Boring Portfolio

Boring Portfolio Report
Tuesday, March 10, 1998
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (March 10, 1998) -- Benchmark equities indexes rose sharply Tuesday, with the Dow soaring 76 points to close above 8600 for the first time ever. The S&P 500 gained 1.14% and the Nasdaq rose 1.35%.

Five of six Boring Portfolio holdings joined the party, but the sixth, Andrew Corp. (Nasdaq: ANDW), did not. Andrew's shares slid an unprincely $3 3/8 prior to trading in the stock being halted around 3pm.

After the market closed, the company warned that if March sales continue at a pace similar to that of January and February, sales and earnings per share for the March quarter could be "about 10-15% below" last year's quarterly revenues of $202 million and EPS of $0.28.

My ancient TI-55III calculator tells me that works out to a projected quarterly EPS of around $0.24. According to First Call, analysts had been looking for $0.33.

Oy vey.

The company said that the slowness arises primarily from two sources. First, overall customer spending in the U.S. wireless infrastructure market has slowed. Second, delays in infrastructure construction, especially in Brazil and Southeast Asia, have resulted in slower growth than previously projected for those regions.

Andrew management said that because the lead time between orders and shipments continues to shorten, visibility of sales patterns necessarily decreases. Consequently, they are unable to forecast with precision how sales in the remainder of March will proceed, let alone how the balance of the fiscal year ending September might turn out.

For now, though, management believes that orders are being delayed rather than canceled and that, therefore, this is more of a relatively short-term timing issue rather than any longer-term trend.

To the contrary, Andrew executives insisted in a follow-up conference call late this afternoon that there is every reason to believe that the communications buildouts in South America, Southeast Asia, China, and other parts of the world must occur if those economies are to develop. Similarly, the PCS buildout in the U.S. is expected to proceed, even if the schedule is stretched out somewhat.

I'm disappointed with this warning coming slow closely on the heels of upbeat message that Andrew executives delivered following their last quarterly earnings report in mid-January. And I'm doubly disappointed in the way that information apparently leaked in advance of the press release today.

Looking past the next few weeks -- or even months -- however, I'm inclined to agree with Andrew's management that the global communications infrastructure buildout is a powerful long-term growth story.

Flipping back to the short-term, the company has plenty of cash on hand and a share buyback program in place that the company will presumably now have the opportunity to activate.

For those who may be interested, Andrew's press release said that a taped replay of the conference call is available until 5 p.m. on Friday the 13th. How apropos. The number for the replay is: 800-951-9642.

Lest it get lost in the news from Andrew, Cisco Systems (Nasdaq: CSCO) announced today that the company has reached agreement to acquire NetSpeed Inc., a privately-held developer of Digital Subscriber Line (DSL) technology. The deal, to be transacted in Cisco stock -- the coin of the realm for such transactions -- is valued at around $236 million.

Cisco's stock picked up $1/8 to close at a bid of $61 5/16.

By the way, Cisco's most recent 10-Q is now available from the SEC's Edgar Website, as is the 10-K for Carlisle Companies (NYSE: CSL). Carlisle's stock gained $3/16.

FoolWatch -- It's what's going on at the Fool today.

Stock  Change    Bid 
 ANDW  -3 3/8   24.69 
 CGO   +  1/4   30.69 
 BGP   +  1/4   34.25 
 CSL   +  3/16  46.94 
 CSCO  +  1/8   61.31 
 FCH   +  1/16  35.00 
                   Day   Month    Year  History 
         BORING   -0.75%  -1.25%  -0.74%  24.90% 
         S&P:     +1.14%   1.42%   9.67%  71.21% 
         NASDAQ:  +1.35%  -1.24%  11.34%  67.97% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     34.25   204.28% 
   8/13/96  200 Carlisle C    26.32     46.94    78.30% 
   6/26/96  150 Cisco Syst    35.93     61.31    70.63% 
    3/5/97  150 Atlas Air     23.06     30.69    33.09% 
   1/21/98  200 Andrew Cor    26.09     24.69    -5.38% 
   11/6/97  200 FelCor Sui    37.59     35.00    -6.89% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  13700.00  $9197.51 
   8/13/96  200 Carlisle C  5264.99   9387.50  $4122.51 
   6/26/96  150 Cisco Syst  5389.99   9196.88  $3806.89 
    3/5/97  150 Atlas Air   3458.74   4603.13  $1144.39 
   1/21/98  200 Andrew Cor  5218.00   4937.50  -$280.50 
   11/6/97  200 FelCor Sui  7518.00   7000.00  -$518.00 
                              CASH  $13625.51 
                             TOTAL  $62450.51