The Boring Portfolio

Boring Portfolio Report
Thursday, December 12, 1996

by Greg Markus (MF Boring)

ANN ARBOR, Mich. (Dec. 12) -- Traders on Wall Street were heard singing tonight:

Ninety-nine Dow points slide off of the wall.
Ninety-nine Dow points slide off.
Stocks go down, get passed all around,
Ninety-nine Dow points slide off of the wall.

A sell-off in the closing half-hour sent stocks sharply lower Thursday, extending yesterday's attitude adjustment. The Dow fell more than 1.5%, the S&P 500 did the same, while the Nasdaq ended 11 points lower, or -0.82%.

The Boring portfolio fell 1.33%, hurt by some late futures-related games played with Cisco shares and continuing weakness in Green Tree Financial. Green Tree's been the victim of a queasy bond market, which has hurt stocks that are sensitive to rises in prevailing interest rates -- or even rumors about prospects for rises in prevailing interest rates. Shares of Borders Group have been soft recently, as well, possibly out of concern that holiday sales may not match expectations -- although there is little or no hard data to support such concerns.

Not everything slid down the wall. Carlisle Companies rose two-bits, and Solectron picked up a half-point. Prime Medical held fast at a bid of $12 5/8.

The big news tonight was about Oracle. The company posted its second quarter earnings shortly after the market closed. Quarterly revenues increased by 36%, to $1.31 billion, but EPS of $0.27, although well inside the $0.25 to $0.29 range of analysts' projections missed the consensus number by a penny.

In its press release, the company noted that overall top- and bottom-line growth were hurt by approximately a 3 percentage point negative currency translation due to weakness in the Japanese yen. Difficulties that Oracle has been facing in Europe were by far the primary focus of the post-report conference call with analysts that ended minutes ago.

CFO Jeff Henley and President Ray Lane emphasized that they were not satisfied with the company's leadership in Europe nor with the caliber of the sales force in at least some countries there. Lane, calling in from Europe, said he was in the midst of taking some significant actions to remedy the situation. The word "firings" was used.

Sales of Oracle applications products increased 77% over last year, meeting or exceeding expectations. Server sales were up "only" 24%, however -- largely due to the aforementioned problems in Europe; and sales of Oracle tools, continued to show negative growth, down 8% year over year.

In addition to replacing top leadership at a number of European locations, the company spokesmen said that growth in employee head-count would "go on a diet," in order to trim some excess from internal expenses. They stressed that this did not mean anything like a freeze, but rather merely slowing the rate of growth by 3 or 4 percentage points.

When asked to comment on competition from Informix, Lane and Henley said that this was not a problem for Oracle. To the contrary, they derided Informix's massive marketing campaign for its Universal Server as being centered around a "band-aid" product patched together and tested for only six-weeks before being launched onto the market. By way of contrast, they emphasized that Oracle's Universal Server has been "in beta" with 300 customers for months now and will go into second stage testing and evaluation next month.

As is customary for companies in highly competitive technology businesses, Oracle execs declined to offer much in the way of guidance for the second half of their fiscal year, other than to say that the company intends to improve server sales (particularly in Europe) and expects some negative currency impact to continue in Q3 and Q4. Also, as previously indicated to analysts, Oracle expects to take a one-time charge for in-process R&D associated with the acquisition of Datalogix in Q3.

I can't offer much in the way of instant analysis or interpretation of the conference call at the moment, except to say that my distinct impression was that the Oracle execs were not at all pleased with having to report that the problems in Europe caused the company to "miss the number." I must also say that I will need to hear more about how exactly Oracle intends to address that issue, as well as compete with not only Informix but also, on the applications side, tough competitors like PeopleSoft and BAAN.

That's it for now. I'll be offering a more complete report on the conference call late tonight.

Stock  Change    Bid
--------------------
BGP   -  7/8   33.00
CSL   +  1/4   58.00
CSCO  -2 1/4   65.75
GNT   -1 3/8   37.63
ORCL  -  5/8   47.25
OXHP  -1 1/4   56.63
PMSI  ---      12.63
SLR   +  1/2   58.50

                    Day   Month    Year  History
        BORING   -1.33%  -2.39%  16.88%  16.88%
        S&P 500  -1.54%  -3.66%  17.32%  17.32%
        NASDAQ   -0.82%   0.44%  24.72%  24.72%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  200 Borders Gr    22.51     33.00    46.59%
   3/8/96  400 Prime Medi    10.07     12.63    25.39%
   2/2/96  200 Green Tree    30.39     37.63    23.82%
  6/26/96  100 Cisco Syst    53.90     65.75    21.99%
  5/24/96  100 Oxford Hea    48.02     56.63    17.91%
  8/13/96  100 Carlisle C    52.65     58.00    10.16%
 10/15/96  100 Solectron     54.52     58.50     7.29%
 11/21/96  100 Oracle Cor    48.65     47.25    -2.88%


    Rec'd   #  Security     In At     Value    Change
  2/28/96  200 Borders Gr  4502.49   6600.00  $2097.51
   2/2/96  200 Green Tree  6077.49   7525.00  $1447.51
  6/26/96  100 Cisco Syst  5389.99   6575.00  $1185.01
   3/8/96  400 Prime Medi  4027.49   5050.00  $1022.51
  5/24/96  100 Oxford Hea  4802.49   5662.50   $860.01
  8/13/96  100 Carlisle C  5264.99   5800.00   $535.01
 10/15/96  100 Solectron   5452.49   5850.00   $397.51
 11/21/96  100 Oracle Cor  4864.99   4725.00  -$139.99

                             CASH  $10651.57
                            TOTAL  $58439.07