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quote:
Originally posted by realityinc21:
HEADS UP--300 SIGNAL BID ON ENRON. BANKRUPCY SETTLEMENT A LONG TIME OUT. IT HAS HIT THE BOTTOM AT ABOUT .03 SHOULD BE SOME INTERESTING TRADING DAYS AHEAD. VOLUME AND BUYS ARE BUILDING.A WATCH LIST MUST. OPINIONS??
NEWS ON ADO ALSO PUTS THIS ON MY BOTTOM FEEDING WATCH LIST. TOOK A DIVE ON RUMORS AND PANIC AND SOME DEALING WITH ENRON THAT WILL BE RESOLVED. SOLID COMPANY. I WILL BE LOOKING FOR A LOW. IT COULD BE BETTER THAN MACY'S BARGAIN BASMENT SALE.
OPINIONS??
By Goran Mijuk and Katharina Bart
Of DOW JONES NEWSWIRES
ZURICH (Dow Jones)--Adecco S.A. (ADEN.VX) shares and bonds moved higher Thursday as some investors decided to risk taking long positions a day after a source close to the company said the reason for delaying publication of the accounts may be clarifiedwithin days rather than weeks.
Three days after Adecco revealed it had hired a lawyer to look at its internal controls, some market participants see the absence of news as an indication that Adecco isn't a disaster like Parmalat Finanziaria SpA (PRF.MI). or Enron Corp (ENE).
Both equity and debt prices rose Thursday. At 1500 GMT shares of Adecco were up 5%, or CHF2.9, to CHF60.5. The share hit a low of CHF42.7 Monday after the company announced the delay in publishing the accounts.
Adecco's euro-denominated bond expiring in 2006 was traded at 99%-100.5%, up from 93% Monday, when the company said it started an internal probe into accounting problems, citing control weakness in North America and compliance issues in other countries.
"It's very difficult to see into Adecco, but if in doubt, it's better to be on the long side," a trader at a Swiss bank said.
Fund managers were equally upbeat, brushing off fears that the company could be embroiled in a major accounting scandal of the scope of Italy's Parmalat.
"If you read the press release between the lines, you would have realized it's not about possible accounting irregularities but control issues," said Robert Scholl, fund manager at Aargauische Pensionskasse, which has around CHF3 billion in assets under management.
Scholl's view dovetails with comments from Chief Financial Officer Felix Weber, who denied accounting irregularities in an interview with The New York Times. He said the probe was due to a change in the audit approach of Adecco.
"We started to buy at around CHF45 and we also bought options to profit from the volatility of the stock," Scholl said. He expects the stock to move toward CHF80 in a few weeks once the issue is fully resolved.
"The worst case that could happen is that the company may readjust the value for some of its U.S. businesses," he said, shrugging off fears Adecco may have to restate its earnings and revenues.
Meanwhile, Credit Suisse First Boston, which rates the stock outperform with a CHF87 price target, said in a report this week that any adjustments to earnings and revenue may be minor, if necessary at all, and limited to a region that accounts for 10% of projected 2004 revenue.
Analysts are speculating that Adecco's problems center around goodwill at its Olsten unit, a U.S. company bought for $1.55 billion in 2000. The market talk is that the company could take an impairment charge of around EUR500 million.
The charge may be necessary if the U.S. unit, which suffers from low profit margins, has lost value since Adecco bought it, triggering an immediate value adjustment under U.S. accounting rules.
Adecco also reports under U.S. Generally Accepted Accounting Principles, or GAAP, because it has American Depository Rights listed in the U.S.
Adecco declined to comment Thursday.
Standard & Poor's, which cut its rating for Adecco earlier this week to a notch above junk grade status, noted that an impairment charge would be a non-cash item.
"What is really important for Adecco to keep its investment grade is its cash position," said S&P analyst Melvin Cooke.
Adecco's cash position as of the end of September 2003 was still strong, with EUR987 million in cash and short-term debt of EUR173 million.
Fund manager Dieter Winet of Swissca, Switzerland's third largest asset manager with CHF30 billion in assets, said the fund also bought Adecco shares at the low earlier this week, but he declined to say if he is continuing to do so. The fund had Adecco underweight in its portfolio because its price was higher in comparison to peers, he said.
Winet said he wasn't very concerned about the current inquiry by the U.S. Securities and Exchange Commission, which he said seemed like standard procedure. He also said the sharp fall of Adecco's shares was mainly due to U.S. funds selling because their rules require them to in such a situation.
But Adecco's silence on the subject since its statement Monday left room for uncertainty and worryDespite the willingness of some investors to buy the company at or near its low, many analysts lowered their ratings on Monday.
"There's nothing in the SEC rules about staying quiet", said Karl Nagel from Karl Nagel & Co., a California-based company that provides accounting oversight compliance services for public companies subject to the Sarbanes-Oxley legislation of 2002.
"What's happening right now is that they're on a full scale internal red alert, with the attorneys controlling all public information," he said.
In the absence of information, investors uncomfortable with the risk are keeping their distance.
"The risks surrounding Adecco are still high," said Rolf Kunz, analyst at Zuercher Kantonalbank, who downgraded the stock to underweight and criticized the vagueness of information that left investors in the dark about the extent of the problem.
Company Web Site: http://www.adecco.com
-By Goran Mijuk, Dow Jones Newswires; +41 1 211 70 14; goran.mijuk@dowjones.com
(END) Dow Jones Newswires
01-15-04 1033ET- - 10 33 AM EST 01-15-04
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