Motley Fool QuickNews

Monday 9/13/99

Closing Market Numbers

DJIA          11030.33      +1.90    (+0.02%) 
S&P 500        1344.13      -7.53    (-0.56%)
Nasdaq         2844.77     -42.29    (-1.46%)
Russell 2000    439.65      -1.54    (-0.35%)
30-Year Bond  101 1/32      -4/32  6.05 Yield

Today's Market Movers:


Online financial news and commentary service (Nasdaq: TSCM) delivered gains of $5 15/16 to $25 11/16 after announcing plans to open an office in the United Kingdom early next year. A team of investors led by Chase Capital Partners pledged $17 million to take a minority stake in the venture.

Online corporate financial statement provider Edgar Online (Nasdaq: EDGR) moved $2 15/16 to $10 11/16 after grabbing $5 million worth of contracts through its acquisition of privately held Under the multi-year deals, Edgar will supply SEC-based data to companies like Reuters Group (Nasdaq: RTRSY) and Standard & Poor's ComputStat.

Diversified automotive cellular phone company Audiovox (Amex: VOX) drove $3/16 to $16 7/8 after reporting Q3 net profit of $0.32 per diluted share, beating First Call survey estimates of $0.26 per share. Chairman and CEO John Shalam said sales exceeded $100 million in July and August and the company is on track to hit $1 billion in sales by year's end.

School bus and passenger transportation operator Laidlaw (NYSE: LDW) rolled $3/4 to $7 5/16 on news it would divest its U.S. healthcare operations, American Medical Response and EmCare. The company also plans to find a buyer for its 44% stake in Safety-Kleen (NYSE: SK), the industrial services company, to focus on its core operations.

Cancer and infectious diseases drugmaker Maxim Pharmaceuticals (Amex: MMP) bounced $1 1/4 to $9 3/16 after the company said its drug Maxamine and interleukin-2 killed prostate cancer cells in rats.

Online government services provider National Information Consortium (Nasdaq: EGOV) lobbied $4 1/8 to $28 1/4 after announcing plans to buy privately held eFed in a stock and cash deal worth $29.6 million. eFed makes procurement software that should add teeth to NIC's e-commerce applications.

Consumer electronics retailer Sound Advice (Nasdaq: SUND) jammed $1 3/4 to $9 3/4 after posting record sales and profits for its fiscal second quarter. Net income jumped to $882,000, or $0.21 per diluted share, compared to a net loss of $231,000, or $0.06 per share, a year ago. The company said its strategy of offering high quality products plus custom design and installation is paying off.


Appliance maker Maytag (NYSE: MYG) tumbled $1 11/16 to $40 1/16, the second consecutive day the firm's shares have fallen, after the company said weak sales in its mid-range and low-end product categories would hurt second half earnings.

Accident, life and health reinsurer ESG Re (Nasdaq: ESREF) dropped $2 15/16 to $9 15/16 after the company announced CEO Wolfgang Wand would resign for medical and personal reasons. John Head, chairman of the board, has assumed the duties of chief executive. ESG also announced plans to take a $7 million charge related to health care initiatives supporting Comed, a German health care association.

Information technology services firm Computer Task Group (NYSE: TSK) slid $1 5/8 to $15 3/16 after announcing that industry-wide year 2000 issues will hurt second half income. Computer Task expects 1999 diluted net income (before a Q1 extraordinary charge) in the range of $1.13 to $1.17, compared to diluted net income of $1.42 per share last year.

Entertainment company SFX (NYSE: SFX) fell $2 1/8 to $37 3/8 after announcing plans to buy EMA Telstar Group, the largest live entertainment company in Scandinavia with $50 million in sales last year. Terms of the deal were not disclosed.

Real estate investment trust Brandywine Realty Trust (NYSE: BDN) tripped $5/16 to $17 3/16 after announcing plans to sell its Twin Forks Office Park complex in Raleigh, North Carolina for $7.75 million. The move is part of Brandywide's plan to sell non-core assets.

Insurance and investment holding company Lincoln National (NYSE: LNC) fell $1 9/16 to $43 14/16 after reaching an agreement to buy Alden Risk Managment of Miami, Florida for $41.5 million in cash.

Today's Top Stories:

Bell Atlantic and Vodaphone Eye Joint Venture in U.S.
By Richard McCaffery (TMF Gibson)

Bell Atlantic's (NYSE: BEL) nod that it is in talks with Britain's Vodafone AirTouch (NYSE: VOD) to form a U.S. joint venture came as no surprise to investors this morning. After all, Vodafone revealed as much last week and telecommunications investors by now must be punch drunk from all the industry alliances.

Bell issued a succinct statement yesterday confirming the talks -- confirming there can be no assurances negotiations will be successful and confirming it won't discuss the matter again until it's settled.

Any business combination between Vodafone, the world's largest mobile phone company, and Bell Atlantic, which will become second largest phone company in the U.S. once its acquisition of GTE (NYSE: GTE) is completed, would create a wireless giant hefty enough to challenge AT&T (NYSE: T) and Sprint (NYSE: FON) in the world's fastest growing and largest cellular market.

Bell Atlantic has about 6 million cellular subscribers in the United States, mostly in the Northeast, while AirTouch has more than 9 million wireless customers largely in the West and Midwest, as well as a large and expanding global presence.

Perhaps the weak response from investors has something to do with a similar release Bell Atlantic issued January 3 regarding negotiations to buy AirTouch. Two weeks later, discussions collapsed and Vodafone proceeded to buy AirTouch for $62 billion.

Or perhaps it's because, in an industry that moves at lunatic speed, investors are focusing on matters they can control and understand rather than uselessly speculating on the next big telecom play.

For example, Bell Atlantic investors who purchased shares in 1983 have watched that investment appreciate 1,671% in the last 16 years. They can't control whether Vodafone and Bell Atlantic will strike a deal, or whether, as Reuters reported today, a newly formed venture might be spun-off as a separately traded entity. Until it happens, all this is just grist for the daily news mill.

What investors do know is that $100 invested in Bell Atlantic December 30, 1983 grew to $1,671 as of June 30, 1999, compared to $1,224 for a similar $100 investment in the S&P 500. That's a nice climb. Since 1983 Bell has rewarded investors with average annual growth of 19.5%, compared to 17.9% for the S&P 500.

Rather than guessing when to jump in or out of Bell Atlantic in the event of a Vodafone alliance, investors should focus on the firm's improving operating and net margins, its steadily increasing dividend payments, and the progress it's making to enter the long distance services market against rivals Sprint and AT&T.

When and if some kind of a joint venture is consummated, investors will turn to Vodafone's fundamentals to determine whether its management will serve them as well. Investors can't do anymore than that.

3Com Plans Palm Computing IPO
By Dave Marino-Nachison (TMF Braden)

In a move that would create the first handheld computing pure-play for investors, networking products maker 3Com (Nasdaq: COMS) said today it intends to make its Palm Computing subsidiary an independent, publicly traded company sometime next year.

"Creating the industry's first independent, publicly traded handheld computing company is a significant milestone, reflecting both the current success and the future potential of our Palm business," said 3Com Chairman and CEO Eric Benhamou. 3Com is planning an IPO for Palm early next year; it will follow it up with a spin-off of the rest of the company's stock to 3Com shareholders.

This doesn't do much to make things better at 3Com overall -- handheld product sales, though they more than doubled between fiscal 1998 and 1999 to $570 million, still account for just 10% of the company's sales. The company's shares have had a difficult run in recent years, with its core networking line finding the competition from Rule Maker Cisco (Nasdaq: CSCO) and others rough trade. For a recent Foolish take on the company at large, click here.

But these are exciting times at Palm. Its seventh-generation PalmPilot is the industry standard, quickly joining the cellular phone as a must-have digital accessory for a public apparently increasingly busy in spite of all our wonderful time-saving technologies.

A little background: Handheld computing was slow to take off as companies struggled to design interfaces that consumers would accept. Apple's (Nasdaq: AAPL) Newton, for example, was one of several much-ballyhooed failures. But the success of the Palm line -- and the influx of competition -- has served as an indicator that this is a market with tons of potential.

In fact, investors might remember reading last week that Handspring, the group that invented the PalmPilot before leaving 3Com, is preparing a product it hopes will take back some of their progeny's market share. The Handspring product, reportedly called "Visor," is said to be a significant improvement technologically and could represent Palm's sternest test yet. According to Reuters, it's slated for an online launch soon, with a retail unveiling next year.

Still, as the clear leader in an exciting, emerging industry, the backing of a large and growing network of accessory and software makers, and more than 4 million units in the marketplace, Palm promises to provide an exciting opportunity for investors -- particularly once freed from 3Com's not particularly inspiring networking business.

Palm hopes its Pilot can continue to generate additional opportunities powered in large part by the inventiveness of its partners. "Palm is uniquely positioned to aggressively drive a number of emerging strategic market segments," the company's statement said, "including handheld operating system licensing, enterprise computing solutions, wireline and wireless Internet services, portal sites and Palm-branded devices."

Interestingly, 3Com's shares were active late last week not only on the expectation of today's news but reportedly on the regeneration of ongoing rumors that the company was the subject of takeover interest from telecom equipment makers such as Lucent (NYSE: LU).

One factor investors should remember when considering Palm is that as a consumer product it will require higher marketing expenses than most of 3Com's products. In fact, since 3Com didn't break out expenses by division in its most-recent annual report, there are a lot of aspects of this business it would be nice to have more information about.

With that in mind, there's probably little reason for investors to jump into 3Com before at least waiting to see Palm's prospectus and getting better acquainted with the business.

More of Today's Best:

FOOL PLATE SPECIAL An Investment Opinion
Hershey Doesn't Skor
By Warren Gump (TMF Gump)
-- Hershey Foods Corp. (NYSE: HSY) warned investors that its per-share earnings for the year wouldn't be very sweet, falling to $2.16-$2.20 per share, 8%-10% below prior company guidance of $2.40 and less than the $2.34 earned last year. Company management blamed the shortfall -- most of which it expects to fall in the current third quarter -- on the implementation of new business systems in areas like customer service, order fulfillment, and warehousing. After initially opening down a couple of points at $50 per share, the stock has actually moved up a little bit in morning trading. While this movement may seem perplexing, analysis of this stock's performance over the past month and a half might provide an explanation.

Motorola Talks Merger With General Instrument
By Richard McCaffery (TMF Gibson)
-- Wireless communications and electronics giant Motorola (NYSE: MOT) is in talks to buy General Instruments (NYSE: GIC), the number one maker of cable set-top boxes in the United States, in a stock deal worth about $10 billion, The Wall Street Journal reported this morning. The alignment would give Schaumberg, Illinois-based Motorola a foothold in the fast-developing world of broadband communications since General Instruments is focused on building set-top boxes and wireless communications systems that enable networks to carry voice, video, and data traffic over a single line. The area of so-called convergence technology is the hottest sector in the communications industry right now, and promises to remain so until the dream of fast, cheap, and simple communications over a single line is realized.

PairGain Warns of Q3 Shortfall
By Brian Graney (TMF Panic)
-- Digital subscriber line (DSL) carrier equipment supplier PairGain Technologies (Nasdaq: PAIR) lost some ground today after warning that its third quarter results will fall below the Street's expectations. The company's press release on the development was short, sweet, and effectively useless. Fortunately, though, shareholders can gain some insight into what is going on at the firm by listening to a replay of management's conference call this morning with analysts. The call is accessible at (800) 633-8284 and the reservation number is 13141178. On the call, PairGain CFO Charles McBrayer roughly quantified the revenue shortfall as 15% to 20% below what analysts had been expecting.

FOOL ON THE HILL An Investment Opinion
Showdown at the Accounting Corral
By Yi-Hsin Chang (TMF Puck)
-- A showdown is imminent between U.S. companies and the Federal Accounting Standards Board (FASB). "Yawn," you say? Not so fast. The issue has to do with something that often captures newspaper and magazine headlines, not to mention our imaginations -- mergers and acquisitions ("M&A" in financial lingo). Hundreds of billions of dollars are at stake here, and some believe that if the FASB gets its way, there actually will be fewer mergers and acquisitions in this country as a result.

Harbinger: Good Things to Come
By Dave Marino-Nachison (TMF Braden)
-- It's shaping up to be a banner 1999 for the companies that make e-commerce software. Powered by the ever-growing consumer and corporate acceptance of electronic commerce, this sector's stars have provided investors with impressive gains with more seemingly on the way heading into the new millennium. Today, business-to-business e-commerce software developer Harbinger Corp. (Nasdaq: HRBC) said it expects EPS to beat Wall Street expectations in both Q3 and Q4.

Affymetrix: The Gene-uine Article?
By Brian Graney (TMF Panic)
-- DNA chipmaker Affymetrix (Nasdaq: AFFX) jumped ahead this morning on a couple doses of good news. First, the company announced its first acquisition since coming public three years ago in the form of privately held Genetic MicroSystems (GMS), which it will gobble up for one million shares. As interesting as that move may be to genomically inclined investors, it pales in significance to Friday's patent ruling by the U.S. Patent and Trademark Office in favor of Affymetrix in a dispute with rival Incyte Pharmaceuticals (Nasdaq: INCY). The ruling, which solidifies Affymetrix's competitive lead in the gene chip business, sent Affimetrix's shares skyward for a 15% gain and lopped off 33% of Incyte's market capitalization in early trading today.