Boring Portfolio

Boring Portfolio Report
Monday, July 21, 1997
by Greg Markus (TMFBoring)

ANN ARBOR, Mich. (July 21, 1997) -- The S&P 500 fell 0.26% on Monday, perhaps a bit jittery ahead of Fed Chairman Alan Greenspan's periodic report to Congress, scheduled for tomorrow. The Nasdaq lost 0.76%. And the Boring Portfolio split the difference, falling 0.46% -- that despite Boring advancers outnumbering decliners five to four.

Among Boring winners were GREEN TREE FINANCIAL (NYSE: GNT) and CARLISLE COMPANIES (NYSE: CSL). Carlisle gained $13/16 on enormous volume (for Carlisle) of more than 240,000 shares to establish an all-time high at $38 3/16. Summaries of both the Carlisle and Green Tree post-earnings conference calls are now available for your review in The Motley Fool.

TIDEWATER (NYSE: TDW) reports its quarterly results tomorrow morning. The stock rose $3/16 ahead of that report. We'll be covering Tidewater's conference call and reporting back to you.

ORACLE (Nasdaq: ORCL) slipped $1/16 -- one of five Boring stocks that moved up or down by 'teenths today.

Tonight's Borefolio recap includes excerpts from a recent conversation between veteran software businessman and investor Bob Sutton and Motley Fool writer Nico Detourn. The topic of the conversation, which took place in the "Oracle" folder within The Motley Fool's site on AOL, was the place of the Network Computer in Oracle's -- or at least founder, Chairman and CEO Larry Ellison's -- grand strategy.

Some Oracle investors and potential investors have wondered why Ellison latched on to the NC concept and why it's become such a centerpiece of so many press releases from Oracle -- if not necessarily the focal point of the company's day-to-day work.

Is Ellison obsessed with one-upping nemesis Bill Gates and MICROSOFT (Nasdaq: MSFT), even at the possible expense of side-tracking Oracle? Does Ellison intend to add a hardwire line to his company -- as his recent musings out loud about buying troubled APPLE COMPUTER (Nasdaq: AAPL) might suggest? And if the NC is the answer, what exactly was the question? Does Larry want to take us all back in time to the age of Big Iron and dumb terminals?

And stuff like that there.

Our story opens with a friendly challenge from one "Cletian," who asked: "Can someone please enlighten me as to exactly how Oracle makes a buck off the net PC? I despise the [Wintel] Evil Empire as much as Ellison does, but I can't afford to invest in companies that venture outside the realm of their competence."

Bob Sutton accepted the challenge, as follows:

"The risk for investors is to misperceive what Oracle is trying to do with the NC. It is not as simple as some are suggesting. Oracle is developing the 'commodity' NC device as a 'proof-of-concept' and to seed the market with early-adaptor institutional customers. It is much more likely that Ellison will spin the NC operation off to shareholders (or perhaps merge it with a larger electronics manufacturer) whenever it becomes a going concern than that he will run it as a profit center within Oracle Corp. He does NOT want to be in the low-margin hardware business.

"What he does want to do is to provide a clear alternative to the monopolistic Microsoft desktop-dominated 'fat-client' architecture that predominates today. If none emerges in the next couple of years, Microsoft will own the world's computing infrastructure by default. So far, nobody else has stepped up to this challenge: UNIX is under attack by NT, Apple has been marginalized, and IBM (NYSE: IBM) is still licking its wounds from the OS/2 debacle.

"Whatever else you may think about the man, Larry has never been afraid to lead. It is a mistake to think that the NC is a vanity project. By attacking the exorbitant operating costs associated with Wintel personal computers, and by demonstrating a lower-cost 'thin-client' architecture, Ellison is trying to grab the industry's attention before it capitulates to Microsoft's integrated vision of desktop and 'back-office' systems.

If the NC strategy succeeds and becomes broadly established throughout business and institutional sites (where the payback is largest), Ellison will have robbed Microsoft of its cash-cow in desktop applications sales and severely reduced the need for Microsoft operating system products, thereby putting Microsoft on a level playing field for the first time in a decade. But it won't really be level, because the proposed NC architecture relies extensively upon centrally managed database and applications servers to host data and applets -- a market in which Oracle is the undisputed King of the Hill. And you can bet that the skinny little NC operating system will optimize whenever it hooks up with one of those Oracle servers.

"Ellison has obviously struck a nerve, as evidenced by Gates's sudden interest in building a Microsoft network computer to counter the NC. Two or three years from now, investors will know whether Ellison's bold gambit worked. But I doubt seriously that we'll see a company whose earnings reflect any measurable distraction from the NC hardware business in the meantime."

Nico Detourn (TMF Nico) took the floor next. Although he agreed with much of what Sutton had to say, Nico still wondered whether the NC's guiding principle of "antiMicrosoftism" may at the end of the day "be little more than personal ambition passing itself off as public service on a grand scale."

Nico went on to offer his take on the various features of the two competing systems: Wintel vs. Orasun. "What I want to know is: What on balance really makes the Orasun centralized management scheme any better than the Wintel monopoly? In particular, why would I choose to have all my stuff stored in the Orasun warehouse rather than on my Wintel-colonized desktop?"

Why, indeed?

Bob Sutton and others have an answer -- and we'll continue the story tomorrow. For know, though, if you want a funny story about How Larry Ellison faced Demo Hell at the spring Comdex show, click over to Upside magazine.

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(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.

Stock  Change    Bid
ATLS  -  1/16  22.31
BGP   - 11/16  25.44
CSL   + 13/16  38.19
CSCO  +  5/16  76.69
GNT   + 11/16  41.88
ORCL  -  5/8   55.13
OXHP  -3       83.00
PMSI  +  1/16  11.63
TDW   +  1/16  47.69
                   Day   Month    Year  History
        BORING   -0.42%   6.04%  18.57%  36.45%
        S&P:     -0.26%   3.14%  23.25%  46.86%
        NASDAQ:  -0.76%   6.53%  18.99%  47.58%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     25.44   125.99%
  5/24/96  100 Oxford Hea    48.02     83.00    72.83%
  8/13/96  200 Carlisle C    26.32     38.19    45.06%
  6/26/96  100 Cisco Syst    53.90     76.69    42.28%
   2/2/96  200 Green Tree    30.39     41.88    37.80%
   3/8/96  400 Prime Medi    10.07     11.63    15.46%
 11/21/96  100 Oracle Cor    48.65     55.13    13.31%
 12/23/96  100 Tidewater     46.52     47.69     2.50%
   3/5/97  150 Atlas Air     23.06     22.31    -3.23%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  10175.00  $5672.51
  5/24/96  100 Oxford Hea  4802.49   8300.00  $3497.51
  8/13/96  200 Carlisle C  5264.99   7637.50  $2372.51
   2/2/96  200 Green Tree  6077.49   8375.00  $2297.51
  6/26/96  100 Cisco Syst  5389.99   7668.75  $2278.76
 11/21/96  100 Oracle Cor  4864.99   5512.50   $647.51
   3/8/96  400 Prime Medi  4027.49   4650.00   $622.51
 12/23/96  100 Tidewater   4652.49   4768.75   $116.26
   3/5/97  150 Atlas Air   3458.74   3346.88  -$111.87

                             CASH   $7788.54
                            TOTAL  $68222.92