Fool Portfolio Report
Wednesday, December 3, 1997
by David Gardner (DavidG@fool.com)


ALEXANDRIA, VA (Dec. 3, 1997) -- The Fool Portfolio failed to keep up with the indices once again, today, maintaining its poor performance over the past four weeks. The Foolfolio recorded a sliver of a gain (0.06%), outpaced by the market's half-percent gain.

Wednesday's trading featured a mixed bag. On the one hand, AOL shot up $4 13/16, following Prudential initiating coverage on the stock with a "Buy" rating. Amazon.com also scored a nice gain, up $1 5/16 to $52 1/8, announcing another exclusive bookselling agreement, this time to sell its books to users of GeoCities (www.geocities.com). And also helping out the Fool today was a $3/16 decline in its short sale of Trump, which came very near touching its all-time low.

On the other hand, almost all our other stocks were down. GM, Iomega, KLA-Tencor, Lucent, and 3M all surrendered a dollar or more. That left the Fool Portfolio flat.

Interestingly, though unsurprisingly to me, 3Com (Nasdaq: COMS) was NOT among those $1 losers, despite its pre-announcement of lower than expected sales and earnings at market close yesterday, and despite a host of brokerage downgrades today (though BA Robertson Stephens actually upgraded its rating on COMS, despite lowering numbers). If you'd checked the message boards yesterday, you would've found some people quoting "after-hours" trading prices far lower than where 3Com closed today, a reminder once again not to listen to silly after-hours quotes. I know we're all curious to hear what the aftermarket thinks of our company's post-bell announcement, but please don't take these quotes seriously. One fellow wrote late last night, "COMS isn't trading after hours -- it is down to about 30.5, then was halted." Now, this isn't to say he had any nefarious intentions... perhaps this information was true, and perhaps it wasn't. Who cares? That's the overall point.

3Com closed down $7/16 to $34 7/8.

The lowered quarterly numbers and estimates had been built into the stock over the past several weeks, making today mostly a ho-hum session (the stock was lower than this most of the day, but came back). A few further of my thoughts went into the COMS folder on our Web site, where I post all over the place these days. If you haven't already checked out our free and exclusive Motley Fool Web message boards, take a look.

Iomega (NYSE: IOM) has been the subject of much discussion recently, flirting with new highs even as a new competitor has come to the landscape. That would be Sony, with its HiFD storage drive that is supposed to hold 200 megabytes per disk, be faster than the Zip, and backward-compatible with the 3.5 inch standard. (Iomega is of course speeding up its own products, and working on its own 200 MB disk, and it enjoys the status as the NEW standard.)

Barron's even wrote a predictably slanted article last weekend that was ostensibly a review of Comdex, but was in fact yet another thinly disguised attack on Iomega, touting this new product as the "Iomega killer."

It's fascinating to watch how Barron's and numerous other Wise publications continue to poison their pens before writing about the Roy, Utah concern whose stock price has appreciated over 1000% in the past two years, matching its explosion in sales (also up 10 times from a few years ago), with healthy and expanding profits and margins. And this is a company that has really improved the lives of consumers and business people with its products, literally carving out a new industry and new technological standard along the way. So it is that each additional misleading article I read about Iomega only demonstrates more bias AND more ignorance. But perhaps we're all used to that by now, right? Many of us are using The Motley Fool today partly because thanks to the online medium, we enjoy the opportunity to assert our own opinions and have them challenged by others in an open interactive format. This is what traditional journalism fears most, as well it should, because it makes it so obvious how much more expertise resides in online communities when compared to, in this case, Barron's.

Joe Journalist wrote about Iomega in Barron's this weekend, expounding that the HiFD drive was the heir apparent to the storage technology industry, likely knocking Iomega out of the box. Read the article yourself, if you wish to visit the newsstand. But I'd suggest a more useful read would be our Iomega folder, where hundreds of people who have followed the whole industry for several years provide their own insights (pro and con) about the Zip, the HiFD, et al. And you can agree or disagree with them; YOU have a voice. You don't just have to sit there and read.

What you'll find is that this notion of "backward compatibility," so often touted as the Zip drive's Achilles heel is, in the words of JJinLA, "Not a decisive advantage. The Zip already has competitors who are selling drives that can read 1.44 floppies. If backwards compatability were a decisive edge, Zip would already be dead. Perhaps it is not a big deal precisely because every PC has a floppy, at almost no cost to the consumer."

It is simple points like these of which the Barron's writer is apparently ignorant that teach the average reader so much about old journalism.

As MrScott wrote in our Iomega folder, "The idea is that the Zip can replace the floppy altogether. I don't remember the last time I had any need for the floppy. All new software is coming out on CD-ROM and if I have any files to save, they are most likely bigger than 1.44MB. Backward compatibility is a non-issue for me, and I suspect it is the same with many people."

It is the same for me. I have stacks of 3.5-inch disks in my office at home, but I never use them. At some point, I need to spend a morning copying them all to a single Zip before jettisoning the lot. That's what 3.5-inch disks mean to me.

Our own TMF Cheeze puts it more succinctly. Making your contemporary storage drive backward compatible, he writes, is like "installing a telegraph key on your telephone in case you need to tap out a message by Morse code."

So it IS all a little bit silly to suggest that backward compatibility gives you an "Iomega killer," particularly considering that most of the competing products that have come along (and disappeared) have had this key "advantage." Meantime, Iomega has an installed base of more than 10 million drives, and likely almost double that if and when Sony actually comes out with its product (supposed to be mid-'98). And Iomega more than any other company has competed best against itself, pouring money into R&D to create products that are better, faster, cheaper. Perhaps only Barron's is slanted enough against this company to suggest that a product that won't materialize for about six months is going to put one of America's great 1990's growth companies out of business.

Then again, birds of a feather DO flock together. Mr. Abelson (the long-time editor whose past work on Iomega is an embarrassment to him), and Joe Journalist last weekend, and in fact much of the Wall-Street-cozy financial journalism out there is, I submit, extremely backward compatible.

Join us in our Iomega folder, or the folder of any of your favorite companies, for more information, discussion, and opinion pro and con, as we all work together to improve our investing.

Finally, calling all Joey Roman fans! Ya gotta read today's Fribble, from the eminently Foolish Mike Kestner.

-- David Gardner, December 3, 1997

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TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN +1 5/16 52.13 AOL +4 13/16 82.00 T + 3/4 57.00 CHV + 1/16 78.56 DJT - 3/16 8.56 GM -1 61.00 INVX - 3/4 22.38 IOM -1 1/8 31.50 KLAC -1 9/16 39.50 LU -3 7/8 78.56 MMM -2 96.31 COMS - 7/16 34.88
Day Month Year History FOOL +0.06% 0.77% 25.03% 233.69% S&P: +0.52% 2.24% 31.86% 113.08% NASDAQ: +0.55% 0.91% 25.10% 124.27% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 31.50 1150.00% 8/5/94 355 AmOnline 7.27 82.00 1027.48% 10/1/96 42 LucentTech 47.62 78.56 64.99% 8/11/95 125 Chevron 50.28 78.56 56.23% 8/12/96 110 Minn M&M 65.68 96.31 46.65% 8/12/96 130 AT&T 39.58 57.00 44.02% 9/9/97 290 Amazon.com 38.22 52.13 36.38% 8/12/96 280 Gen'l Moto 51.97 61.00 17.37% 4/30/97 -1170 *Trump* 8.47 8.56 -1.11% 8/24/95 130 KLA-Tencor 44.71 39.50 -11.66% 6/26/97 325 Innovex 27.71 22.38 -19.25% 8/13/96 250 3Com Corp. 46.86 34.88 -25.58% Rec'd # Security In At Value Change 5/17/95 980 Iomega Cor 2509.60 30870.00 $28360.40 8/5/94 355 AmOnline 2581.87 29110.00 $26528.13 9/9/97 290 Amazon.com 11084.24 15116.25 $4032.01 8/11/95 125 Chevron 6285.61 9820.31 $3534.70 8/12/96 110 Minn M&M 7224.44 10594.38 $3369.94 8/12/96 280 Gen'l Moto 14552.49 17080.00 $2527.51 8/12/96 130 AT&T 5145.11 7410.00 $2264.89 10/1/96 42 LucentTech 1999.88 3299.63 $1299.75 4/30/97 -1170*Trump* -9908.50 -10018.13 -$109.63 8/24/95 130 KLA-Tencor 5812.49 5135.00 -$677.49 6/26/97 325 Innovex 9005.62 7271.88 -$1733.75 8/13/96 250 3Com Corp. 11714.99 8718.75 -$2996.24 CASH $32438.81 TOTAL $166846.87