Friday, January 2, 1998
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Sybase Crashes

The hegemonic three of the database industry, Oracle (Nasdaq: ORCL), Informix (Nasdaq: INFX), and Sybase (Nasdaq: SYBS), have all suffered of late. The latest bad news to come out of the industry was served up this morning by Sybase, which crashed $3 15/16 to $9 3/8 on announcing that it will not meet estimates for its upcoming fourth quarter. Sybase announced that revenues for its fiscal fourth quarter are currently expected to be in the range of $245 million to $250 million (which on the low end would represent a 0.4% sequential increase and an 8% year-over-year decrease in revenues) and earnings per share will range from a loss of $0.07 per share to a profit of $0.02 per share. Expectations had been for earnings per share of $0.12. Before today's announcement, Sybase was already trading at a steep 50% discount to its expected EPS growth rate going into 1998. Even if Sybase manages to come in with earnings at the high end of its new range, it will still only be a paltry 16% of what was expected.

Interestingly, on the Wednesday after Oracle's stock imploded after it missed Q2 earnings estimates, Sybase CEO Mitchell Kertzman was in Chicago joining a panel with two other Oracle rivals, Informix CEO Robert Finocchio and the head of IBM's (NYSE: IBM) database business, Janet Perna. Kertzman reportedly told San Francisco Chronicle columnist Herb Greenberg that "they all weren't experiencing the same slowdown in sales to Asia and the telecommunications industry that Oracle claimed it's facing." Well, that removes one excuse the company can use to explain its severe shortfall. What's left? Sybase has yet to show any momentum in sales of its latest product, Adaptive Server (outside of its installed base), and the timing of closing large license agreements increases sequential volatility for the company. Sybase records 50% to 70% of its revenues in the third month of each quarter. However, Kertzman's early December comments came in the wake of his own sale of Sybase shares. Kertzman sold 20,000 shares at the end of November at $14.75 per share, for a total take of $295,000.

With product revenue lines showing anemic growth across the board among the big firms, this latest announcement confirms some of the initial fears raised about an industrywide slowdown when Oracle blew its second quarter numbers. The overall database market grew by 15% in 1996 to $5.7 billion, and initial reports estimate growth in 1997 of 13%, to $6.4 billion. Overall, customers that need to update to new versions of database software have contracts that allow them to do so for a low fee.

                         Fwd PE  PSR     ROE  Rev.%chng 
 Informix (Nasdaq: IFMX)  N/A   1.08   -21.54%   15.03% 
 Oracle (Nasdaq: ORCL)     24   3.97    38.75%   34.59% 
 Sybase (Nasdaq: SYBS)     32*   .70   -18.89%    5.75% 
 IBM (NYSE: IBM)           16   1.46    24.84%    5.57% 
 *1997 estimate


Dental instruments and abrasives manufacturer Moyco Technologies (Nasdaq: MOYC) gained $7/8 to $7 1/2 after the company announced the sale of its chemical mechanical polishing (CMP) slurries unit and CMP product line to a unit of ChemFirst Corp. (NYSE: CEM), a specialty chemicals company. Last week, Moyco announced that it had broken off talks with Ashland Inc. (NYSE: ASH) about the possible sale of the CMP properties. Investment banker Brown Brothers Harriman said the net present value of the cash, notes, and royalties to be received from ChemFirst could surpass $10 million.


High-stakes bingo network company Multimedia Games (Nasdaq: MGAM) fell $3 5/16 to $11 1/4 after the company announced that the FBI raided its headquarters on New Year's Eve, disrupting play across the company's bingo network. While the company was aware of federal concern over the nature of the company's operations, company officers said they were cooperating with allaying those concerns and were shocked that the FBI would take this action as well as seizing player stations at two bingo halls operated by the Cherokee Nation and the Senaca Cayuga tribe in Oklahoma.

Kaiser Ventures (Nasdaq: KRSC) was trashed for a $2 1/2 loss to $9 1/2 after the company announced that a San Diego Superior Court has tentatively ruled as inadequate the company's environmental impact report for proposed uses of the company's Eagle Mountain Landfill Project. The company said it expects to receive a final ruling within 90 days.

AT&T (NYSE: T) slid $2 7/16 to $58 7/8 after a Federal court ruled as unconstitutional a provision of the 1996 Telecommunications Act that restricted the ability of Regional Bell Operating Companies (RBOCs) to enter the long-distance telecom market before facing competition in their own service areas. While companies such as Bell Atlantic (NYSE: BEL) were up on the news since they are expected to benefit greatly from offering long-distance service in their various local access areas.

Natural gas distributor Atmos Energy Corp. (NYSE: ATO) lost $1 1/2 to $28 3/4 after Merrill Lynch lowered its rating on the company's stock to "near-term neutral" from "accumulate" and to "long-term accumulate" from "long-term buy." Other stocks of companies in the sector that Merrill Lynch also downgraded today include Connecticut Energy Corp. (NYSE: CNE), Eastern Enterprises (NYSE: EFU), and New Jersey Resources Corp. (NYSE: NJR), among others.


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