Wednesday, April 14, 1999
DJIA 10440.24 +45.23 (+0.44%) S&P 500 1347.52 -2.30 (-0.17%) Nasdaq 2586.61 +3.11 (+0.12%) Russell 2000 420.97 +3.73 (+0.89%) 30-Year Bond 96 18/32 +2/32 5.48 Yield

An Investment Opinion
by Warren Gump

Motorolaing Ahead

Shares of wireless communications and semiconductor maker Motorola (NYSE: MOT) jumped this morning after the company announced better than expected Q1 results. Earnings for the quarter were $0.28, ahead of the $0.24 analyst consensus and the $0.23 from the prior year. Sales were up 5% to $7.2 billion. Driving these results was a rebound into profitability for the semiconductor segment, along with success in digital handsets and infrastructure equipment. The company also stated that Q2 sales and earnings may be slightly better than expectations, although it was premature to raise estimates for the whole year.

What a change of course this company has taken over the past nine months. Last summer and early fall, the stock was mired in the $40-$50 range, having fallen from an all-time peak in 1997 of $90. The company was losing market share in the wireless business because it was slow to move from analog to digital technology. In addition, the semiconductor segment was in the doldrums due to the worldwide economic malaise. Having disappointed the street for several quarters, many analysts and pundits were uncertain if the stock was ever going to rebound.

Motorola was certainly facing many challenges last year. The company was under the stewardship Christopher Galvin, who had just been named CEO in January 1997. Would he be able to navigate the company through the obstacles it was facing? Investors with a long-term perspective, looking through the company's hiccups and stumbles to see amazing people and technological assets probably said yes. If they had picked up shares during the summer or fall, they would now be sitting on a plump 60%-100% return in less than a year.

You can't always be sure that a technology company with a stellar history will succeed in the future. Companies with a narrow product line or a lack of innovation are often doomed to oblivion. More broad-based companies -- the Motorolas, IBMs, and Intels -- seem to have staying power. While they might lose steam for a period of time, they always seem to rebound stronger than ever. Seeing Motorola back on an earnings growth track is pleasing, but not really that surprising.


Disk drive maker Seagate Technology (NYSE: SEG) added $2 1/2 to $29 1/8 after reporting fiscal Q3 EPS of $0.49 before charges, well ahead of last year's $0.10 loss and Wall Street's $0.46 consensus estimate. President Steve Luzco said in an interview with Reuters after the earnings release that the company is assuming Q4 EPS will be flat with the year-ago $0.11 figure; First Call's projection is currently $0.52.

Telecommunications equipment maker Lucent Technologies (NYSE: LU) won $3 3/4 to $60 11/16 after it said it expects to report fiscal Q2 EPS "in line with or exceeding" analysts' mean forecast of $0.15. The company added that it's "on target" to post more than $8 billion in revenues, representing an increase of more than 30% year-over-year. Lucent plans to report results April 22. The company remains "very confident" about its short-term and long-term prospects, and it continues to expect revenue growth of 19% to 20% and EPS growth of around 35%, before one-time items, for the year.

Publishing company Primedia Inc. (NYSE: PRM), which produces 350 print titles including Seventeen and Soap Opera Digest, advanced $3/8 to $16 3/4 after it said its Channel One network will provide news and information aimed at teens to America Online (NYSE: AOL).

Equipment lease financing company First Sierra Financial (Nasdaq: FSFH) climbed $6 11/16 to $25 7/16 after it announced plans to launch a business-to-business Internet bank that will be operational by the end of Q4 1999. First Sierra wants to expand its equipment lease financing offerings to include a broader range of business banking services.

Enterprise network security products developer Pilot Network Services (Nasdaq: PILT) rose $3 3/4 to $20 3/8 after it said it will provide secure e-commerce services to General Electric (NYSE: GE).

Mortgage real estate investment trust IndyMac Mortgage Holdings (NYSE: NDE) swung up $3 9/16 to $15 3/8 after announcing that it is changing its emphasis in the home improvement lending business from transactions with specialty loan brokers and dealers to loans originated via the Internet at LoanWorks.com and LoanWorks' other direct lending channels.

Wireline and wireless network synchronizing products maker Datum Inc. (Nasdaq: DATM) recorded gains of $2 3/16 to $9 1/8 after agreeing to buy Digital Delivery Inc., a provider of secure information and product distribution software, for an undisclosed sum.

South American industrial and financial services holding company Quinenco SA's (NYSE: LQ) American Depositary Receipts won $2 1/16 to $11 1/8 on reports that it will sell its 50% interest in its O'Higgins Central Hispano joint venture with Spain's Banco Central Hispano to its partner for $600 million. The venture has interests in several banks, including a 43% stake in Banco Santiago (NYSE: SAN).

Computer media and technology company Ziff-Davis Inc. (NYSE: ZD) earned $1 1/8 to $20 1/8 after Merrill Lynch upgraded the stock's intermediate rating to "accumulate" from "neutral," maintaining a long-term "buy" rating.

"System on a Chip" company LSI Logic (NYSE: LSI), reportedly started at "buy" by Lehman Brothers, advanced $1 15/16 to $36 1/4 this morning. The company earned another new "buy" yesterday from Salomon Smith Barney.

Earnings Movers

(NYSE: BFO) up $1 to $48; Q1 EPS $0.49 vs. $0.44 last year; estimate: $0.49

E-Tek Dynamics (Nasdaq: ETEK) up $3 1/2 to $47; fiscal Q3 EPS $0.14 vs. $0.06 last year; estimate: $0.11

Fleet Financial(NYSE: FLT) up $1 1/16 to $44 1/8; Q1 EPS $0.72 vs. $0.53 last year; estimate: $0.69

Hertz(NYSE: HRZ) up $1 1/8 to $59 13/16; Q1 EPS $0.45 vs. $0.33 last year; estimate: $0.39

J.P. Morgan(NYSE: JPM) up $6 3/16 to $135 1/2; Q1 EPS $3.01 vs. $1.80 last year; estimate: $1.73


GO Network portal partner Infoseek Corp. (Nasdaq: SEEK) lost $9 1/2 to $70 after reporting a pro forma fiscal Q2 loss of $0.39 per share (excluding charges), which was not quite as bad as the loss of $0.41 per share forecasted by analysts surveyed by First Call. However, revenues declined 2% sequentially to $29.6 million. BT Alex. Brown cut its rating on the firm to "buy" from "strong buy."

Solid waste and recycling services company KTI Inc. (Nasdaq: KTIE) was kicked $1 5/8 lower to $7 15/16 after landfill, recycling, and waste collection firm Casella Waste Systems (Nasdaq: CWST) said it will call off its proposed merger with the company if "certain breaches by KTI of its representations" in the merger agreement are not ironed out in the next 30 days. Casella gained $3 1/8 to $23 5/8.

Chipmaker Intel Corp. (Nasdaq: INTC) slipped $2 17/32 to $57 31/32 despite reporting Q1 EPS of $0.57 late yesterday, topping analysts' estimates by $0.02. However, investors may have been rattled by a larger-than-expected sequential drop in revenues, which slid 7% to $7.1 billion. For more details on the earnings report, see this morning's Breakfast With the Fool and last night's Drip Port report.

Biomedical company Biomatrix (NYSE: BXM) slumped $6 5/8 to $83 3/8 following a Prudential Securities downgrade to "accumulate" from "strong buy."

Digital wireless communications network operator Sprint PCS (NYSE: PCS) dropped $5 3/4 to $49 3/4 after Morgan Stanley Dean Witter lowered its opinion of the company to "neutral" from "strong buy."

Business Internet services provider PSINet Inc. (Nasdaq: PSIX) slid $4 7/8 to $58 3/4 after announcing plans to sell 6 million common shares and 7 million convertible preferred shares in two concurrent offerings.

Several of yesterday's Internet banking big winners gave back part of their gains this morning, perhaps as traders sought to overcome their hangovers from Tuesday's share price party. Florida Banks (Nasdaq: FLBK) lost $6 5/8 to $24 5/8, Net.B@nk (Nasdaq: NTBK) retreated $24 27/32 to $210 3/16, TeleBanc Financial (Nasdaq: TBFC) dropped $11 1/2 to $129, and Atlantic Bank (Nasdaq: ATLB) returned $5 to $36 1/8.

Oilfield services company Baker Hughes (NYSE: BHI) fell $1 1/8 to $23 5/16 after CEO Max Lukens reportedly hinted at a conference yesterday that the company may have to continue cutting back its staff this year if its oil and gas exploration clients maintain their current posture of reducing projects in the face of low oil and gas prices and an ongoing supply glut. Rival Halliburton (NYSE: HAL) slid $1 1/4 to $35 1/2, and Schlumberger (NYSE: SLB) lost $13/16 to $57 5/16.


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