2001 price
target. Although our recommendation does not rely on
acquisition to evidence intrinsic value in Hughes, we believe a positive
resolution to the matter could serve as a share catalyst if it
provides the clarity and closure that the market seems to now desire.
*We are concerned about weak 2Q growth due to the economy and slow rural
take-up. Our forecast of 275k 2Q01 net adds (vs. 275k-350k
guidance) and our 1.3mn 2001 net adds is well below guidance of 1.5mn to
1.7mn net adds. Therefore, near-term growth is still
a concern and risk.
*We believe Hughes is undervalued and a quality asset in the satellite
communications arena with leading enterprise and consumer
service businesses.

EchoStar Communications(DISH) 2 - Buy W. Kidd, .212.526.4849
A Dominant Operator with Few Weaknesses (C)
OLD NEW STREET P/E
Price: $30.50 EPS 2000 N/A -$1.32 N/A N/A
52 Wk Ra: $56.44 - 20.50 EPS 2001 N/A -$0.48E -$0.66E N/A
Mkt Cap: $16.0B EPS 2002 N/A $0.43E $0.51E 70.9
FY: 12/31 Price Target N/A $40
Rank N 2
*Initiating coverage with a 2-Buy rating and a year-end 2001 price target of
$40.
*Operationally, the company is executing well on all cylinders. EchoStar is
taking market share from DIRECTV, acquiring
incrementally more valuable subs while building monthly ARPU and controlling
churn. It's not surprising with such operational
discipline that EchoStar has evolved into an investor favorite.
*Although a sector issue, we are a little concerned that 2Q01 growth and
quite possibly 3Q01 growth might fall well below 1Q levels.
The risk is perhaps least meaningful to EchoStar since management already
voiced concerns about the quarter. Big picture, EchoStar
is still going to produce the best growth in the sector, in our view.

Gilat Satellite Networks(GILTF) 2 - Buy W. Kidd, .212.526.4849
Possible Turnaround on the Horizon (A,C)
OLD NEW STREET P/E
Price: $12.51 EPS 2000 N/A $2.06 N/A N/A
52 Wk Ra: $93.38 - 9.36 EPS 2001 N/A -$1.56E -$0.75E N/A
Mkt Cap: $321.5MM EPS 2002 N/A $1.96E $1.65E 6.4
FY: 12/31 Price Target N/A $16.5
Rank N 2
*We are initiating coverage of Gilat with a 2-Buy rating and $16.50 price
target. Our Buy rating is driven by our belief that Gilat
seems able to rebuild its core VSAT earnings engine back to near historical
levels, making the present price level attractive.
*We are going to dare to say that we have already hit bottom. In the last
six to nine months, Gilats operating stability and the
confidence investors once placed in the company have eroded. We believe in
successive quarters, starting with 2Q02, Gilat will be
able to increasingly demonstrate that its business is in fact profitable and
stable.
*Long-term, we find it hard to imagine how Gilat cannot play a meaningful
role in the evolution of satellite broadband, since it
effectively created the enterprise and consumer equipment technology, along
with Hughes, that makes it all possible.
*We are concerned about StarBand's ability to build traction. However, at
the present Gilat price level, faith in StarBand is not a
requirement for purchase.

Loral Space & Communications(LOR) 1 - Strong Buy W. Kidd, .212.526.4849
SatCom Sector Stalwart Poised for Comeback (A)
OLD NEW STREET P/E
Price: $2.94 EPS 2000 N/A -$1.44 N/A N/A
52 Wk Ra: $8.50 - 1.03 EPS 2001 N/A -$0.81E -$0.90E N/A
Mkt Cap: $1.0B EPS 2002 N/A -$0.51E -$0.67E N/A
FY: 12/31 Price Target $15 $6
Rank 1 1
*We are assuming coverage of Loral with a 1-Strong Buy rating and a $6.00
year-end 2001 price target.
*Loral stands significantly undervalued relative to its FSS peer group. We
believe Loral should not trade at a nominal discount to the
sector, when it possesses superior cash flow growth and solid assets.
*Easing liquidity concerns is an important near-term step. Management plans
to divest between $100 million and $200 million in non-core
assets to lighten the load. Although there are risks, like ChinaSat-8, our
model indicates that Loral should be able to successfully
manage through a tight 2001.
*Sector consolidation could make FSS assets like Loral's more scarce. Loral
should at least be an indirect beneficiary.

Orbital Sciences(ORB) 3 - Market Perform W. Kidd, .212.526.4849
The Time May Soon Be Upon Us
OLD NEW STREET P/E
Price: $3.50 EPS 2000 N/A -$4.98 N/A N/A
52 Wk Ra: $15.50 - 3.45 EPS 2001 N/A -$1.06E -$0.81E N/A
Mkt Cap: $137.9MM EPS 2002 N/A $0.31E $0.60E 11.3
FY: 12/31 Price Target N/A N/A
Rank N 3
*We are initiating coverage of Orbital Sciences with a 3-Market Perform
rating. Although the company appears undervalued, we
would like to see the company make greater progress in its turnaround before
getting aggressive. Given recent disappointments, we
advise potential investors to remain on the sidelines at least until 2Q
results confirm or disprove our thesis that Orbital Sciences is on
track to build value through improvements in its core satellite
manufacturing and launch services businesses.
*Orbital has successfully divested all of its non-core business lines to
reduce debt and facilitate its refocus on its core satellite
infrastructure business.
*We expect the company to show meaningful signs of a recovery in 2Q01.
However, a fairly robust recovery might still be a year
away.

Pegasus Communications(PGTV) 2 - Buy W. Kidd, .212.526.4849
Maturation is the Next Step in the Life Cycle (C)
OLD NEW STREET P/E
Price: $22.06 EPS 2000 N/A -$4.97 N/A N/A
52 Wk Ra: $54.50 - 18.25 EPS 2001 N/A -$5.95E -$5.57E N/A
Mkt Cap: $1.5B EPS 2002 N/A -$4.64E -$4.73E N/A
FY: 12/31 Price Target N/A $32
Rank N 2
*We are initiaing coverage with a 2-Buy Rating and a $32 year-end 2001
target. We believe positive elimination of the litigation risk
associated with DIRECTV is required for our target to be realized. The
present lack of clarity surrounding the issue restrains us from
more aggressively recommending Pegasus shares in spite of the seeming
potential.
*Historically, Pegasus has outpaced its peers because of satellite TV's
strength in rural markets. However, a relatively more mature
rural market and a weaker economic model, relative to Hughes and EchoStar,
have caused the company to recently switch its focus to
preserving its bottom line in lieu of growth.
*New DirecPC-based broadband model should be a near-term plus.
*Survivability disagreement with DIRECTV could go to trial in early 2002. If
Hughes is bought, we believe the new owner could
delay the trial to negotiate, leading possibly to a more favorable stance.

PanAmSat(SPOT) 3 - Market Perform W. Kidd, .212.526.4849
Relative Valuation Warrants Pause (C)
OLD NEW STREET P/E
Price: $38.96 EPS 2000 N/A $0.84 N/A N/A
52 Wk Ra: $52 - 25 EPS 2001 N/A $0.20E $0.20E 194.8
Mkt Cap: $5.8B EPS 2002 N/A $0.35E $0.34E 111.3
FY: 12/31 Price Target N/A N/A
Rank N 3
*Initiating coverage of PanAmSat with a 3-Market Perform rating. Although
PanAmSat has excellent assets, we find its current
valuation, which rests on the high end of the range, hard to justify with
its current growth trajectory.
*The core business remains impressive. Growth at PanAmSat, although low
relative to the industry, is far from absent, and comes in
the form of both new satellite launches, which include PAS-10 and Galaxy
IIIC in 2001, and increasing utilization rates aboard the
existing satellite fleet. PAS-10 was launched in 2Q01 and Galaxy IIIC will
be launched in 3Q01, bringing PanAmSats total fleet to 23
satellites from 21.
*We see a de-emphasis of Net-36 as prudent.

ViaSat Inc(VSAT) 2 - Buy W. Kidd, .212.526.4849
Prudent Broadband (C)
OLD NEW STREET P/E
Price: $18.54 EPS 2001 N/A $0.66 N/A N/A
52 Wk Ra: $34 - 9.37 EPS 2002 N/A $0.66E N/A 28.1
Mkt Cap: $424.6MM EPS 2003 N/A $0.82E N/A 22.6
FY: 3/31 Price Target N/A $22
Rank N 2
*We are initiating coverage of ViaSat with a 2-Buy rating and a $22 year-end
2001 target. Although the company's near-term earnings
do not produce an overly compelling valuation on quantitative metrics alone,
the company's long-term potential and strategic
initiatives warrant investor attention and support.
*ViaSat has become a primary supplier to a number of leading satellite
broadband projects, ensuring the company's prominent role in
the development of a mass market, last-mile satellite broadband solution.
*Hughes and Gilat have been tied to their own broadband endeavors, leaving
ViaSat to sign-up everyone else.
*The company's in-house engineering talent appears to be paying off in a
significant way. We believe a large potential defense
contract award could come as early as calendar 3Q01, potentially serving as
an important share catalyst if we are right.

FOCUS STOCKS

Intel Corp(INTC) 3 - Market Perform D. Niles, .415.274.5252
Slightly Below Midpoint of Prior Guidance Due To Comm (C)
OLD NEW STREET P/E
Price: $31.14 EPS 2000 N/A $1.65 N/A N/A
52 Wk Ra: $76 - 22 EPS 2001 $0.55E $0.55E $0.54E 56.6
Mkt Cap: $217.0B EPS 2002 $0.70E $0.70E $0.79E 44.5
FY: 12/31 Price Target N/A N/A
Rank 3 3
*INTC did what was expected which is lower revs to slightly below the
midpoint of the old range but state that they expected a
seasonally stronger 2nd half.
*On a positive note, INTC said processors and flash were in line with
expectations but that comm ICs were below plan. They also
believe that processor inventory at customers are at normal levels.
*On the neg side, INTC lowered GMs to slightly below the midpt of the old
guidance but lower exp. will offset that. Amort is higher
due to acquisitions.
*The main question is how customers (such as HP two days ago) can be
lowering forecasts for PC demand and talking about
increasing weakness in Asia and Europe with INTC not seeing it. The answer
is that Intel is one step removed from the end
customer. We are curious as to what guidance in mid-July looks like.
*The stock will be up tomorrow. The question is where is it by mid-summer if
current global trends continue.

Du Pont(DD) 3 - Market Perform S. Vasnetsov, .212.526.3212
DD Pharma Sale: Finally, it's drug-free, at a good price!
OLD NEW STREET P/E
Price: $46.34 EPS 2000 N/A $2.73 N/A N/A
52 Wk Ra: $51 - 38 EPS 2001 $1.95E $1.95E $1.99E 23.8
Mkt Cap: $48.4B EPS 2002 N/A $2.55E $2.56E 18.2
FY: 12/31 Price Target $45 $45
Rank 3 3
*DuPont announced the sale of its Pharma unit (ex. cozaar/hyzaar) to Bristol
Myers for $7.8 B in cash. We expect DD's stock to be UP
by ~4.5%, given the rich price and 10 cents accretion on our FY2002 estimate
of $2.55/share.
*We believe DuPont is getting a higher than expected price, particularly
since the deal excludes cozaar. Companies expect deal to
close in 4Q01.
*We believe the deal is accretive by 9 c/share on our FY2002 est. of $2.55.
We're not changing our FY 2001 EPS estimates until the
timing of the sale and the pace of the stock buyback is clear.
*DuPont will use the proceeds from the Pharma sale to buy back stock and pay
down debt. The company has also announced a new
$2.0 B stock repurchase plan, to be implemented when the current $2.5 B buy
back is finished.
*We expect more details from DuPont's conf. call @ 10:30 am (Eastern time)
this morning. The conf. call dial in # is 973-633-1010
(Reservation # 12439).

Cendant Corp(CD) 1 - Strong Buy J. Kessler, .212.526.5162
In Talks To Acquire Galileo; Reit Strong Buy, $30 Target (A)
OLD NEW STREET P/E
Price: $18.48 EPS 2000 N/A $0.91 N/A N/A
52 Wk Ra: $19 - 8 EPS 2001 $1.00E $1.00E $1.01E 18.5
Mkt Cap: $15.6B EPS 2002 $1.12E $1.12E $1.13E 16.5
FY: 12/31 Price Target $30 $30
Rank 1 1
*Yesterday, Cendant ended widespread speculation by announcing that it is in
talks to acquire computer reservation service provider
Galileo in a transaction that, if consummated, could be significantly
accretive to Cendant's earnings in 2001 and 2002.
*Rationale supporting the acquisition include: (1) CD's ability to sell GLC
solutions into its large corporate customer base; (2) enhance
reservation capabilities of existing brands; (3) leverage CD's investment in
WizCom and travel portal; (4) GLC's excellent cash flow
characteristics; (5) attractive valuation ('01 P/E 10.5-11x, '01 EV/EBITDA
5.5-6x).
*Issues that Cendant will have to address include: (1) GLC has struggled to
grow its core business by more than mid single digit rates;
and (2) GLC appears behind the curve with Internet reservation technology
and has had its U.S. share eroded somewhat by
Travelocity and Expedia.
*While there are some risks, we believe that a GLC acquisition would be a
positive for CD. We reiterate our 1-Strong Buy rating and
$30 price target.

DTE Energy(DTE) 1 - Strong Buy D. Ford, .212.526.0836
A Great Value
OLD NEW STREET P/E
Price: $43.7 EPS 2000 N/A $3.32 N/A N/A
52 Wk Ra: $45 - 30 EPS 2001 $3.54E $3.54E $3.55E 12.3
Mkt Cap: $6.2B EPS 2002 $4.06E $4.26E $4.00E 10.3
FY: 12/31 Price Target $51 $51
Rank 1 1
*DTE's analyst conference went well and we reiterate our Strong Buy rating
and $51 target. The company provided more thorough
earnings guidance and detail on the unregulated businesses.
*We believe DTE's plan for raising EPS growth from 6% to a top-tier 8% is
convincing. Non-reg income could grow from $130M in
'01 to $350M in '05.
*Key unregulated stakes are in coal (including synfuels), generation
development, midstream gas supply, and energy technology.
*Recent closing of MCN merger provides strategic gas pipeline and storage
assets. Synergies are likely to be better than forecasted.
*We are raising our 2002E $0.20/share to $4.26 which reflects better overall
comfort in drivers and excludes goodwill.
*DTE is a good stock for the current choppy environment. We see 22% return
on upside to our $51 target on 12x our 2002E and a
4.7% yield.

COMPANY/INDUSTRY UPDATES
Handspring Inc(HAND) 2 - Buy J. To, .415.274.5242
Preannounces Q4 (June); Revs down 50% q/q (C)
OLD NEW STREET P/E
Price: $8.90 EPS 2000 N/A -$0.59 N/A N/A
52 Wk Ra: $99 - 9 EPS 2001 -$0.34E -$0.55E -$0.30E N/A
Mkt Cap: $1.3B EPS 2002 -$0.13E -$0.42E -$0.09E N/A
FY: 6/30 Price Target $18 $18
Rank 2 2
*Handspring preannounced Q4 (June) revenues would be down 50% q/q versus
their prior forecast of up 5%. This was much worse
than we had expected when we lowered our revenue estimates down 10% on May
17th.
*There were three factors contributing to the large shortfall in revenue.
First, the general economic slowdown in the US has caused
channel sell through growth of handheld computing devices to drop from 100+%
y/y in January to 12% y/y growth in April and May.
Second, Palm's pricing actions and new product introductions had a negative
impact on Handspring sales during the quarter. Third,
retail channel inventory levels for Handspring have increased from the low
end of the 8-12 week recommended range to 12 weeks for
all devices.
*We are lowering our Q4 (June) rev est from $110m to $60m and EPS from
($0.12) to ($0.32). FY01 revs go from $420 to $370 and
EPS from ($0.34) to ($0.55). FY02 rev est go from $556m to $360m and EPS
from ($0.13) to ($0.42).

Bristol-Myers Squibb(BMY) 2 - Buy C. Butler, .212.526.4410
Bristol Buys DuPont Pharma for $7.8 Billion
OLD NEW STREET P/E
Price: $56.6 EPS 2000 N/A $2.36 N/A N/A
52 Wk Ra: $75 - 48 EPS 2001 $2.41E $2.41E $2.41E 23.5
Mkt Cap: $113.0MM EPS 2002 $2.69E $2.67E $2.69E 21.2
FY: 12/31 Price Target $75 $75
Rank 2 2
*Yesterday, BMY entered into a definitive agreement with DuPont to buy their
pharmaceutical business for $7.8 billion in cash.
*This acquisition appears expensive to us at this price. According to
guidance, the deal is dilutive for BMY in 2002 and accretive in
2003 and beyond. It is particularly expensive considering the deal does not
include the crown jewel of DuPont's portfolio, namely the
hypertension agents Cozaar/Hyzaar.
*Moreover, this move does nothing to address potential near term revenue
pressures for BMY. Generic entry of Glucophage is
imminent and the switch strategy has been less than stellar.
*There is a reasonable fit with the respective product franchises (HIV,
cardiovascular). Thus, we believe a small sales synergy may be
gained. Plus, we feel a cost synergy can be realized, beginning in 2002 and
peaking in 2003.
*Based on a lack of near term revenue inflexions, we maintain our 2 BUY
rating and price target of $75.

Willamette Industries(WLL) 3 - Market Perform P. Ruschmeier, .212.526.9898
Probability of WY/WLL Combo is Rising
OLD NEW STREET P/E
Price: $48.78 EPS 2000 N/A $3.16 N/A N/A
52 Wk Ra: $51 - 26 EPS 2001 $2.35E $2.35E $2.41E 20.8
Mkt Cap: $5.4B EPS 2002 $4.50E $4.50E $3.53E 10.8
FY: 12/31 Price Target $55 $55
Rank 3 3
*Although we maintain a Market Perform rating on shares of WLL for
fundamental investors, we believe it is increasingly likely that
WLL will seek value enhancing initiatives which include negotiating with WY.
*Yesterday (6/7), WY attempted to elect 3 board members to WLL's 9 member
board. Although it may take another 2 weeks for the
official count to be tallied, it appears increasingly likely that WY will
win the vote.
*In addition, given WLL chairman Bill Swindells comments, it is evident he
acknowledges that shareholders seek some type of value-enhancing
transaction. We believe a combo with WY will maximize value for WLL
shareholders.
*Ultimately, we believe stock will enter into the current cash offer. Thus,
WY shares may be range bound as arbs are likely to short
WY upon the introduction of stock to the deal.

Wireless & Internet Infrastructure T. Luke, .212.526.4993
2001 Guide to Comm Networks & Equip
*Back by popular demand, the Communications Equipment team is publishing
Lehman Brothers' 2001 Guide to Communications
Networks and Equipment.
*This poster shows once again how pieces of today's communications puzzle
fit together and builds on the strong investor interest in
prior versions.
*In this edition, we have listed our estimates, developed with leading
consultancies and company data, of the worldwide market sizes,
growth rates, and market shares by vendors for 40 communications equipment
markets.
*It reflects some technological advances made during 2000 and highlights
some key new network segments including data-enabled
wireless network and all-optical transport network.
*We believe this poster can be a useful resource for investors. For copies,
please call your Lehman Bors salesperson.


David C. Morris
Sr. VP Lehman Brothers
713-652-7112/800-227-4537
dcmorris@lehman.com

Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The
Lehman Brothers analyst who covers this company also has position in its
securities.
Key to Investment Rankings: This is a guide to expected total return (price
performance plus dividend) relative to the total return of the stock's local
market over the next 12 months. 1 = Buy (expected to outperform the market
by 15 or more percentage points); 2=Outperform (expected to outperform
the market by 5-15 percentage points); 3=Neutral (expected to perform in
line with the market, plus or minus 5 percentage points); 4=Underperform
(expected to underperform the market by 5-15 percentage points); 5=Sell
(expected to underperform the market by 15 or more percentage points);
V=Venture (return over multiyear time frame consistent with venture capital;
should only be held in a well-diversified portfolio).
This document is for information purposes only. We do not represent that
this information is complete or accurate. All opinions are subject to
change.
The securities mentioned may not be eligible for sale in some states or
countries. This document has been prepared by Lehman Brothers Inc., Member
SIPC, on behalf of Lehman Brothers International (Europe), which is
regulated by the SFA. ?Lehman Brothers, Inc.



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- MF June 8th 2001.pdf