Star Tribune from Minneapolis, Minnesota • Page 46

Business PACE D2 STAR TRIBUNE SATURDAY, MAY 6 2000 Fate of Funco's local operations unclear STOCKS Stocks rally as investors overlook strong jobs report By Janet Moore Star Tribune Staff Writer It's too early to tell how the Twin Cities operations of Funco Inc. will be affected by its $161.5 million sale to giant bookseller Barnes Noble Inc. Funco, a video games and interactive entertainment retailer, employs about 200 at its headquarters and distribution operations in Eden Prairie. On Friday, Funco President Stanley Bodine said decisions about the company's local management team and employee base will not be made until well after the deal is formally completed in June. "Those decisions will be made after a formal review," he said.

"We're really not sure yet." The announcement that Funco officially accepted Barnes Noble's offer of $24.75 per share for all outstanding shares came after the markets closed Thursday. New York-based Barnes Noble operates 540 Babbage's Etc. video game and entertainment software stores under the names Babbage's, Software Etc. and GameStop and sells on the Internet. Babbage's is based in Dallas.

Funco has 404 FuncoLand video game retail stores and operates an e-commerce site. Combined, Funco and Babbage's will become the world's largest video game and interactive entertainment retailer. "Babbage's and Funco each Conseco to sell some former Green Tree assets 629 stores are in malls nationwide, initially bid $1 10 million, or $17.50 per share, for Funco on April 3. Four days later, Barnes Noble counter-attacked with an unsolicited offer of $135 million, or $21 per share. Two weeks later, Electronics Boutique matched that bid, but Barnes Noble upped the ante in late April with its $161.5 million bid.

Since bidding began, Funco's stock has more than doubled in value. On Friday, it closed at $24.44 per share, up 13 cents. "This is the highest stock price in the history of the company," Bodine said. "We are very happy with the transaction." earnings grew anticipated grew considerably for a second straight month. Even manufacturing, which lost around 248,000 jobs last year, created 1 1,000 jobs in April.

Construction companies shed 55,000 workers. Separately, Americans rang up a less-than-expected but still sizable $9.1 billion in consumer debt in March, the smallest increase in five months, the Fed said. BRIEF Born Information Services, Wayzata, said it has been appointed to three Microsoft Certified Solution Provider Partner Advisory Councils the infrastructure, business intelligence and Windows DNA councils. Northwest Airlines Eagan, said it flew 6.5 billion revenue passenger miles in April, an increase of 8.9 percent from 5.97 billion flow in April 1999. Available seat miles increased 4.8 percent to 8.47 billion from 8.09 billion in April 1999.

System wide passenger load factor was 76.7 percent. Associated Press NEW YORK Renewed enthusiam for technology issues propelled the stock market higher Friday, helping investors overlook the latest evidence that the economy is growing too fast for the Federal Reserve Board. The Dow Jones industrial average rose 165.37 to 10,577.86 and the Nasdaq composite index rose 96.58 to 3,816.82. Despite the solid rally, both indexes finished the week with losses, failing to recover completely from Wednesday's big losses. The Dow, which tumbled 250 points on Wednesday, ended the week 156.05 points lower while the Nasdaq lost 43.84 points.

Broader stock indicators rose Friday. The Standard Poor's 500 rose 23.06 to 1,432.63 and the Russell 2000 index of smaller companies rose 10.93 to 512.84. The rally surprised analysts who expected the market to fall in the wake of an exceptionally strong employment report, which raised expectations of a big increase in interest rates this month. The U.S. Department of Labor said the nation's unemployment rate fell in April to a three-decade low of 3.9 percent.

Most analysts had expected a 4.0 reading. Average hourly earnings, a key gauge of inflation pressures, rose 0.4 percent in April to $13.64, twice as fast as many analysts were predicting. "There is some consensus in the stock market that the Fed will raise interest rates a half-point in May and the market is prepared for that," said Alan Ackerman, senior vice president at Fahnestock Co. But he said serve different market segments, but have in common outstanding and experienced personnel who are passionately committed to the video-game business," said Dick Fontaine, Babbage's CEO, in a prepared statement. The combined Babbage's and Funco will be led by Fontaine and Dan DeMatteo, chief operating officer of Babbage's.

Barnes Noble won a month-long bidding war for Funco with Pennsylvania-based Electronics Boutique Holdings Corp. Although Funco was required to pay Electronics Boutique $3.5 million in breakup fees, those costs will be borne by Barnes Noble, Bodine said. Electronics Boutique, whose ECONOMY from Dl Average hourly twice as fast as The rate for Hispanics dropped to a record low 5.4 percent surpassing the previous 5.6 percent mark set in January. Meanwhile, average hourly earnings, a key gauge of inflation pressure, grew by 0.4 percent to $13.64 in April. That was twice as fast as many analysts anticipated.

For the year ended April 30, wages rose 3.8 percent, the biggest year-over-year leap since July. In March, average hourly earnings went up 0.3 percent. "Heightened wage pressures now look like the rule rather than the exception," First Union economist Mark Vitner said. The hiring of 73,000 temporary census workers helped boost overall payrolls in April. Excluding this hiring, employment would have grown by a more modest but still robust 267,000, government analysts said.

The service sector, the driving force of job creation in the United States, led the way in job growth last month, adding 380,000 workers. Retailers added 119,000 jobs, mostly at bars and restaurants. Business services, a category that includes a wide range of activities, added 121,000 jobs. Employment at hotels and other lodging places Search Compare Search new Friday's strong report raised questions about whether the Fed will follow up with another big increase in June. Investors, however, seemed to brush off concerns about higher interest rates and continued to buy stocks.

"We've already seen a lot of damage in this market. We had a vicious shakeout about a month ago," said Larry Wachtel, market analyst at Prudential Securities. "Now, they can throw bad news at us and we won't react as badly." Technology stocks were mostly higher as investors poured money into the sector, believing rapid growth will equip those companies to best handle a spate of interest rate increases. Applied Materials rose $4.13 to $101.88 and JDS Uniphase rose $2.31 to $93.81. Computer networking provider Cisco Systems was the most active Nasdaq stock, rising $4.13 to $67.75 after it agreed to acquire Arrowpoint Communications in a stock swap valued at $5.7 billion.

Arrowpoint rose $5.38 to $140.19. Hewlett-Packard was the strongest Dow component, rising $4.63 to $136.75. General Electric rose $2.94 to $156.94 in advance of a 3-for-l stock split to take effect Monday. Several Internet retailers rose after Lehman Brothers initiated coverage of the sector. Amazon.com rose $3.44 to $58.50.

"The larger companies with established brands and critical mass should continue to evolve into world-class commerce platforms with highly profitable business models," Lehman analyst Holly Becker told clients. When's the best time to begin your search for a new home? home listings by price, size, location and more. Floor Plans Check out floor plans, photos and builder information. insurance, but no bidders have surfaced. Several finance firms, including Associates First Capital Corp.

and GE Capital, have publicly denied interest. The mobile home lending sector remains in a slump. Last week, Conseco's CEO was ousted because of the Green Tree acquisition. Conesco's largest investor, Thomas H. Lee Partners, which is owed $500 million, took direct control of the firm.

Conseco said it plans to use $500 million of the proceeds from the asset sale to repay part of a $2 billion intracompany loan that the insurer used to shore up Green Tree immediately after the 1998 acquisition. The remainder, analysts said, probably would pay back some of the firm's outstanding lines of credit. Analysts did not believe that Lee Partners would immediately repay itself. Conseco did not return phone calls seeking clarification. The asset sale also reveals the continuing relationship between the firm and Lehman Brothers, which arranged the sale of Green Tree to Conseco and is now providing advice on the resale, which some expect could be for less than half what Conseco paid.

Homes and plans courtesy of Rick Olson Homes. By Jill J. Barshay Star Tribune Staff Writer Conseco Inc. said Friday that it will sell $1.5 billion in assets from its St. Paul-based finance unit to Lehman Brothers as it continues to seek a buyer for the troubled mobile home lender.

Several analysts said Conseco executives arranged the asset sale to raise cash for the parent company and convince Wall Street that the Carmel, insurer is on solid footing. "This was a transaction to soothe the markets. It sends a message that there's going to be enough cash," said Christopher Wolfe, an analyst at Fitch IBCA. The assets to be sold are mobile home and other consumer loans issued by the company, formerly called Green Tree Financial. The sale is not expected to reduce or enhance the price that Conseco might fetch for Green Tree, which it purchased for $6 billion in stock in 1998.

The lender borrowed $1.5 billion to issue the loans, leaving Green Tree's underlying value unchanged. It has been more than a month since Conseco said it would sell Green Tree to focus on -2. -ra Classified Ventures, 1.1 All rights reserved. Maps Find any new community quickly, easily. School Information Get information on the schools your children will attend.

ill Acces NewHomeNetwork.com at startribune.comhomezone Oh, how about 3 minutes from now? NewHomeNetwork.com.