Boring Portfolio Report
Monday, July 22, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI (July 22) -- Friday's selling continued on Monday as the DJIA ended 36 points lower after being off around 60 points earlier in the day. Trading was relatively light -- typical for a summer Monday.

The S&P 500 index fell three-quarters of a percentage point in value. And continuing a pattern we've seen for about a month now, the NASDAQ Composite index incurred the worst damage, off 16 points, or a bit one than one percent.

As for the Boring Portfolio, the day was suitably boring. A few stocks fell, a few stocks rose, and for the day the Borefolio lost $150, or -0.29%.

Cisco was among the losers, shedding $1 3/8 (on the bid side) to $50 1/2. The news this morning was that Cisco had agreed to buy Telebit and its Modem ISDN Channel Aggregation (MICA) technology for approximately $200 million, or $13.35 per Telebit share.

The press release describing the acquisition is available on AOL and at the Cisco website. It's written in technospeak, but the basic idea is that Cisco is acquiring the MICA(tm) ISDN technology and products and the approximately 50 Telebit personnel who do MICA stuff. Cisco will simultaneously sell Telebit's analog modem biz back to Telebit's management, who will then form a new company out of that piece of the former business. (Included in the $200 million price tag is $35 million in financing that Cisco is supplying to the Telebit managers so that they can do the buy-out.)

The next question is, why is Cisco doing this? And the answer, which I got from a Cisco spokesperson, is that the MICA technology allows greater density of ports into Cisco's existing remote access products -- i.e., more bang for the buck for industrial-strength internetworking users. The new technology should start showing up in Cisco products early next year.

Note that the deal is paid for out of Cisco's lush cash reserves: no debt, no secondary, no nuthin'. And it should pay for itself quickly, according to the Cisco source.

According to the press release, "Cisco expects the agreement will result in a one-time charge against after-tax earnings of between 22 and 25 cents per share in its first fiscal quarter of 1997 as a write-off of in-process research and development."

So why is the stock down today? What am I, a fortune teller? Maybe the one-time charge rubbed some folks the wrong way. All I can tell you is that it looks like a good deal to me, Joe Shareholder.

Cisco (and Shaw Group, TXI, and Borders) may have slipped a bit today, but Green Tree Financial and the Borefolio's two healthcare holdings, Prime Medical Services and Oxford Health Plans, were all in the plus column.

Oxford presumably benefited from some favorable coverage in th current issue of Barron's. A story in there argues that as HMOs come under greater scrutiny for the quality of services they provide, and not just their costs, the organizations that score higher on measures of quality should benefit the most. The story singles out Oxford "as a plan that has received high marks for quality" -- which is precisely why it's in the Borefolio.

By the way, I haven't acquired those 100 Spiders <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX:SPY)") else Response.Write("(AMEX:SPY)") end if %> for the Borefolio yet. Maybe tomorrow? (I've got until Thursday's close to make the buy under the Foolish rules.)

That's about it for tonight. Time to watch those Michigan swimmers work some more of their magic in Atlanta.

Transmitted: 7/22/96