<BREAKFAST WITH THE FOOL>
Tuesday, October 6, 1998

Gentlemen who prefer bonds don't know what they're missing." -- Peter Lynch

Latest Market Numbers

Motoring Motorola

Motorola (NYSE: MOT) + Restructuring = Better-than-expected earnings.

And a possible turnaround for the cellular phone and telecommunications equipment company. Last night, the Schaumburg, Ill.-based company reported third quarter earnings of $0.07 a share before charges, down from $0.51 in the same year-earlier period but exceeding analysts' mean estimate of $0.01 share -- the second consecutive quarter Motorola has topped expectations. Revenues for the quarter dropped 3% to $7.2 billion from $7.4 billion a year ago.

Manufacturing consolidation, cost reduction, and restructuring programs generated an estimated $140 million in savings during the quarter, which helped to offset some of the continuing negative impact of economic problems in Asia and weakness in the semiconductor and paging products markets worldwide. The company said it's beginning to see "some early signs of progress," and it's "on track to achieve its goal of an annualized savings rate of at least $750 million by mid-1999."

Here's a quick breakdown of Motorola's performance in its various segments of operations:
Cellular Products -- sales up 9% to $3 billion, orders down 2%.
Land Mobile Products -- sales up 3% to $1.3 billion, orders up 20%
Messaging, Information, and Media -- sales down 38% to $552 million, orders down 10%
Space and Systems Technology -- sales up 12%, orders down 87%
Semiconductor Products -- sales down 14% to $1.8 billion, orders down 10%
Automotive, Component, Computer, and Energy -- sales down 12%, orders down 10%

News to Go

The Japanese government reversed an earlier forecast and said it expects the country's economy to contract for a second straight year. Instead of a prediction of 1.9% growth, officials now anticipate the world's second largest economy will shrink by 1.8% this year -- marking the first time that economy has slowed for two straight years since 1955.

Computer disc drive manufacturing giant Seagate Technology (NYSE: SEG) announced that its majority-owned subsidiary Seagate Software will sell its Network and Storage Management Group (NSMG) to storage management software developer Veritas Software Corp. (Nasdaq: VRTS) in exchange for about 33 million Veritas shares, valued at roughly $1.6 billion. Seagate Technology will end up with a 35% stake in Veritas.

Investment banking firm Lehman Brothers Holdings (NYSE: LEH) said its exposure to Long-Term Capital Management is "a fraction of the $447 million it has at risk to all hedge funds," The Wall Street Journal reported. In an attempt to stanch the 69% drop in its share price, Lehman disclosed that it holds collateral to cover all but $72 million of its exposure to hedge funds. In the case of Long-Term Capital, the company has $41 million in collateral against an exposure of $32 million.

Biogen Inc. (Nasdaq: BGEN) reported after yesterday's close Q3 EPS of $0.49, up from $0.27 in the same prior-year period and in line with analysts' estimates. The biopharmaceutical company's revenues were boosted by sales of Avonex, its drug for treating relapsing forms of multiple sclerosis. The treatment is now being used by more than 50,000 patients globally compared with 44,000 at the beginning of the quarter.

Aftermarket car retail and service chain Pep Boys - Manny, Moe & Jack (NYSE: PBY) said it will sell 100 of its nonservice/nontire format Express stores to rival AutoZone (NYSE: AZO) for $108 million in cash. What's more, Pep Boys plans to close nine underperforming Express stores and take a pre-tax charge of about $34 million to account for the sale and closings. The company also reported a 9.5% increase in comparable store sales for the third quarter.

Meanwhile, in addition to buying 100 Express stores from Pep Boys (NYSE: PBY), AutoZone (NYSE: AZO) reported fiscal Q4 EPS of $0.60, up from $0.53 a year ago. Analysts had been forecasting a mean EPS estimate of $0.61. The company is about to open its first test store outside the U.S., in northern Mexico.

Earnings Announcements Today:

Advanced Micro Devices (NSYE: AMD) -- Q3 mean EPS estimate: loss of $0.13; last year: loss of $0.22
Aluminum Co. of America, or Alcoa (NYSE: AA) -- Q3 mean EPS estimate: $1.06; last year: $1.22
International Speedway Corp. (Nasdaq: ISCA) -- Q3 mean EPS estimate: loss of $0.06; last year: profit of $0.16
Jabil Circuit (NYSE: JBL) -- Q4 mean EPS estimate: $0.32; last year: $0.47

More Foolishness

Fools on our message boards are debating whether Cisco is overvalued or a good buy after the stock plummeted $7 7/16, or 13%, yesterday... The Boring Portfolio is under new management -- Dale and Alex, who say, "If you're not looking for value, then you're not an investor"� Check out the latest Daily Double, InterVoice Inc... Hot off the presses! Don't miss The Motley Fool Investment Tax Guide.

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor

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