<THE DRIP PORTFOLIO>
Online Banking
Asking Fools around the world

by Jeff Fischer (TMFJeff)

ALEXANDRIA, VA (May 11, 1999) --

Only the educated are free.
--Epictetus

Mellon Bank (NYSE: MEL) continues to slim down into a lean, mean, fighting bank.

It was announced that Mellon is selling its electronic funds transferring unit to U.S. Bancorp (NYSE: USB). Financial terms were not disclosed, but the acquisition will make U.S. Bancorp one of the largest third-party transaction processors in the country. The much-respected USB was a finalist in our financial industry study last year. U.S. Bancorp has been building its business by adding building blocks; Mellon has been building its value by, in part, dismantling.

In less than one year, Mellon has closed its credit card department and sold assets on more than four occasions. Management is delivering on an initiative to focus on its highest-return areas of expertise. Mellon has more than $2.3 trillion under management, administration or custody, a number that I can't even fathom -- a number that makes Bill Gates poor. Mellon provides banking, investment and trust services, as well as sporting a hefty mutual fund business.

The company possessed some of the best ROA, ROE, and ROE2 returns, among other measures, in our study of over a dozen companies. Please see the industry study link above for definitions of those acronyms and much more information from Dale's work.

Intel (Nasdaq: INTC) also made news. After the market closed, it was shared that the company would cut -- as in "cutthroat" (bad contextual joke there) -- the prices of its Pentium IIIs. The chip was released in March and already prices will decline as much as 35% on Sunday. As it lowers prices, Intel will also announce the speeds of its next generation of chips.

The price cuts should help sell Pentium IIIs quickly and phase out Pentium IIs. The 450MHz chip will fall 35% in price to $268, the 500MHz chip will decline 24% to $480, and Pentium II prices will logically decline as well. Celeron prices -- the chip that most challenges Advanced MicroDevices (NYSE: AMD) -- will fall another 21%, too. Meanwhile, the next line of Pentium IIIs should be introduced at speeds of 550MHz.

Even when selling Pentium IIIs at $268 apiece, Intel is probably earning a minimum 50% gross margin on each chip. In its next generation of product, as Intel again moves to smaller micron technology, the company will be able to produce more chips per wafer, charge even less per chip, and still earn the same or even better margins, ideally.

Intel closed above $62. Our fictional $58 1/2 sales price -- the price received when advised to sell by a well-known analyst -- isn't very attractive so far. The stock needs to fall to $54 before we can buy it back and be "even," following taxes. Intel trades at 26.6 times 1999 earning estimates.

Campbell Soup (NYSE: CPB) rose 7% without news.

Fools Around the World

I spent much of today catching up with our two Drip message boards on the Web. I regard these two boards with very high... well, regard. In my opinion, they're among the most civil, balanced, and helpful boards among the Fool's many.

Of late on the Drip Companies board, Fools from around the world, of all different backgrounds and experience, have been discussing the merits of Home Depot (NYSE: HD) vs. those of Lowe's Home Improvement (NYSE: LOW). The discussion has been excellent for several days.

Yesterday, Fools began to discuss IRAs in Drips, and Fool "Trevar" went so far as to post most of the companies that offer an IRA option. This conversation has been great as well.

Meanwhile, on the Drip Basics message board any question can be asked and a Foolish answer is shortly received. No question is too silly. You could ask, "How old am I?" and a Fool would politely respond, "Well, do you know what year you were born, Fool? If you do, we'll help you determine your age." Our community is the strongest asset that the Drip Port can offer. I rely on it more than any other resource.

Including now.

I'd like to begin banking online. For research, I began by reading the Fool's Financial Center, focusing on Online Banking. What I'd now appreciate greatly is first-hand references. I want to bank online for simplicity, to allow for electronic payments, and so forth. It doesn't take Einstein to realize that soon having everything online will be a great convenience holding numerous advantages. Some Fools argue that you should wait until your local or current bank goes online, rather than tear up roots and open a new account. I'd rather open a new account now and get started online now, and forever.

So, any online banking suggestions that you have are sought! Although the Drip Companies board isn't made for this topic, that board is a fine catch-all and it has a great community, so let's discuss the topic there. I'm going to post this question there, so please post your thoughts there, too. Hopefully many of us -- anyone who is considering banking online -- can benefit from the ensuing discussion. Thank you for your help; thanks for being part of the Fool community; and thanks for being Foolish.

For now, Fool on!

The Fool is hiring. Answer the call.

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