Boring Portfolio

First the Bad News
Friday, March 13, 1998
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (March 13, 1998) -- Friday the 13th ended a week full of news and events for the Boring Portfolio -- some of it good and some of it decidedly less good, at least in the short term.

First the bad news. A new chapter was written in the continuing saga, When Bad Things Happen to Good Portfolios, when Andrew Corp. (Nasdaq: ANDW) warned late Tuesday that sales and earnings for the March quarter could be "about 10-15% below" last year's quarterly revenues of $202 million and EPS of $0.28.

The company attributed the shortfall primarily to sluggish spending by its customers in the U.S. wireless infrastructure market and delays in infrastructure construction, especially in Brazil and Southeast Asia.

In a follow-up conference call, Andrew's management said that because lead times between orders and shipments continue to shorten, visibility is limited regarding sales patterns for the balance of the company's fiscal year, which ends in September. That said, the company believes that its June and September quarters should come out ahead of last year, based on what customers are saying now.

As for the long haul, Andrew executives insist that there is every reason to believe that the communications buildouts in South America, Southeast Asia, China, and other parts of the world will pick up eventually, as will the PCS buildout in the U.S., even if the schedule is stretched out somewhat.

Disappointment with the short-term news aside, it's difficult for me to view the build-out of the global communications infrastucture as anything other than a compelling long-term growth story. So we're sticking with Andrew.

Now some good news, and there's a lot.

Borders Group (NYSE: BGP) reported its fourth quarter and fiscal 1997 results on Monday morning. In line with the company's recent guidance, Borders earned $0.96 per share in the fourth quarter, up 17% over last year's $0.82. Consolidated fourth-quarter sales increased 18% to $859 million.

In their conference call, Borders management said they expect sales to rise to $2.6 billion in 1998, an increase of approximately 16.5%, and gross margins are projected to improve by approximately 70 basis points (0.70 percentage points). All in all, Borders execs said that the current quarter is on plan, and they projected diluted earnings of $1.21 per share for 1998.

The company anticipates opening 40 domestic Borders superstores and 3 international Borders during the year -- two in the United Kingdom and one in Australia. Borders management said that they are "very hopeful" of launching in the current quarter, but they and their partner in the effort, IBM (NYSE: IBM), want to make sure everything is as it should be prior to launch.

I guess they don't want to hear in their headsets, "Ann Arbor, we have a problem."

Cisco Systems (Nasdaq: CSCO) provided big news almost every day this week. On Tuesday, Cisco announced that it had reached agreement to acquire NetSpeed Inc., a privately-held developer of Digital Subscriber Line (DSL) technology, for $236 million in Cisco stock.

The next day, the folks on Tasman Drive said they'd signed a definitive agreement to acquire privately-held Precept Software Inc., a multimedia networking software company based up the road in Palo Alto. The price of the deal is about $84 million in -- you guessed it -- Cisco stock.

Simultaneously, Cisco announced that Precept's president and CEO, Judith Estrin, was promoted to senior vice president and chief technology officer at Cisco. She replaces Ed Kozel, who is cutting back to half-time to enjoy some time with his family before resuming a full-time pace at Cisco in a couple of years.

Atlas Air (NYSE: CGO) forwarded some good news of its own. In an interview with Reuters, Don Hickey, Atlas's vice president of marketing, said his company was in talks with Chinese airlines and expected to start operations to mainland China in 1998.

"Our belief is that we will have at least one airplane in China before the end of the year," Hickey said.

And on Friday, Atlas announced it intends to repurchase up to 100,000 shares from time to time in the open market, making the shares available for use under its employee stock purchase and options plans.

Atlas stock ascended $2 1/2 this week, or 8.3%, to $32 1/2.

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

Stock  Change    Bid 
 ANDW    ---    21.94 
 CGO   +1 3/16  32.50 
 BGP   -  1/4   33.25 
 CSL   -  15/16 47.00 
 CSCO  +  5/8   64.56 
 FCH   -  3/8   35.38 
                   Day   Month    Year  History 
         BORING   -0.15%  -1.41%  -0.90%  24.69% 
         S&P:     -0.13%   1.83%  10.12%  71.90% 
         NASDAQ:  +0.43%   0.07%  12.82%  70.19% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     33.25   195.39% 
   6/26/96  150 Cisco Syst    35.93     64.56    79.67% 
   8/13/96  200 Carlisle C    26.32     47.00    78.54% 
    3/5/97  150 Atlas Air     23.06     32.50    40.95% 
   11/6/97  200 FelCor Sui    37.59     35.38    -5.89% 
   1/21/98  200 Andrew Cor    26.09     21.94   -15.92% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  13300.00  $8797.51 
   6/26/96  150 Cisco Syst  5389.99   9684.38  $4294.39 
   8/13/96  200 Carlisle C  5264.99   9400.00  $4135.01 
    3/5/97  150 Atlas Air   3458.74   4875.00  $1416.26 
   11/6/97  200 FelCor Sui  7518.00   7075.00  -$443.00 
   1/21/98  200 Andrew Cor  5218.00   4387.50  -$830.50 
                              CASH  $13625.51 
                             TOTAL  $62347.39