Investors spooked by gloomy market
NEW YORK — Seagram Co. shares plunged Tuesday after several analysts predicted a fiscal first-quarter slowdown in the company’s music business.Several Wall Streeters called the 9% drop a wild overreaction as investors were spooked by a dismal market and sold. The Dow Jones Industrial average dropped a hefty 225 points. Seagram shares closed at $46.81 after falling by as much as 14% early in the trading day. Seagram declined to comment. But in response to a query by the Toronto Stock Exchange, the company issued a statement that it was “not aware of any material developments.” The company also filed a so-called Notice of Intention with the exchange to purchase up to 8.6 million shares, or 2% of all its shares outstanding as of Sept. 17. Wall Streeters pointed out that Seagram told them back in August that music growth in the first and second quarters could be slow and nothing has changed since then. The company’s fiscal year ended June 30. Seagram became the world’s largest music group when it acquired giant Polygram late last year. “It’s not an easy company to follow because we’re in the first year of the acquisition, so people don’t have a clear idea of how the quarters roll out. The fundamental story remains on track. There’s nothing different from what we already knew,” one analyst said. Seagram is expected to generate cash flow from music of about $1 billion for the fiscal year, up 18%, according to Salomon Smith Barney analyst Jill Krutick. But growth won’t occur in the first half because of spending related to online music initiatives. Seagram also faces tough comparisons with Polygram’s strong cash flow last year. Music cash flow in the first quarter is only expected to rise 5% to $175 million. But Krutick raised her overall fiscal 2000 forecast to a net loss of 10¢ a share from a loss of 23¢, reflecting narrower losses from film due to Universal’s strong box office and management fees for the Islands of Adventure theme park. Rich Bilotti of Morgan Stanley Dean Witter lowered his forecasts for music in a report published Tuesday, attributing the decrease to weakness in the overseas music market, especially countries such as Brazil, Germany, Japan and France. Tim Casey of Canadian firm Nesbitt Burns did the same.