FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay

Optimistic Optical Cable

Here's a blast from the "not so distant" past. If you thought K-tel International (Nasdaq: KTEL) was the only company able to parlay a commodity offering into a web sensation, here's another one for you. Optical Cable Corp. (Nasdaq: OCCF), a provider of a range of fiber optic cable, is recasting the headline "Hope Floats." Are investors really buying, though? Check out this Fool news item from May of 1996 to get the first part of the story:

"Optical Cable (NASDAQ: OCCF) surged $31 to $110 today. This double-digit price move is the fourth in as many days, a torrid rise that has taken executives at the Roanoke-based manufacturer of fiber-optic cable products aback. What is behind this sizzling rise? Earnings tremendously ahead of expectations? A hot new product just announced? How about just the fact that of the ten million shares outstanding of the recently public company, only 1.5 million are available to the public for trading. Such thinly traded issues are usually volatile, and Optical Cable is clearly no exception."

Back to the future, Optical Cable picked up as much as 18% in early trading this morning after announcing that it intends to establish an Internet subsidiary in order to offer "one-stop shopping to global purchasers of communication materials." With 38 million shares outstanding and only 2.02 million available to the public, today's rise looks like a case of "plus ca change..." Here's how "the plan" will work though; at first, the venture will be a part of the company's existing website and will only include the optical cable line of products. However, Optical Cable is planning on making all kinds of strategic alliances with "other leading suppliers of communications equipment" in order to ultimately create an "independent communications superstore." Wow, sounds great! Did you know that none of this is going to get started until the spring of 1999?

OK, let's get this straight. Optical Cable hasn't even established an online node of distribution for its own products, and won't until the spring of 1999. It hasn't yet approached any other "leading suppliers of communications equipment" to fulfill this vision of a "virtual warehouse," and yet the market added $44 million to the firm's value this morning. Hey -- streamlined 24-hour ordering, one-stop shopping, and less capital intensive business models all go hand in hand with the promise of Internet. However, I bet those other "leading suppliers of communications equipment" have taken a little bit of time to assess how the Internet will affect their future business plans as well, don't you?

UPS

Telecom giant AT&T (NYSE: T) rang up $3 1/16 to $67 13/16 after announcing it will buy IBM's (NYSE: IBM) Global Network business for $5 billion in cash. In addition, IBM agreed to outsource a large portion of its global networking needs to the telecommunications giant in a contract worth $5 billion over five years. AT&T, in return, will outsource applications processing and data center management operations to IBM in a deal valued at $4 billion over the next decade. A replay of the companies' conference call this morning will be available at 3 p.m. Eastern at (800) 248-7600.

Premium ice cream maker and marketer Ben & Jerry's Homemade (Nasdaq: BJICA) added $7/8 to $23 3/8 after Hambrecht & Quist raised its rating to "buy" from "hold," citing lower butterfat prices and the resolution of a distribution rights complaint against the company.

Wireless communications microwave transmission modules maker REMEC (Nasdaq: REMC) tacked on $7/8 to $15 5/8 after reporting Q3 EPS of $0.06, down from the $0.15 reported last year (excluding gains) but ahead of the Zacks mean estimate of $0.03. The company also said it is canceling its current stock repurchase program.

Cable TV and Internet access customer billing services firm CSG Systems International (Nasdaq: CSGS) rose $5 1/2 to $73 1/8 after Morgan Stanley Dean Witter upgraded the company to "strong buy" from "outperform" and boosted its fiscal 1999 earnings estimate to $2.05 per share from $1.75 per share.

Records and document management outsourcer Lason Inc. (Nasdaq: LSON) climbed $2 3/8 to $55 1/2 on news it will be added to the Standard & Poor's SmallCap 600 Index, replacing Northwestern Steel & Wire Co. (Nasdaq: NWSW).

Aviation petroleum products, cargo services, and support systems provider Mercury Air Group (AMEX: MAX) gained $2 to $9 after saying it is in "early" discussions with an unspecified party that may be interested in acquiring the company.

British-based international telecommunications services provider Esprit Telecom Group PLC (Nasdaq: ESPRY) sprinted ahead $8 1/16 to $38 5/16 after the company agreed to a $985 million stock and debt merger with European telecom companies operator Global TeleSystems Group (Nasdaq: GTSG). The deal values Esprit at $37.16 per American depositary receipt, which is a 23% premium to the company's closing price of $30 1/4 per share yesterday. Global TeleSystems picked up $3 5/8 to $45 3/8 this morning.

Online community operator theglobe.com (Nasdaq: TGLO) moved up $4 1/16 to $43 15/16 after Bear Stearns started coverage with an "attractive" rating and set a 12-month price target of $50 per share.

Luxury goods retailer Gucci Group NV (NYSE: GUC) strutted its way $3 1/16 higher to $45 5/16 after Donaldson, Lufkin & Jenrette raised its rating to "buy" from "market perform" and set a 12-month price target of $46 per share.

Automotive electrical and electronic components maker Stoneridge (NYSE: SRI) gained $1 9/16 to $19 1/4 after agreeing to acquire privately held pressure, temperature, and pressure level sensors designer Hi-Stat Manufacturing Co. for $362 million in cash. The deal is expected to add to Stoneridge's earnings in fiscal 1999.

Israeli-based software information security firm Aladdin Knowledge Systems (Nasdaq: ALDNF) climbed $4 to $13 1/8 after agreeing to acquire the assets of privately owned EliaShim Ltd., including Internet security products maker eSafe Technologies, for 1.24 million Aladdin shares and up to $11.5 million in cash, depending on eSafe's fiscal 1999 revenues.

DOWNS

Furniture retailer Heilig-Meyers Co. (NYSE: HMY) cracked $1/2 to $7 3/4 after it said lower sales at its Rhodes division will pull fiscal Q3 EPS "significantly" below Wall Street's $0.22 consensus estimate when the company reports earnings Dec. 16. Same-store sales for November fell 1.5%.

Shares of electronic design automation (EDA) tools developer Avant! (Nasdaq: AVNT) slowed $15/16 to $14 7/8 after a California federal court partially lifted a stay on a long-running civil lawsuit brought by Cadence Design Systems (NYSE: CDN) alleging that Avant! stole computer code from Cadence through employees who left the company to join competitor Avant! The court previously imposed a stay on the suit pending the outcome of a similar criminal case.

Chemicals and plastics manufacturer Union Carbide (NYSE: UK) steamed off $1 7/8 to $42 1/8 after it said Q4 EPS would meet analysts' $0.31 estimate but only because of a gain from the settlement of a lawsuit. CFO John Wulff said earnings were depressed by weak Asian chemical markets and delays in restarting the company's Taft, La., plant.

Heating and cooling equipment distributor Pameco Corp. (NYSE: PCN) fell $2 15/16 to $10 5/8 on the news that higher-than-expected labor and interest costs will leave fiscal Q3 EPS "only slightly" above breakeven, well below First Call's $0.15 per share seven-analyst consensus. The company also expects a loss in Q4; the Street currently projects a penny profit.

Credit card issuer and specialty finance company Capital One Financial (NYSE: COF) slumped $4 3/4 to $108 on last night's news that CFO James Zinn will leave on Jan. 31 for another company.

Bank holding company State Financial Services Corp. (Nasdaq: SFSW) retreated $7/8 to $17 1/2 after it said the exchange ratio for its planned acquisition of Home Bancorp of Elgin (Nasdaq: HBEI) was boosted to 0.914 from 0.86 because State Financial's market value didn't meet or beat $20 per share over the last month.

In the troubled oil sector, the 13th biggest oil concern Amerada Hess (NYSE: AHC) lost $1 3/16 to $53 1/4 after it announced plans to reduce capital spending to $900 million next year from this year's $1.45 billion. It will also cut 400 jobs, representing 20% of its U.S. and U.K. exploration crew and 4.4% of its global workforce. The company plans to take a $150 million charge in the fourth quarter in addition to the previously announced $150 million charge related to a new joint venture in St. Croix, the Virgin Islands.

Monday hero ThrustMaster Corp. (Nasdaq: TMSR) lost $1 11/16 to $9 9/16 today after gaining $6 7/16 yesterday following its release of software that allows computer gamers to talk over the Internet while playing.

Insurance holding company AFLAC Inc. (NYSE: AFL) paid out $1 11/16 to $40 1/2 after Credit Suisse First Boston started coverage of the company with a "hold" rating.

General Electric (NYSE: GE) dimmed $5/16 to $90 1/2 on the news that Gary Wendt, the chairman and CEO of its financial services unit, plans to resign at the end of the year. He will be succeeded by Dennis Dammerman, CFO of the parent company and a close adviser to GE Chairman Jack Welch.

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