FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

Dell Looking Well

DELL COMPUTER (Nasdaq: DELL) careened ahead $9 to $108 5/8 this morning after reporting first quarter results that were well above consensus expectations. Dell earned $1.08 per share on $2.6 billion in revenues in its fiscal first quarter versus consensus expectations of $0.94 per share. In spite of the fact that consensus expectations have been rising in the past few days and whispers on the Street had put Dell's earnings in excess of $1.00 per share, $1.08 was apparently much better than anyone imagined. Last year, Dell earned $0.42 per share on $1.6 billion in revenues. Last quarter, Dell earned $1.01 per share on $2.4 billion in revenues. Revenues and profits both increased sequentially, and Dell's sales increased 59% year-over-year, almost four times the 15% growth rate of the industry in the first quarter and the highest year-over-year growth rate the company has reported in the last five quarters.

Asset management remained a key theme at Dell. Inventories turned more than 30 times on an annualized basis, while days sales outstanding (DSO) dropped to 32 days, two days lower than last quarter. Higher inventory turns and lower receivables mean that Dell continued to minimize its working capital needs and decrease the amount of time it took to convert an actual sale into cash. The company bought back 6.6 million shares in the quarter, bringing the total shares repurchased to 26.8 million in the past five quarters. Additionally, Dell has $264 million in put options on the liability side of the balance sheet, meaning that Dell has sold the right to buy back shares at a fixed price. If the share price goes down, it buys back the shares at a preset price. If the share price goes up, it pockets the premiums from the puts and probably uses it to buy back shares. Roughly 25% of the shares repurchased in the past five quarters were repurchased last quarter, indicating that weighted shares outstanding will continue to come down at a rapid pace.

Contrary to all expectations, Dell increased its operating margins to 10.7% from 10.3% last quarter. This was accomplished in spite of a slight drop in gross margins, as Dell made up all of that cost and more by reducing its operating costs as a percentage of sales. Analysts were raising estimates for the company all morning, with consensus numbers clocking in at $4.61 per share for this year and $5.81per share for next year, up from $4.14 and $5.21, respectively.

Dell has confounded the notion that its gross margin was going to drop precipitously because of price increases on its components, the key reason why analysts had originally expected Dell to earn less this quarter than last quarter. Additionally, sales momentum for Dell continues to roll ahead, another big surprise to many Dell watchers. Much of this benefit came from the 247% growth in server sales in the quarter, as servers carry higher margins and higher price points. With servers only 6% of Dell's total systems revenues, the company still has quite a bit of room to grow server sales as a way to maintain margins and juice up revenue growth.

UPS

Semiconductor fabrication facility equipment company ASYT TECHNOLOGIES (Nasdaq: ASYT) jumped $3 7/8 to $29 after reporting Q4 earnings per share (EPS) of $0.52 on revenues of $34.9 million, showing better gross margins and order growth.

CKS GROUP (Nasdaq: CKSG) gained $4 to $27 1/2 after Goldman Sachs installed the marketing company and website designer on its "recommended list," moving it up from a "market perform" rating.

Biotech company SEQUANA THERAPEUTICS (Nasdaq: SQNA) climbed $1 1/8 to $14 1/4 after announcing that it has isolated the gene responsible for asthma.

INVISION TECHNOLOGIES (Nasdaq: INVN) rose $1 3/8 to $13 1/2 after Prudential Securities initiated coverage of the bomb detection equipment company with a "buy" rating.

Industrial valve and flow control equipment manufacturer KEYSTONE INTERNATIONAL (NYSE: KII) surged $10 7/8 to $31 3/8 after agreeing to merge with TYCO INTERNATIONAL (NYSE: TYC) in a stock swap valuing each Keystone share between $31 and $37 per share.

KU ENERGY CORP. (NYSE: KU) powered up $4 1/2 to $34 3/8 after the Kentucky utility and operator of non-regulated power-related companies agreed to be merged into LG&E ENERGY CORP. (NYSE: LGE) for 1.67 shares of LG&E for each KU share.

Environmentally sensitive telecommunications infrastructure builder MASTEC INC. (NYSE: MTZ) gained $2 5/8 to $32 1/4 after announcing that it has acquired a 50% stake in Brazil's Inepar S.A. Industria e Construcoes for a capital contribution of $29.4 million.

SCI SYSTEMS (NYSE: SCI) added $3 3/8 to $61 after Merrill Lynch reinstated coverage of the electronics components manufacturer with a "near-term accumulate" rating.

Telecom equipment manufacturer BSN INC. (NYSE: BSN), formerly Boston Technology, rose $1 to $27 1/2 on reporting Q1 EPS of $0.21, beating estimates of $0.18, on revenues of $63.4 million, which rose 77% over last year's first quarter.

DOWNS

Comments about disk drive pricing during the Dell conference call last night sent shares of disk drive companies and their suppliers down this morning. SEAGATE TECHNOLOGY (NYSE: SEG) slid $3 to $42 3/8; WESTERN DIGITAL (NYSE: WDC) declined $4 to $59 1/4; QUANTUM CORP. (Nasdaq: QNTM) lost $3 3/4 to $37 5/8; READ-RITE (Nasdaq: RDRT) fell $2 3/4 to $21; and HUTCHINSON TECHNOLOGY (Nasdaq: HTCH) fell $1 17/32 to $29 11/32, while Minnesota neighbor INNOVEX (Nasdaq: INVX) lost $2 7/8 to $35.

NUKO INFORMATION SYSTEMS (Nasdaq: NUKO) was flattened $1 3/4 to $4 7/16 after the data codec maker announced re-stated Q1 revenues of $2.2 million and a loss of $0.37 per share, down from the previously announced $6.1 million and a loss of $0.17 per share. The company also announced the departure of its Chief Financial Officer today.

Restaurant company AU BON PAIN (Nasdaq: ABPCA) lost $7/8 to $6 1/8 after reporting break-even results in its first quarter, missing First Call EPS estimates of $0.02.

ENGINEERING ANIMATION (Nasdaq: EAII) fell $1 7/8 to $31 1/8 after the engineering and interactive software company announced its intention to offer 1.43 million shares, of which half a million are being sold by the company, increasing the share count by 12%.

Mining and paper making equipment company HARNISCHFEGER INDUSTRIES (NYSE: HPH) lost $3 1/4 to $39 3/4 after reporting Q2 earnings and announcing that it may miss 1997 EPS estimates of $3.80 by up to $0.38 per share because of short-term factors in the mining industry.

HONDA MOTORS (NYSE: HMC) fell $4 1/2 to $59 3/4 after reporting Q4 EPS of $0.53 on revenues of $11.9 billion, up 15.9% from last year. Earnings for the year totaled $3.66 per share, short of estimates of $3.77 per share.

CONFERENCE CALLS

DELL COMPUTER (Nasdaq: DELL)
(800) 839-1826 -- replay available until 8:30 p.m. EDT on 5/21

HEWLETT PACKARD (NYSE: HWP)
(303) 446-5399 (reservation # 2554014) -- replay through 5/22

APPLIED MATERIALS (Nasdaq: AMAT)
(800) 642-1687 (code: 353749) -- replay

INTERNATIONAL RECTIFIER (NYSE: IRF)
(Re: Restructuring)
(800) 633-8284 (reservation # 2765732) -- replay

HOME DEPOT (NYSE: HD)
(402) 220-3005 -- replay after 12:00 noon until 5/23

DAYTON HUDSON CORP. (NYSE: DH)
(800) 633-8284 (reservation # 2703946) -- replay from 12:30-5:00 p.m. EDT

ROSS STORES INC. (Nasdaq: ROST)
(402) 220-1007 -- replay available from 5:00 p.m. EDT through 5/27 @ 8:00 p.m. EDT

05/22/97 (Thursday)
WIND RIVER SYSTEMS (Nasdaq: WIND)
(800) 633-8284 (reservation # 2748792, code: 2589) -- replay
(303) 248-1201 (reservation # 2748792, code: 2589) -- replay (Intl. callers)

THIS WEEK'S CONFERENCE CALL SYNOPSES

HEWLETT-PACKARD (NYSE: HWP) Q2 Call
STAPLES INC. (Nasdaq: SPLS) Q1 Call
HADCO CORP. (Nasdaq: HDCO) Q2 Call
PAPA JOHN'S INT'L (Nasdaq: PZZA) Q1 Call
APPLEBEE'S (Nasdaq: APPB) Q1 Call
DELL COMPUTER (Nasdaq: DELL) Q1 Call
FAMILY GOLF CENTERS (Nasdaq: FGCI) Q1 Call

FOOL PORTFOLIO STOCKS
FOOL PORTFOLIO

ATCT down $3/32 at $3 15/16
AOL down $5/8 at $49 3/8
CHV down $3/8 at $70
COMS up $1 7/16 at $40 7/16
DJT unch. at $9 5/8
GM down $7/8 at $56 5/8
IOM down $1/2 at $17
KLAC down $1 3/8 at $49 1/4
LU down $3/8 at $63
MMM down $1/4 at $90 7/8
T up $1/4 at $34 3/8