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Midway Games Cut to Avoid

Midway Games (MWY): Downgraded to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Markos Kaminis

The seller of entertainment software posted a loss in the second quarter of fiscal 2001 (June) of $0.08 vs. EPS of $0.48, below expectations. We see revenue comparisons dismal through fiscal 2001 (June), since the company only had one title for Sony's Playstation 2 release. Also, Midway has abandoned its old 32-and 64-bit video game platform for next-generation consoles including PlayStation 2, Gamecube and Xbox, a strategy we believe will pay benefits later as long as the company can access the capital markets for investment funds. With decent visibility and brand value, we believe capital is accessible. However, we are placing our estimates under review for a decrease and we would recommend avoiding Midway shares for now.

AOL Time Warner (AOL): Maintain 3 STARS (hold)

Analysts: Scott Kessler, Jonathan Rudy

At an analysts' meeting in New York, AOL affirmed its 2001 financial projections. The slowing international economy doesn't seem to be notably hurting AOL's advertising and commerce segment, and AOL expects 20% 2001 revenue growth driven by its strong properties and customer relationships. We still project 2001 revenue of $40 billion and EBITDA of $11 billion. We are encouraged by AOL's global aspirations; its detailed synergy and cost savings; and its expected Q4 broadband and film offerings but with AOL's lofty valuation even against its peers we expect the shares to perform in line with market estimates.

Halliburton (HAL): Maintain 3 STARS (hold)

Analyst: Tina Vital

The oil-services firm announced a pact to sell Dresser Equipment, a unit that makes and sells components to the energy-infrastructure sector including power plants, refineries and pipelines. First Reserve, Odyssey Investment Partners and others agreed to acquire Dresser for about $1.55 billion. The unit has sales of more than $1.4 billion. For the last 15 years, worldwide energy demand has grown at about 2% but energy infrastructure development has lagged. In 1999 and 2000, Halliburton sold parts of Dresser and set a plan in April 2000 to sell the rest of the underperforming, non-core unit.

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