Fielding Innovex
Wednesday, June 10, 1998
by Jeff Fischer
(JeffF@fool.com)

ALEXANDRIA, VA (June 10, 1998) -- Despite generally upbeat words from Alan Greenspan, the stock market couldn't decide which direction to swing -- until the afternoon when it finally collapsed. Greenspan stated that inflation is essentially under control, meaning that an increase in interest rates is unlikely in the near term. For Greenspan's complete remarks, please visit the Fool's collection on the issue, which we offer whenever the G-man officially speaks.

After eating its Frosted Lucky Charms this morning, the Fool Port continued its magically delicious performance, rising another 0.54% in the face of a soggy market. In the past three days the portfolio has gained 5.9% in value, or over $11,000. Of course, it only benefits us if the portfolio is larger five or ten years from now, so I'll shut up about the daily performance. Historically the Fool has gained 309% and the S&P 142%.

First order of business:

Like a crippled warplane, Innovex (Nasdaq: INVX) has only spun lower -- and lower and lower -- over the past six weeks. At one point we even saw smoke billowing from its ticker symbol. This week I utilized our "two-way radio" and gave the company's CFO, Mr. Doug Keller, an important call in order to ascertain the company's position.

He reports that the situation is stable. Despite woes in the disk drive war, Innovex is remaining profitable and is therefore improving its financial strength during these difficult times. Even so, Innovex hasn't won any wars yet, though it has been victorious in many battles over the past five years. The problem is that the war will probably never end -- technology is always changing. Mr. Keller is confident in the company's new HIF product, though, which Seagate is using and other clients are testing.

So why the slaughter? Innovex's stock is below $17 after touching $28 in mid-April.

Innovex believed in its last conference call that it had seen the bottom of its quarterly performance. It hoped that business would accelerate from that point forward, but that didn't prove true. This quarter will likely be flat with the last quarter after all. Mr. Keller said that, although orders were higher in April, they trailed off in May, while forward visibility has not yet improved. As of Monday, the company was just compiling June orders. So it appears that this quarter's performance will be about flat with last quarter's $0.28 per share in earnings. The old estimate for this quarter was $0.36.

We saw what Innovex stock did when it appeared that the business would finally turnaround -- it quickly rose. We've also seen what it did after the turnaround proved premature -- it fell just as quickly, and even further than it had risen. We can only hope that the business does eventually improve. Mr. Keller said that Asia is a factor somewhere in this equation, but much larger are the changes in the drive industry and the recent inventory glut, as mentioned in the last conference call. At least a few companies are testing Innovex's new pre-bonded HIF technology, though, and hopefully they'll begin programs with it in the coming months, helping improve sales and earnings.

With $0.76 per share in earnings for its fiscal year-to-date, let's be pessimistic and call for only another $0.50 per share for the last two quarters of the year. That would be $1.26 in earnings, putting the stock at a P/E of 13. Next year's earnings are anyone's guess, but some think that much of the potential downside has been factored into the stock price. Hey, let's hope so!

Today's news from Western Digital (NYSE: WDC) did little to help Innovex. The fifth-largest disk drive maker announced that it will lose much more money than was expected due to pricing pressure and lower sales for some hard drives. Though this news doesn't impact Innovex much (Western Digital isn't even one of Innovex's top five customers), it did cast a sordid pall over the entire industry. When disk drive investments look deader than disco, it might be time to consider them as investments again. Right now they're about as dead as calypso music.

Elsewhere, Amazon.com (Nasdaq: AMZN) followed yesterday's gain with another new high today (on three times normal volume). On Friday, Amazon was featured as the Fool's Post of the Day. TMF Cheeze shares interesting thoughts on what Amazon might become; he's not thinking that it's your typical bookstore.

And Iomega (NYSE: IOM) isn't your typical stock. Not many equities have swung so wildly in valuation over the past three years, but then again, not many stocks have gained over 400% in the past three years, either. (We'll take it!) No news on Iomega as it bounced today, but the new Dueling Fools is about shareholder lawsuits, in which Iomega is currently gaining experience. Are shareholder lawsuits fair? Are they beneficial and for whom? This informative Duel has, of course, two opinions.

Last up...

Are you a Foolish contributor? At the same time that this column is being posted online, hundreds of Foolish posts are being made in our message boards. On a typical day the Fool is home to between 4,000 and 5,000 posts on its Web and AOL message boards. On top of that, there is much more traffic reading those posts. All told, there are thousands of great stories and mountains of knowledge out there, waiting to be dug up, read, and shared.

What of it?

We want to highlight some of that Foolishness in this column for the benefit and pleasure of everyone. What I'm asking is, "Would you like to write a Fool column?" If so, drop me a note at tmfjeff@aol.com. Whether you're working in an industry that many people invest in (or the Fool has invested in) and you have insight to share, or if you simply have the desire to cover the day's news and share your Foolish experiences, send an email and we'll take it from there. (Please share what you'd like to write about if you have a topic in mind.)

One recent example of Foolishness on the message boards was sent to me by TMF Python. A great but "quiet" post on our Home Depot (NYSE: HD) message board tells the story of a Fool who has owned this stock since its initial public offering in 1981. Because he didn't listen to various money managers (every one of them wanted him to sell Home Depot as early as 1984), this investor is now able to write on the message board, "In 1992 I retired at the age of 42." Especially the last three paragraphs of this post are very Foolish.

Until next time, be Foolish...

--Jeff Fischer

[Related message boards: Innovex I Amazon.com I Iomega I Home Depot]

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TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN +2 7/8 54.13 AOL + 9/16 89.19 T +1 15/16 63.31 DD -1 1/16 77.13 DJT + 1/16 8.63 XON -1 1/16 68.81 INVX -1 1/8 16.63 IP - 3/4 46.19 IOM + 1/8 6.63 KLAC - 13/16 27.88 LU - 11/16 73.81 COMS -1 7/16 26.19 TDFX + 1/2 22.56 SPY - 23/32 111.44
Day Month Year History FOOL +0.54% 5.78% 21.87% 308.99% S&P: -0.55% 1.97% 14.62% 142.64% NASDAQ: -1.53% -0.32% 12.92% 146.22% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 89.19 2352.61% 5/17/95 1960 Iomega Cor 1.28 6.63 417.41% 10/1/96 84 LucentTech 23.81 73.81 210.03% 9/9/97 580 Amazon.com 19.11 54.13 183.22% 8/12/96 130 AT&T 39.58 63.31 59.97% 2/20/98 215 DuPont 59.83 77.13 28.90% 1/8/98 115 S&P Depos. 95.91 111.44 16.19% 2/20/98 200 Exxon 64.09 68.81 7.37% 4/30/97 -1170*Trump* 8.47 8.63 -1.84% 2/20/98 270 Int'l Pape 47.69 46.19 -3.15% 1/8/98 425 3Dfx 25.67 22.56 -12.10% 8/24/95 130 KLA-Tencor 44.71 27.88 -37.66% 6/26/97 325 Innovex 27.71 16.63 -40.00% 8/13/96 250 3Com Corp. 46.86 26.19 -44.12% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 63323.13 $60741.26 9/9/97 580 Amazon.com 11084.24 31392.50 $20308.26 5/17/95 1960 Iomega Cor 2509.60 12985.00 $10475.40 10/1/96 84 LucentTech 1999.88 6200.25 $4200.37 2/20/98 215 DuPont 12864.25 16581.88 $3717.63 8/12/96 130 AT&T 5145.11 8230.63 $3085.52 1/8/98 115 S&P Depos. 11029.25 12815.31 $1786.06 2/20/98 200 Exxon 12818.00 13762.50 $944.50 4/30/97 -1170*Trump* -9908.50 -10091.25 -$182.75 2/20/98 270 Int'l Pape 12876.75 12470.63 -$406.13 1/8/98 425 3Dfx 10908.63 9589.06 -$1319.56 8/24/95 130 KLA-Tencor 5812.49 3623.75 -$2188.74 6/26/97 325 Innovex 9005.62 5403.13 -$3602.50 8/13/96 250 3Com Corp. 11715.99 6546.88 -$5169.12 CASH $11662.57 TOTAL $204495.95

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