RULE MAKER PORTFOLIO

<THE RULE MAKER PORTFOLIO>
What Happened to Cash-King?

Rule Maker News

By Rob Landley (landley@flash.net)

Austin, TX (Jan. 19, 1999) -- Cisco's rival Lucent Technologies (NYSE: LU) just announced that is buying Ascend Communications (Nasdaq: ASND) for $20 billion, putting Cisco and Lucent more directly in competition. Even assuming Lucent can easily digest a company the size of Ascend, it still has an uphill battle to make any sort of dent in Cisco's market share. However, the competition should help keep Cisco (Nasdaq: CSCO) on its toes anyway. Here's some analysis of the merger from Ziff-Davis' Inter@ctive Investor, which goes into far more detail than I have space for here.

The microchip design formerly known as "Katmai" has now been rechristened "Pentium III" by Intel (Nasdaq: INTC), which intends to launch it in March according to this article in the Electronic Buyers' news. The chip will initially be manufactured to run at 500 mhz, with the runts of the litter sold at 450 mhz. The article also talks about Advanced Micro Devices' (NYSE: AMD) forthcoming competitor, the K7 microchip, which will apparently come to market later and be more expensive to manufacture.

For those of you interested in the technical details of Intel's new chip, here's a detailed review. Katmai includes many new CPU instructions, meaning software compiled to take full advantage of it won't run without it. The moat digging continues.

In other Intel news, the company recently announced plans to include encryption capabilities in future chips, which apparently neatly bypasses the U.S.' brain-dead encryption export laws that have now forced almost all encryption research and development overseas. Those laws currently only apply to software, not hardware.

And before moving on to the rest of the portfolio, I would be derelict in my duties as a Fool if I didn't pass along the following article, proving once and for all that techies are weird: "Installing a network PostScript printer on a Sun workstation running SunOS, as illustrated through interpretive dance."

Pfizer (NYSE: PFE) filed a patent for a faster-acting spray version of Viagra, although the company says it has no plans to develop an actual product around it yet.

Gap Inc. (NYSE: GPS) is one of 18 companies targeted by a human rights lawsuit over the generally disreputable working conditions of foreign workers in the clothing industry. Nike had similar problems a while back, which turned into a public relations nightmare. In this case, the sweatshops were run by subcontractors that supplied garments to several different companies. Although Gap Inc. wasn't directly involved (this time), the underlying problem that foreign textiles are far cheaper than domestic equivalents is industry-wide, due to the nature of textile work as unskilled labor. It's harder to monitor the conditions of foreign workers, and tempting to just follow the numbers on the balance sheet and ignore the underlying reality until protesters show up at your door. Hopefully, our company will be more careful in the future.

The Coca-Cola Co. (NYSE: KO) continues to pay attention to cheap Asian bottling assets, and American Express (NYSE: AXP) continues to buy up smaller accounting firms. Make money, use it to buy something else that makes even more money, watch the stock go up, pat the CEO on the back at the annual meeting, rinse, repeat.

I'll be covering Microsoft's recent news tomorrow. Those of you in the front row may want to shield yourselves with your dinner menus. It's bound to get ugly.

Until then,

- Oak

Al

01/19/99 Close
Stock  Change    Bid
AXP   -3 7/8   100.50
CHV   +  1/2   80.56
CSCO  +4 11/16 106.38
KO    -  13/16 64.06
GPS   +  7/16  57.88
EK    -  1/4   68.75
XON     ---    71.06
GM    +4 11/16 88.00
INTC  +4       139.38
MSFT  +5 7/8   155.63
PFE   +  1/16  115.69
SGP   -  5/16  52.44
TROW  -  15/32 33.91

                   Day   Month    Year  History
        R-MAKER  +1.25%   3.86%   3.86%  35.16%
        S&P:     +0.70%   1.85%   1.85%  24.45%
        NASDAQ:  +2.55%   9.83%   9.83%  44.52%

Rule Maker Stocks

    Rec'd    #  Security     In At       Now    Change
    2/3/98   24 Microsoft     78.27    155.63    98.83%
   6/23/98   34 Cisco Syst    58.41    106.38    82.12%
    5/1/98 55.5 Gap Inc.      34.06     57.88    69.92%
   2/13/98   22 Intel         84.67    139.38    64.60%
    2/3/98   22 Pfizer        82.30    115.69    40.57%
   8/21/98   44 Schering-P    47.99     52.44     9.26%
    2/6/98   56 T. Rowe Pr    33.67     33.91     0.69%
   5/26/98   18 AmExpress    104.07    100.50    -3.43%
   2/27/98   27 Coca-Cola     69.11     64.06    -7.30%

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo    72.41     88.00    21.54%
   3/12/98   20 Exxon         64.34     71.06    10.46%
   3/12/98   20 Eastman Ko    63.15     68.75     8.87%
   3/12/98   15 Chevron       83.34     80.56    -3.34%

Rule Maker Stocks

    Rec'd    #  Security     In At     Value    Change
    2/3/98   24 Microsoft   1878.45   3735.00  $1856.55
   6/23/98   34 Cisco Syst  1985.95   3616.75  $1630.80
    5/1/98 55.5 Gap Inc.    1890.33   3212.06  $1321.73
   2/13/98   22 Intel       1862.83   3066.25  $1203.42
    2/3/98   22 Pfizer      1810.58   2545.13   $734.55
   8/21/98   44 Schering-P   2111.7   2307.25   $195.55
    2/6/98   56 T. Rowe Pr  1885.70   1898.75    $13.05
   5/26/98   18 AmExpress   1873.20   1809.00   -$64.20
   2/27/98   27 Coca-Cola   1865.89   1729.69  -$136.20

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo  1230.89   1496.00   $265.11
   3/12/98   20 Exxon       1286.70   1421.25   $134.55
   3/12/98   20 Eastman Ko  1262.95   1375.00   $112.05
   3/12/98   15 Chevron     1250.14   1208.44   -$41.70

                              CASH    $120.62
                             TOTAL  $29541.18

  
Note: On 8/4/98 $2,000 cash was added to the
portfolio. $2,000 will be added every six months.


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