<THE LUNCHTIME NEWS>

Wednesday, March 3, 1999
THE MARKET MIDDAY
DJIA 9272.08 -25.53 (-0.27%) S&P 500 1222.81 -2.69 (-0.22%) Nasdaq 2251.52 -7.51 (-0.33%) Russell 2000 392.34 -2.09 (-0.53%) 30-Year Bond 94 3/32 -20/32 5.66 Yield

FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump

Dell Announces Gigabuys.com

Earlier this morning, Dell Computer (Nasdaq: DELL) announced the launching of an on-line computer products superstore, Gigabuys.com. Through this site, consumers will be able to buy over 30,000 computer-related products such as printers, digital cameras, scanners, and software. CEO Michael Dell stated in a press release that he hopes this new offering will "deepen" Dell's relationship with current customers as well as attract new ones. When I checked out the site around 11:30 a.m., I received a friendly "Coming Soon" sign (not all was lost... it did capture another unique visitor to tout in its next quarterly earnings release). In midday trading, Dell was trading up $5/16 to $78 3/8.

Expanding to sell a more significant array of computer products is a natural extension of the direct selling model. If you have people coming to your site in a buying mood, why not have them pick up everything customers might want? Just last week, direct computer seller Gateway (NYSE: GTW) announced that it was taking a stake in the NECX Office and Personal Technology Center, another online superstore. Broadening product offerings is a logical step to leverage off each company's large customer base.

Investors need to remember, however, that the Internet space is a competitive world. In addition to the superstores that the direct sellers have created, many others are out there. Some of these are from new companies such as Onsale's atCost service. Others are offered from traditional retailers such as CompUSA (NYSE: CPU) online and distributors like Compucom's (Nasdaq: CMPC) pcsave.com.

While most of these companies can enjoy initial success as they grow from very small bases, I would anticipate a significant competitive battle sometime in the next few years. Such a struggle will lead to the sale or closure of many weaker sites. Who will the winners be? Most likely they will be the ones who create a strong brand name, develop a loyal customer base, provide reasonable prices, offer excellent customer service, and have deep pockets. Based on its success in achieving these characteristics in the personal computer business, Dell is likely to be a strong contender in this field as well.

UPS

Life sciences company Monsanto (NYSE: MTC) gained $2 15/16 to $47 5/16 following reports in The New York Times that the company held preliminary talks to be acquired by chemicals giant DuPont (NYSE: DD) in a way that would allow Monsanto to retain its special character and habits, with its own compensation and incentive programs and possibly its own stock. Last June, Monsanto agreed to be acquired by American Home Products (NYSE: AHP) for $34.4 billion, but the deal was canceled in October.

CD and software distributor Navarre Corp. (Nasdaq: NAVR) rose $1 7/16 to $16 1/4 after ending months of "will they or won't they" speculation, filing with the SEC for a $37.4 million IPO of its NetRadio operation, which broadcasts audio over the Internet. Everen Securities will be the lead underwriter.

Casual restaurant operator Outback Steakhouse (Nasdaq: OSSI), which split its stock 3-for-2 after the bell last night, grilled its way ahead $15/16 to $32 5/8. CFO Robert Merritt said yesterday the company plans to add takeout at its stores this year in hopes of yielding an additional $300,000 in sales per restaurant.

Sony Corp.
(NYSE: SNE), which unveiled the widely anticipated second generation of its hot-selling PlayStation video-game console, zipped ahead $2 3/8 to $76 1/16. With a 128-bit microprocessor, compared with a 64-bit chip now, PlayStation II can produce three-dimensional characters of the same quality as those seen in the movie Toy Story. It can also connect users to the Internet and a PC and play music and movies using CD-ROMs.

Personal-finance software maker Intuit Inc. (Nasdaq: INTU) announced an agreement to buy privately held Computing Research Inc. for $200 million in cash and stock in an effort to expand its small business product offerings. Shares of Intuit took on $3 1/16 to $93 5/8 this morning.

Defense contractor General Dynamics (NYSE: GD) added $5/8 to $59 9/16 after it said it will receive a $250 million federal tax refund in the second quarter from research and experimentation tax credits from 1987 through 1989 and other tax amounts carried forward from 1981 through 1986. The company expects a $300 million refund in the third quarter.

French telecommunications giant Alcatel SA (NYSE: ALA) rose $2 1/16 to $23 15/16. The company, which said yesterday it would buy data networking firm Xylan (Nasdaq: XYLN), this morning announced plans to develop an integrated communications server in tandem with computer telephony company Dialogic Corp.

Audio books direct marketer Audio Book Club (AMEX: KLB) recorded a gain of $5/8 to $10 9/16 after announcing a promotional deal with web portal Lycos (Nasdaq: LCOS). Audio Book Club will establish links across the Lycos network and extend an affiliate program to users of the Tripod and Angelfire homepage communities.

Telecommunications operation support systems provider Architel Systems Corp. (Nasdaq: ASYCF) dialed up a gain of $3 27/32 to $19 1/2 after Amdocs Ltd. (NYSE: DOX) agreed to buy the company in a stock deal valuing Architel at $24.52 per share, about a 57% premium to yesterday's closing price. Amdocs shed $3 3/4 to $22 1/16 on the news.

Shares of Concentra Managed Care (Nasdaq: CCMC), which agreed to merge with 14.9% owner and New York investment firm Welsh, Carson, Anderson & Stowe, rose $3 1/8 to $14 3/4 this morning. The buyout group agreed to buy all but 7% of the company's shares for $16.50 each, a 42% premium over yesterday's closing price. It will also seek a buyer for the remaining 7% at the same price.

Online retailer Cyberian Outpost (Nasdaq: COOL) cashed in a gain of $6 1/4 to $22 3/8 after it said Q4 (ended Feb. 28) revenues are seen coming in around $33 million when the company reports results in early April. That's about four times the year-ago level and 40% above Q3.

Microwave and radio frequency wireless communications products maker Alpha Industries (Nasdaq: AHAA) warmed up $4 to $18 1/4 after it said it expects to report fiscal Q4 EPS of $0.51. That figure includes a $0.20 per share tax benefit, without which the number is closer to the $0.22 estimate three analysts gave First Call. Revenues are seen coming in slightly below expectations. Alpha expects fiscal Q1 EPS to be in line with analysts' projections.

Chipmaker VLSI Technology (Nasdaq: VLSI) moved up $9/16 to $17 3/16 following reports that Dutch semiconductor and consumer electronics company Philips Electronics NV (NYSE: PHG) will pursue a hostile takeover of VLSI if the California firm doesn't play ball. News of Philips' overtures hit the stands Feb. 26; the company wanted a response by today.

Pacific Gateway Exchange (Nasdaq: PGEX), a facilities-based provider of international telecommunications services, rose $1 7/8 to $24 3/8 after reporting Q4 EPS of $0.25, up from $0.19 last year and a penny above estimates. Pacific reported a commitment for a new $200 million credit facility -- expandable to $300 million -- the company plans to use to finance undersea fiber optic cable investments and its expansion to into the U.S. and Western Europe markets.

Linear and mixed signal chip maker Burr-Brown Corp. (Nasdaq: BBRC), upgraded to "outperform" from "neutral" by Morgan Stanley Dean Witter, rose $1 to $19 7/8 this morning.

Young adult fashion retailer Pacific Sunwear of California (Nasdaq: PSUN) shined this morning, taking on $1 3/4 to $31 3/4 after BT Alex. Brown upgraded the stock to "strong buy" from "buy."

DOWNS

Networking products company 3Com (Nasdaq: COMS) dropped $3 1/2 to $23 1/2 after it warned that its fiscal Q3 (ended Feb. 26) earnings will not meet analysts' expectations due to an unexpected slowdown in the U.S. and Latin American enterprise markets, weakness in the traditional two-tier distribution channel, and lower-than-expected PC original equipment manufacturer (OEM) sales. The company said it expects earnings from ongoing operations of $0.23 a share, below analysts' mean forecast of $0.36. Unimpressed, at least four brokerages downgraded the firm this morning.

Internet-based telecommunications services firm Tel-Save.com (Nasdaq: TALK) slipped $3/4 to $8 3/8 after an article in USA Today speculated that online services conglomerate America Online (NYSE: AOL) may form an Internet telephony alliance with AT&T (NYSE: T), possibly before Tel-Save.com's exclusive provider deal with AOL runs out next year. In a press release, Tel-Save.com claimed the AOL contract actually does not expire until 2003.

Professional staffing services firm StaffMark (Nasdaq: STAF) tanked $4 to $8 7/16 after saying a spending slowdown by its finance, banking, and legal clients and lower growth at its domestic information technology staffing unit will lead to Q1 EPS between $0.22 and $0.25, short of the IBES mean estimate of $0.35. Fiscal 1999 EPS is now expected to be in the $1.65 to $1.69 range, missing the $1.89 currently forecasted. As a result of the slowdown, StaffMark said it will rein in its acquisition program for the balance of the year.

Industrial fluid filter and separation devices maker Pall Corp. (NYSE: PLL) fell $5 1/4 to $16 1/16 after saying lower margins resulted in fiscal Q2 EPS of $0.15, down from $0.22 a year ago and $0.04 shy of the First Call mean estimate. For fiscal 1999, the company expects EPS before charges to come in 10% to 15% below the $0.92 earned last year, meaning the current analysts' mean estimate of $1.02 will be adjusted downward. The company plans to take an unspecified charge in Q3 to restructure and cut costs by $50 million per year.

Women's clothing designer Jones Apparel Group (NYSE: JNY) was ripped for a $2 5/16 loss to $23 5/8 after announcing it will buy women's shoe designer Nine West Group (NYSE: NIN) for about $1.4 billion in cash, stock, and assumed debt. If the deal goes through, Nine West shareholders will end up with 0.5011 of a Jones share and $13 in cash for each Nine West share owned, but some observers are questioning the rationale for the deal. For more details, so this morning's Breakfast With the Fool.

Women and children's shoe maker Maxwell Shoe Co. (Nasdaq: MAXS) was stomped for a $1 1/4 loss to $9 1/2 after reporting fiscal Q1 EPS of $0.23, which was $0.03 short of the First Call mean estimate. The company said it is "cautiously optimistic" about its near-term prospects, even though the shoe industry continues to be hampered by excess inventories.

Elsewhere in shoe land, discount retailer Payless ShoeSource (NYSE: PSS) tripped $2 9/16 to $52 13/16 after saying its same-store sales declined 4.5% year-over-year in February, on the back of a 1.5% decline in total revenues during the month to $160.4 million.

Enterprise resource planning (ERP) software developer SAP A.G. (NYSE: SAP) slid $2 1/16 to $28 3/4 after the company announced that Jeremy Coote has resigned as President of its SAP America unit.

Disposable specialty medical products maker Maxxim Medical (NYSE: MAM) dropped $3 1/8 to $17 1/2 after posting fiscal Q1 EPS of $0.40 (excluding charges), up from $0.37 a year ago but shy of the First Call mean estimate of $0.42.

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Bob Bobala (TMF Bobala), a Fool's Fool
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