Boring Portfolio at Last!
Monday, May 4, 1998
By Greg Markus (TMF Boring)

ANN ARBOR, Mich. (May 4, 1998) -- Their intraday gains pared back considerably in late-day trading, the S&P 500 and Nasdaq indexes rose modestly Monday, gaining 0.10% and 0.20%, respectively. In contrast, the Boring Portfolio lost 0.35% in value, due primarily to a $1 drop in shares of Borders Group (NYSE: BGP) to $31 11/16.

During the day, Borders preannounced results for its fiscal first quarter. The company said it expects to report diluted earnings per share of $0.05 per share, a penny ahead of the Street's consensus. Consolidated sales for the company's Borders and Waldenbooks operations increased 17.6% over the year-ago period, to $545.4 million.

In addition, Borders announced that it will launch its e-commerce site,, later this week. Details about the site will be provided in a press release on the day of the launch.

Yahoo! ... um, I mean Yippee! So, uh, why with all this good news did the stock fall?

Good question, and one for which I have no definitive answer... although I've got an idea. Before speculating, though, let's keep things in perspective: the drop was only a buck, the stock closed above its intraday low, and trading volume was only average.

Now to the speculation (and that's all it is). Although revenues at the Borders superstores rose a solid 27.1% over last year's first quarter, to $463.6 million, most of that growth is attributable to an increase in the number of stores. There are now 206 Borders superstores, versus 163 a year ago. On a comparable store basis, sales increased a relatively modest 4.5%.

On the Waldenbooks side, sales for the quarter fell 2.8% to $191.7 million. That result is also largely attributable to a change in the number of stores, although in the Waldenbooks case, the change is a net decline: 903 stores now versus 930 a year ago. On a same-stores basis, sales decreased less than 1%.

The same-stores results appear to be slightly behind plan. In last month's conference call following the release of fiscal 1997 results, Borders management suggested 5 to 6 percent "comps" this year as a target for the superstores and around -0.5% for Waldenbooks.

In today's press release, Borders noted that sales in February and March were "slightly above expectations," but a "softening" in sales occurred in April, "which was attributable to unseasonably warm weather in the northeast and midwest regions of the country."

Whatever. The comps numbers look a tad soft, but it's nothing that can't be made up in the balance of the year. And the news that is finally, finally ready to roll is certainly welcome to at least this Borders shareholder.

Borders will release full details of its first-quarter results and hold a follow-up conference call on May 13. We'll be on the call and will provide you with a timely summary.

Speaking of which, Cisco Systems (Nasdaq: CSCO) will release its fiscal third-quarter results tomorrow, after the closing bell. A conference call will follow immediately thereafter, and we'll be covering that one, too. According to First Call, analysts are looking for earnings of $0.44 per share, excluding one-time charges for acquisitions. That would constitute a 26% gain over the year-ago results.

Ahead of the earnings report, Cisco stock rose $1 3/8 on the bid to set a new closing high at $74 15/16.

Never one to rest, even on the day before a quarterly earnings report, The Kid announced today the signing of a definitive agreement to acquire privately-held CLASS Data Systems of Ra'anana, Israel and Cupertino, California, for $50 million in cash and stock. Cisco expects to take a one-time charge against after-tax earnings of between $0.02 and $0.04 per share in its fiscal fourth quarter in connection with the transaction, which is expected to be completed by the beginning of June.

CLASS Data provides software that gives network administrators the ability to classify and prioritize Internet Protocol (IP) network data traffic. That way, service providers can offer enhanced "quality of service" to business-critical transmissions -- at a premium price, presumably -- while at the same time offering cheaper rates to those of us who merely want to send an email to Aunt Minnie in Duluth.

Or maybe buy a book from

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

Stock  Change    Bid 
 ANDW  +  11/16 22.75 
 CGO   -  5/8   38.13 
 BGP   -1       31.69 
 CSL   -  5/16  50.56 
 CSCO  +1 3/8   74.94 
 FCH   +  1/4   35.50 
 PNR   -  11/16 42.63 
                   Day   Month    Year  History 
         BORING   -0.35%   0.30%   3.48%  30.21% 
         S&P:     +0.09%   0.93%  15.63%  80.51% 
         NASDAQ:  +0.20%   0.47%  19.54%  80.33% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     31.69   181.51% 
   6/26/96  150 Cisco Syst    35.93     74.94   108.55% 
   8/13/96  200 Carlisle C    26.32     50.56    92.07% 
    3/5/97  150 Atlas Air     23.06     38.13    65.34% 
   4/14/98  100 Pentair       43.74     42.63    -2.55% 
   11/6/97  200 FelCor Sui    37.59     35.50    -5.56% 
   1/21/98  200 Andrew Cor    26.09     22.75   -12.80% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  12675.00  $8172.51 
   6/26/96  150 Cisco Syst  5389.99  11240.63  $5850.64 
   8/13/96  200 Carlisle C  5264.99  10112.50  $4847.51 
    3/5/97  150 Atlas Air   3458.74   5718.75  $2260.01 
   4/14/98  100 Pentair     4374.25   4262.50  -$111.75 
   11/6/97  200 FelCor Sui  7518.00   7100.00  -$418.00 
   1/21/98  200 Andrew Cor  5218.00   4550.00  -$668.00 
                              CASH   $9447.76 
                             TOTAL  $65107.14