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            B R E A K F A S T   W I T H   T H E   F O O L
                     Wednesday, November 22, 2000

benjamin.rogers@enron.com
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"Everything's got a moral, if only you can find it." --- Lewis
Carroll


COKE LOSES ITS FIZZ FOR QUAKER
Coke's board says "no thanks" to the Quaker Oats deal. Who's
next in line?

By LouAnn Lofton

First it was PepsiCo (NYSE: PEP). Then it was Coca-Cola (NYSE:
KO). Now it looks like it's the French food company Groupe
Danone (NYSE: DA). What am I talking about? The latest bidder
for cereal company and Gatorade-owner Quaker Oats (NYSE: OAT),
of course.

Talks between Coke and Quaker are over. Coke's board of
directors met yesterday to discuss the potential $15.75 billion
stock acquisition of Quaker. Coca-Cola wanted Quaker for the
same reason that Pepsi did -- the Gatorade sports drink.
Gatorade controls about 80% of the sports drink market, with
Coke's Powerade coming in second. Coke would have been saddled,
though, with those parts of Quaker's business that make up the
majority of its revenues and are growing the slowest -- its
cereal and oatmeal operations.

It's likely that several factors led to the decision by Coke's
board not to proceed with the Quaker acquisition. First, with
value guru Warren Buffett as a director, you better believe that
the price Coke was going to pay for Quaker was a very important
consideration. Coke's shares had been driven down 10% since the
potential deal was announced Monday, as many thought Coke would
be paying too much for Quaker.

Another factor that likely caused the board to reject the
acquisition was the potential for antitrust hang-ups with the
deal, given that Coke's sports drink Powerade controls the
largest part of the market after Gatorade. A third contributing
factor was probably one of focus. Coke refocused itself on its
core beverages business in the late 1980s, and buying Quaker --
with its Cap'n Crunch and Rice-A-Roni, among other brands --
would have moved it beyond the beverage business once again. The
company doesn't appear to want to take that route.

So, Pepsi's out, Coke's out, and already, another company has
announced that it's pulling a chair up to the bidding table.
Danone issued a statement confirming that it is considering a
bid for Quaker. The bottled water, dairy products, and biscuits
company wants to develop its business to become "a world leader
in focused, growth oriented, healthy nutrition and beverage
business." Perhaps Quaker can help it get there.
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NEWS TO GO

NTT DoCoMo, a subsidiary of Nippon Telegraph and Telephone
Corporation (NYSE: NTT), is rumored to be interested in buying a
20% stake in AT&T Wireless (NYSE: AWE). The investment would be
about $9 billion. A deal like this would give DoCoMo a presence
in the strong U.S. wireless communications market. Currently,
AT&T Wireless is a tracking stock of AT&T (NYSE: T). Once AT&T
splits into four separate businesses, AT&T Wireless will become
an independent company.

Software company Novell (Nasdaq: NOVL) announced fourth-quarter
and fiscal year-end earnings yesterday. Sales in the fourth
quarter fell 21% to $273 million from last year's $344.5
million. A decline in sales of the company's packaged software
to small businesses impacted results. On a diluted per share
basis, Novell broke even in the fourth quarter, matching
analysts' expectations. It earned $0.17 a share in the fourth
quarter last year. For the fiscal year, net income dropped to
$49 million, or $0.15 a diluted share, compared to $191 million,
or $0.55 per share the year before.

CacheFlow (Nasdaq: CFLO) reported second-quarter results
yesterday. The company, which makes technology that improves the
flow of content over the Internet, lost $0.09 a share on a pro
forma basis. Analysts had expected a loss of $0.11 a share.
CacheFlow's revenues grew to $32.55 million from last year's
$22.45 million. This sales increase of 45% was below the 55%
increase expected by some analysts, and shares traded down
after-hours despite the company's smaller-than-expected loss.

The president of fashion designer and retailer Liz Claiborne
(NYSE: LIZ) resigned. Denise V. Seegal, whose last day is
December 8, has been president of Liz Claiborne since 1996. Liz
Claiborne's Chairman and CEO Paul Charron said that there are no
plans to replace her, and that he'll be taking over her duties.
Charron said, "We had different approaches. I wanted to get
closer to the managers running the business units."

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