HEROES
Supply management software company ASPECT DEVELOPMENT (Nasdaq: ASDV) gained $2 to $19 1/2 after yesterday reporting Q1 EPS of $0.07, beating estimates of $0.05, on $7.7 million in revenues. The company also announced a new version of its component and supplier management software, which helps production and purchasing departments keep their heads straight on millions of little parts. The software also benefits a supplier in knowing where inventory is moving. Supply chain and enterprise management software is still one of the hotter software sectors, where BAAN CO. N.V. (Nasdaq: BAANF) is still hovering near its 52-week high.
Morgan Stanley premiered new ratings on movie theater companies today, starting CARMIKE CINEMAS (NYSE: CKE) with an "outperform" rating, projecting the stock up $1 1/2 to $31 1/4. Carmike also reported Q1 earnings per share (EPS) of $0.35, which beat estimates of $0.32 per share. With things cooking at the box office, Morgan Stanley also raised its rating on AMC ENTERTAINMENT (NYSE: AEN), sending the shares up $1 5/8 to $21 1/4.
INTERNEURON PHARMACEUTICALS (Nasdaq: IPIC) jumped $2 1/8 to $15 after clearing up a little mistake that Associated Press made in a news story that mentioned the death of a woman using the company's anti-obesity drug, Redux. The first part of the mistake was the weight of the woman, who weighed 220 pounds and not 120 pounds as reported. The second part of the information boo-boo, all of which was actually the fault of someone at the Food and Drug Administration (FDA), was the failure to mention that the woman died as a result of homicide and was only coincidentally a patient using the drug. According to Dow Jones, the FDA said that so far patients have shown no adverse side effects to Redux. Marketing partner AMERICAN HOME PRODUCTS (NYSE: AHP) also gained $2 1/4 to $63 5/8.
QUICK TAKES: DAOU SYSTEMS (Nasdaq: DAOU) ran up $1 1/4 to $7 1/8 after the computer network integrator for the healthcare industry reported Q1 revenues of $5.2 million and a loss of $0.02 per share... Electronic transaction software company HNC SOFTWARE (Nasdaq: HNCS) rose $2 7/8 to $21 5/8 on reporting Q1 EPS of $0.11 on revenues of $18.5 million... UNITED VIDEO SATELLITE GROUP (Nasdaq: UVSGA) added $2 1/4 to $16 3/4 on announcing Q1 EPS of $0.25, up 25% over last year... Helpdesk software company SCOPUS TECHNOLOGY (Nasdaq: SCOP) rose $3 to $22 1/4 after reporting Q4 revenues of $21.5 million, up 135% over last year, and EPS of $0.16, which creamed estimates of $0.09 per share... CENTOCOR INC. (Nasdaq: CNTO) gained $3 1/8 to $26 7/8 despite downgrades from UBS Securities and Cowen & Co. after reporting a 111% increase in Q1 revenues... Oil and gas company ORYX ENERGY (NYSE: ORX) gained $2 to $19 3/8 on the strength of Q1 EPS of $0.61, which pounded estimates of $0.49 like a tough steak... WATERS CORP. (NYSE: WAT) rose $2 1/2 to $26 3/8 after the liquid chromatography equipment company reported Q1 EPS of $0.38, beating estimates of $0.35... Chinese chemical company JILIN CHEMICAL INDUSTRIAL CO. (NYSE: JCC) added $1 1/4 to $13 1/4 despite reporting a 58% decline in net profits for 1996.
GOATS
EAGLE USA AIRFREIGHT (Nasdaq: EUSA) was grounded for a $8 5/8 loss to $21 7/8 after reporting Q2 revenues of $61.5 million and EPS of $0.16, which was up 45% over last year. Unfortunately for the air freight company, these earnings were a penny shy of First Call estimates of $0.17 per share. The company said this is normally its weakest period of the year and that this quarter's results were strong. Having grown earnings at a 64% yearly rate over the last five years, investors might have been somewhat disappointed by the below-trend growth, but this is only one quarter out of an entire year.
Entertainment company VIACOM INC. (AMEX: VIA) lost $3 1/8 to $27 1/4 after the company warned investors that Q1 cash flow at its Blockbuster unit will drop 15% to 20%. Viacom also announced plans to launch an IPO of a tracking stock for Blockbuster, a la Tele-Communications Inc. tracking stocks (which really haven't really done much to enhance shareholder value for Tele-Communications holders, but that's a different story). "Tracking stock" is a new-fangled word for a stock issue of a subsidiary company. Separately, Chairman Sumner Redstone got rid of another executive, Blockbuster CEO Bill Fields. Video rental chain HOLLYWOOD ENTERTAINMENT CORP. (Nasdaq: HLYW) lost $1 3/4 to $20 1/2 as Viacom said video releases at Blockbuster during the first quarter were "inferior."
Consumer products company TUPPERWARE CORP. (NYSE: TUP) lost a little of its freshness in falling $3 3/4 to $31 1/2 after reporting Q1 EPS that were in line with estimates but down 13% on a pro-forma basis from a year ago. The company said that it expects to see a down second quarter, not only because of foreign exchange pressure but also due to fundamental business drivers. In a Reuters interview today, the company said it expects to see a modest sales decline in the current quarter but a significant drop-off in earnings. However, it forecast only a marginal profit decline for the entire year.
QUICK CUTS: CENTRAL FINANCIAL ACCEPTANCE CORP. (Nasdaq: CFAC) lost $4 7/8 to $9 as the consumer finance factoring company reported Q1 EPS of $0.25 and said it expects to see tougher business conditions through the remainder of the year... Implantable vision correction products maker KERAVISION INC. (Nasdaq: KERA) fell $1 5/8 to $7 1/4 after reporting a quarterly loss that was 74% greater than last year's loss... LUNAR CORP. (Nasdaq: LUNR) lost another $3 1/2 to $16 1/2 after the bone densitometer company reported disappointing results on Monday... Application development software company OBJECT DESIGN INC. (Nasdaq: ODIS) lost $1 to $5 1/2 after Alex. Brown downgraded the shares to "market performer" from "buy"... TBC CORP. (Nasdaq: TBCC) fell $1 5/8 to $7 3/4 after the tire distributor, which acquired Big O Tires last summer, reported Q1 EPS of $0.14, missing estimates of $0.19... Healthcare services company CRA MANAGED CARE (Nasdaq: CRAA) slid $5 3/8 to $32 1/2 after announcing its intention to merge with physician practice management company OCCUSYSTEMS INC. (Nasdaq: OSYS), but failed to attract the sponsorship of Morgan Stanley, whose analyst stepped aside with a "neutral" rating despite calling the combination "brilliant."... ZILOG INC. (NYSE: ZLG) fell $3 to $18 after reporting Q1 EPS of $0.23, beating estimates of $0.22. Alex. Brown cut its rating on the company... SONUS PHARMACEUTICALS (Nasdaq: SNUS) lost $3 3/8 to $23 1/8 and MOLECULAR BIOSYSTEMS (NYSE: MB) dipped $1 1/8 to $6 7/8 as ultrasound contrast agent companies are asking that Molecular Biosystems' products be judged by the FDA as drugs, not medical devices... NATIONAL SEMICONDUCTOR (NYSE: NSM) fell $3 3/8 to $23 1/2 after Morgan Stanley cut its rating on the company to "neutral" from "outperform" on fears of Intel encroaching on the company's markets... Disk drive head maker APPLIED MAGNETICS (NYSE: APM) dropped $2 1/8 to $27 3/8 on reporting Q2 fully diluted EPS of $1.06, missing estimates of $1.14... SOUTHERN PACIFIC FUNDING CORP. (NYSE: SFC) slid $1 1/8 to $11 7/8 after the non-prime mortgage lender reported Q3 EPS of $0.53, easily topping estimates of $0.45 per share. The company expressed confidence about the remainder of the year... Surgical laser company PLC SYSTEMS (AMEX: PLC) dropped $1 to $13 7/8 after announcing the resignation of its CEO.
FOOL ON THE
HILL
An Investment Opinion by MF
Templr
3Com's Wild Ride
After hitting a two-and-a-half year low in afternoon trading, 3COM CORP. (Nasdaq: COMS) recovered from the low of $20 3/8 to trade up to $27 3/16 at the close. A high-profile downgrade by SoundView Financial analyst Michael Karfopoulos following two INTEL CORP. (Nasdaq: INTC) product announcements yesterday caused many investors to dump the shares in heavy trading today. 3Com merger partner U.S. ROBOTICS (Nasdaq: USRX) also came face to face with a multi-year low, trading at $40 3/4 during the worst of today's selling, but finishing the day up $1 13/16 at $46 7/8.
Intel's decision in February to cut prices on its fast ethernet network interface cards (NICs) began 3Com's descent into the Netherworld. After peaking at $81 and change in December, the company was crushed when news of slowing sales began to circulate in late January and Intel cut prices on 10/100 megabit fast ethernet cards by as much as 40% in early February. With NICs making up more than 40% of 3Com's revenues, price competition from number two positioned Intel Corp. was viewed as potentially disastrous for 3Com margins.
Today's turmoil in 3Com can once again be traced back to Intel. Intel has introduced two new products that directly impact 3Com's lineup -- the Intel Express 10/100 megabits per second stackable hub and the 82558 controller chip. Intel's Express hubs are aggressively priced and compete directly with 3Com's hubs. The 82558 controller chip puts some of the functionality of a fast ethernet NIC on the motherboard, potentially slashing the cost of the NIC card to the end-user. This apparent all-out assault was enough to spook a number of 3Com investors into dumping their shares.
"Putting the networking element on the motherboard will always be cheaper," stated a spokesperson for 3Com. "[But] right now that concept makes up only about 10% of the market, so clearly customers haven't gone this way yet." Although putting part of the NIC on the motherboard of a personal computer (PC) makes it cheaper, it traps the customer into one specific type of network protocol -- fast ethernet in this case. "If you want to move up the food chain, it is a lot easier to change in and change out a NIC than a motherboard." If the technology were to move from fast ethernet to gigabit ethernet or asynchronous transfer mode (ATM), customers would face an expensive round of motherboard overhauls as opposed to the straightforward replacement of NICs.
Even with some significant questions surrounding the viability of the 82558 controller chip solution for network access, Intel is clearly going after 3Com in two of its largest product categories -- NICs and hubs. Although Intel's emphasis on fast ethernet NICs can be explained by its overall strategy to increase processing power needs to drive sales of faster central processing units (CPUs), the move to make hubs is a little more curious. Although shared media hubs were big networking products in 1994, most within the industry view it as a dying product category that will have sub-par growth going forward. Why Intel would launch a big assault here has some scratching their heads, but regardless of the motive it is viewed as potentially affecting 3Com.
3Com stressed today that Intel's move has simply forced them to take a price decrease planned for June in April. The company views this news from Intel as having a negligible impact on its margins. What is viewed as not so negligible is 3Com's ability to execute in its enterprise and carrier-class business -- something that SoundView's Karfopoulos was not entirely convinced was a sure bet. Karfopoulos wrote that he had "difficulty seeing 3Com moving into high-growth wide area networking," despite the company's substantial increase in the carrier-class remote-access business with the acquisition of U.S. Robotics' TotalControl business.
Clearly these doubts were alleviated as the trading day went on, as much of this has already been discounted into the current valuation of the combined company. With analysts forecasting more than $2.00 in earnings per share (EPS) for this year and $2.50 EPS for next, today's low of $20 and change discounted quite a bit of bad news. U.S. Robotics' impending release of quarterly earnings tomorrow evening should give investors some more texture as far as the viability of the modem business, the success of Robot's X2 56 kilobit per second standard, and the current direction and velocity of Robot's remote access business -- potentially auguring another roller-coaster ride for 3Com/U.S. Robotics investors on Thursday.
CONFERENCE CALLS
IOMEGA (NYSE: IOM)
(800) 633-8284 (reservation # 2593689)
Replay from 6:30 PM ET through 4/23
360 COMMUNICATIONS (NYSE: XO)
(402) 220-3014 -- replay through 4/22
SUN MICROSYSTEMS (Nasdaq: SUNW)
(800) 633-8284 (reservation # 2584848) -- replay avail through 4/22
APPLIED DIGITAL ACCESS (Nasdaq: ADAX)
(402) 220-6032 -- replay through 4/22
AT&T (NYSE: T)
replay after 11:00 a.m. EDT
(800) 475-6701 (code: 338707)
(320) 365-3844 (code: 338707) -- outside US
IONA TECHNOLOGIES (Nasdaq: IONAY)
replay available after 1:00 p.m. EDT for 5 days
(800) 475-6701 (code: 338970)
(320) 365-3844 (code: 338970) -- outside US
RTW INC. (Nasdaq: RTWI)
replay available from 2:00 p.m. EDT through 4/28
(800) 475-6701 (code: 338849)
(320) 365-3844 (code: 338849) -- outside US
04/22/97 (Tuesday)
FORCENERGY INC. (Nasdaq: FGAS)
(800) 475-6701 (code: 338955) -- replay avail. through 4/29
(320) 365-3844 (code: 338955) -- replay (outside US)
MATTSON TECHNOLOGY (Nasdaq: MTSN)
(402) 220-6969 -- replay available through 5/6
ACE CASH EXPRESS (Nasdaq: AACE)
(800) 642-1687 (code 355311)
From 6 PM EDT, replayed every two hours
04/23/97 (Wednesday)
OLSTEN CORP. (NYSE: OLS)
(800) 475-6701 (code: 338904) -- replay through 4/24
(320) 365-3844 (code: 338904) -- replay (outside US)
04/23/97 (Wednesday)
GENZYME TISSUE REPAIR (Nasdaq: GENZL)
(212) 547-0375 (confirmation # 664581) -- live
(402) 220-5189 (confirmation # 664581) -- replay through 4/30
04/23/97 (Wednesday)
US ROBOTICS (Nasdaq: USRX)
Available after 7:00 PM EDT
(800) 696-1563 (code: 164010) -- replay
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