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Mergers and speculations

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On Friday, it was reported that Johnson and Johnson (NYSE:JNJ) $52.00 was in advanced talks to buy Scios (NASDAQ:SCIO) $42.20 for $45.00 per share, or approximately $45.00 per share. This morning, JNJ announced that it was indeed buying biopharmaceutical Scios (SCIO) for $45.00 per share and paying in cash. JNJ expects the deal to have a $0.05 per share dilutive impact in 2003 and 2004. JNJ will also take an estimated one- time charge of approximately $700 million for in-process research and development and will have an EPS impact of $0.23 per share.

Both the New York Times and Financial Times are reporting that Dow component SBC Communications (NYSE:SBC) $25.18 may be a bidder for Hughes Electronics (NYSE:GMH) $9.75 DirecTV and if so, could have shares of SBC under selling pressure. The Financial Times is suggesting that investors may associate such a deal with other telephone companies "unsuccessful venture into cable television." The Financial Times article also notes that a deal to buy DirecTV would mark a change of direction for SBC, which currently has an agreement to market EchoStar's (NASDAQ:DISH) $24.70 satellite television service to its customers. The speculation of an SBC / DirecTV deal also makes it unclear how such a marriage would affect SBC's joint venture with Yahoo! Inc. (NASDAQ:YHOO) $17.54 to provide high speed Internet services.

Shares of SBC Communications (SBC) are trading $24.65 over the New York ECN, down $0.53 from Friday's close, or -2.1%, while GM Hughes (GMH) rise $0.74, or 7.5% to $10.49 in pre-market trading.

Traders are looking at a modestly higher to unchanged open for the markets here in the U.S. this morning. S&P futures (sp03h) currently trade unchanged at 830.50. NASDAQ futures (nd03h) are higher by 2.5 points at 962.00, while Dow futures (dj03h) are rising by 22 points at 7,875.

Fair value for the S&P 500 today is $-0.02. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.14 and set for program selling at $-2.82. Fair value for the NASDAQ-100 today is $1.24.

Jeff Bailey

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