Boring Portfolio Report
Thursday, February 27, 1997
by Greg Markus (MF Boring)
JACKSONVILLE, Fla. (Feb. 27) -- The Dow lost 58 points on Thursday, closing at 6925. The S&P 500 and the Nasdaq followed suit, losing 1.32%. and 2.08% respectively. The Borefolio went down, as well -- by 1.85%. Every single holding fell. Ouch!
The market greeted yesterday's news of a pending merger between 3COM (Nasdaq: COMS) and US ROBOTICS (Nasdaq: USRX), with an old fashioned Bronx cheer. CISCO SYSTEMS (Nasdaq: CSCO) couldn't avoid the crossfire and closed down $3.
Apparently Wall Street has found some sort of a connection between that merger and Cisco, even though my analysis of the situation shows no connection at all. I guess I just don't get it. But then practically every networking stock fell today (except for a couple of small fry that looked like they might get bought up), so maybe it was nothing personal towards Cisco.
In other news, Larry Ellison's little company, ORACLE CORP (Nasdaq: ORCL), fell $3/4 today, despite some rather interesting announcements.
At a conference in Orlando, a mere 140 miles from my house, Oracle, EMC CORP (NYSE: EMC), and HEWLETT-PACKARD (NYSE: HWP) announced the completion of a major test of Oracle's next-generation database software, Oracle8.
Called the "Test-to-Scale II" program, this is a major milestone for this product, which shows the viability of Data Warehousing. When storing huge amounts of data, computers must overcome many obstacles, the biggest being access time and reliability It doesn't do a business much good if the data is on a disk somewhere, but it takes, say, 10 hours to access it. It also doesn't do much good if the data is corrupted on the disk, even if it takes a millisecond to access it.
In a nutshell, engineers from all three companies took an 8-node HP 9000 Enterprise Parallel server, with an EMC Symmetrix 3000 Integrated Cached Disk Array (ICDA), and ran Oracle8 with its parallel server option.
Huh? Say again?
Okay, the engineers took 8 HP Computers and hooked them together. They stuck a bunch of big disks on it and ran Oracle8. They created a 1.2 terabyte database and ran a series of tests on this huge database. Oracle8 passed it with flying colors.
Meantime, in a town a bit farther from me then Orlando -- Redwood Shores, Calif., to be precise -- Oracle announced that their Large Systems Support (LSS) center is capable of testing open systems configurations for up to 10,000 users. They call this the "Odyssey Project".
Basically LSS is a way for Oracle's customers to test their stuff before going live with a new system or an upgrade. With Oracle's help, customers can simulate all sorts of scenarios with their client/server applications that they would not dare do with their real system. The more nodes these simulations can handle, the more realistic the tests are for large customers.
Moving further on, in a town a much, much farther from me than Redwood Shores or Orlando -- Cairo, Egypt to be precise -- Oracle announced that they will open a new subsidiary: Oracle Egypt Ltd. This is not a "pyramid" scheme. Oracle plans to target the government, public, private, defense, oil and gas, and banking sectors as places to sell Oracle stuff. Currently, Egypt is a $3 million market for Oracle, with the potential to grow to maybe $750 million in three to four years.
Finally, PRIME MEDICAL SERVICES (Nasdaq: PMSI) lost $1/8 today after reporting fourth quarter earnings and holding the company's first ever conference call. I now relinquish control of the nightly recap to our own on the spot reporter, MF Boring.
Greg, come in Greg....
Howdy, Gary. Man, it's great to have you around on days when the Oracle press office tries to earn its keep.
Here's the scoop on Prime.
Net income for the fourth quarter increased by 65% to $3.39 million, or $0.17 per share, versus $2.06, or $0.13 per share for the year ago period. Quarterly revenues nearly tripled, to $22.2 million versus $7.63 million a year ago.
Both the EPS and revenues numbers were in line with analysts' estimates, and the stock was not much affected by the news. PMSI's bid price slipped $1/8, to a bid of $11 1/2, on relatively meager volume of 74,000 shares. The full financial figures were not available today but will be soon. At that time, the analysts can comb through them and rejigger their models, if needed.
Recall that Prime Medical is the largest operator of lithotripters in the U.S., with 55 stonebusters in 32 states and contracts with approximately 400 hospitals and 255 managed care companies.
At today's price, Prime Medical's stock is trading at 17.2 times trailing earnings. If you're wondering why stock of a company that is tripling revenues and increasing earnings by 65% trades at such a low multiple, you're not alone.
The market's not entirely bonkers, however -- although on days like today I have my doubts. For one thing, nobody expects the company to continue growing at such a pace in 1997 and beyond. After all, Prime more than doubled in size partway through last year when it merged with Lithotripters, Inc. Also, the company benefited from a tax break last year (due to earlier business losses) that will partially expire this year.
On the other hand, Prime has been increasing its minority stake in lithotripter partnerships with urologists around the country and just received state approval to begin offering mobile lithotripsy services in Hawaii. The Aloha state's salty local food and hot, humid weather are perfect for growing kidney stones, so this could be a nice, steady business for Prime's mobile stonebuster.
In addition, the company is negotiating a joint venture with an outfit called EDAP Technomed to develop mobile routes similar to the lithotripsy business but using a new machine, called a Prostatron, for treating benign prostatic hyperplasia (BPH). As noted in this morning's follow-up conference call, the Prosatron biz won't impact 1997 revenues, but it does show promise of contributing significantly to earnings thereafter.
The company also pointed out this morning that they expect the business to become more efficient in 1997 as the company continues to merge Prime's and Litho Inc's administration and accounting operations. The company has also negotiated more favorable insurance and maintenance rates in light of its greatly increased scale of operations.
Altogether, I'm delighted to keep Prime in the Borefolio.
Now let's see if we can get maybe one winning stock tomorrow?
(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 -------------------- BGP - 1/8 42.75 CSL -1 33.00 CSCO -3 55.13 GNT - 3/8 36.88 ORCL - 3/4 39.88 OXHP - 5/8 55.63 PMSI - 1/8 11.50 SLR -2 1/8 53.75 TDW - 7/8 42.50
Day Month Year History BORING -1.85% -3.93% 0.48% 15.62% S&P: -1.32% 1.13% 7.34% 27.90% NASDAQ: -2.08% -4.86% 1.68% 26.11% Rec'd # Security In At Now Change 2/28/96 200 Borders Gr 22.51 42.75 89.89% 8/13/96 200 Carlisle C 26.32 33.00 25.36% 2/2/96 200 Green Tree 30.39 36.88 21.35% 5/24/96 100 Oxford Hea 48.02 55.63 15.83% 3/8/96 400 Prime Medi 10.07 11.50 14.22% 6/26/96 100 Cisco Syst 53.90 55.13 2.27% 10/15/96 100 Solectron 54.52 53.75 -1.42% 12/23/96 100 Tidewater 46.52 42.50 -8.65% 11/21/96 100 Oracle Cor 48.65 39.88 -18.04% Rec'd # Security In At Value Change 2/28/96 200 Borders Gr 4502.49 8550.00 $4047.51 8/13/96 200 Carlisle C 5264.99 6600.00 $1335.01 2/2/96 200 Green Tree 6077.49 7375.00 $1297.51 5/24/96 100 Oxford Hea 4802.49 5562.50 $760.01 3/8/96 400 Prime Medi 4027.49 4600.00 $572.51 6/26/96 100 Cisco Syst 5389.99 5512.50 $122.51 10/15/96 100 Solectron 5452.49 5375.00 -$77.49 12/23/96 100 Tidewater 4652.49 4250.00 -$402.49 11/21/96 100 Oracle Cor 4864.99 3987.50 -$877.49 CASH $5999.08 TOTAL $57811.58