INDEX:

I. Market News: Market Buoyed by AT&T Announcement
II. Heroes: SHL Systemhouse, Drexler, Westernbank, Richardson
III. Goats: Electromagnetic Sciences, Bolle, Dynatech, Read-Rite
IV. Investment News: AT&T Triple Play
V. Calendar: Thursday's Economic Events

MARKET CLOSE

DJIA: 4792.69, up 25.65
S&P 500: 586.77, up 2.57 (RECORD)
NASDAQ: 1065.09, up 4.77

MARKET NEWS

Largely on the back of AT&T's strong advance (see Investing News), the Dow powered ahead for more than a 25-point gain today. Technology stocks continued to advance on positive comments coming out of the Montgomery conference in San Francisco, driving the Nasdaq back to near-record levels. The S&P 500, however, out-paced the other major indices, setting yet another record mark.

HEROES

SHL Systemhouse <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SHKIF)") else Response.Write("(NASDAQ:SHKIF)") end if %> up $5 1/64 to $12 41/64. MCI Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MCIC)") else Response.Write("(NASDAQ:MCIC)") end if %> reached an agreement to acquire SHL, a Canadian-based world leader in information technology services. The $1 billion deal puts roughly a $13 price tag on each share of SHL. MCI expects the deal to help its business customers become even more competitive by affording MCI the opportunity to act as a single-source provider of information and communications services.

Drexler Technology Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DRXR)") else Response.Write("(NASDAQ:DRXR)") end if %> up $2 9/16 to $13 5/8. Drexler reported yesterday that the Republic of South Korea's Ministry of Health and Welfare will be using a Drexler optical memory card for the "National Health Card" supplied to the South Korean population over the next four years. Drexler manufactured the first 5000 LaserCards this quarter. Ultimately, the program calls for 40 million such cards.

Westernbank Puerto Rico <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:WBPR)") else Response.Write("(NASDAQ:WBPR)") end if %> up $7 1/2 to $43. Westernbank's Board of Directors approved a 3-for-1 stock split to be paid on October 18. In addition, the Board raised the annual dividend 12.5 percent to $0.90 per share.

Richardson Electronics, Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:RELL)") else Response.Write("(NASDAQ:RELL)") end if %> up $1 1/8 to $8. Richardson reported fiscal 1996 first-quarter results yesterday of $0.15 per share, compared to last year's earnings of $0.07. Both sales volume and profit margins also improved over last year for the company's several divisions. Richardson is a leading international distributor and manufacturer of electron tubes and power semiconductors.

GOATS

Electromagnetic Sciences, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ELMG)") else Response.Write("(NASDAQ:ELMG)") end if %> down $4 to $11 3/4. Because of an expected loss by LXE Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:LXEI)") else Response.Write("(NASDAQ:LXEI)") end if %>, a 72%-owned subsidiary, Electromagnetic Sciences announced that its own third-quarter earnings would be adversely affected. LXE's loss should drag ELMG earnings down by approximately $0.20 per share, leaving the company with a consolidated loss of roughly $0.13 per share for the third quarter. ELMG is a wireless communications company.

Bolle America, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BLLE)") else Response.Write("(NASDAQ:BLLE)") end if %> down $2 1/2 to $7 3/8. Benson Eyecare Corp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:EYE)") else Response.Write("(NYSE:EYE)") end if %> and Bolle announced today that the companies have amended their merger agreement. The stock-exchange ratio has been reduced from one share of EYE for every BLLE share to 0.775. The principal reason is to reflect lowered expectations for Bolle's earnings for the second half on 1995.

Dynatech Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DYTC)") else Response.Write("(NASDAQ:DYTC)") end if %> down $3 7/8 to $15 1/8. Dynatech suffered today in the face of an analyst downgrade by Merrill Lynch from "above average" to "near-term neutral." Dynatech supplies products for the support of voice, video, and data communications. Recently the company announced it was acquiring Tele-Path Industries, a privately-held company.

Read-Rite <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:RDRT)") else Response.Write("(NASDAQ:RDRT)") end if %> down $6 3/4 to $38 1/2. In a story indirectly affecting Read-Rite, Seagate Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:SEG)") else Response.Write("(NYSE:SEG)") end if %> and Conner Peripherals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CNR)") else Response.Write("(NYSE:CNR)") end if %> announced that they are considering a merger which would create a $7.5 billion company, by far the largest in the computer storage industry. Traders fear that Read-Rite, for whom Conner is a major customer, may lose sales of its disk-drive components because of the proposed merger. Conner rose $5/8 to $17 1/2 and Seagate dropped $2 to $45 1/4 on the news.

INVESTING NEWS: The AT&T Trinity

A dozen years ago, AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:T)") else Response.Write("(NYSE:T)") end if %> was forced to divest itself of what investors now refer to semi-affectionately as the Baby Bells, the Regional Bell Operating Companies. In a move that took Wall Street by complete surprise this morning, AT&T---the Ma Bell to these near-teenagers---has announced that it is breaking up yet again. This time, however, no court is compelling the company to split up. AT&T Chairman Robert E. Allen characterized the voluntary separation into three separate publicly traded companies as "the next logical turn in AT&T's journey since divestiture."

Under the proposed plan, AT&T will become three companies devoted separately to communications services, communications equipment, and transaction-intensive computing. AT&T believes that together the companies were butting heads as competing strategies and management techniques in the complex giant have prevented the several segments from succeeding as well together as they will be able to individually. In addition to making the management of the three entities more flexible and responsive to the changing competition and technology in the communications industry, the split-up is intended to afford each company the chance to achieve a more accurate---and higher---valuation multiple in the stock market than the combined company has been able to command.

The largest of the three units, the communications services company, will retain the AT&T company name and will include the company's current Communications Services Group, the AT&T Universal Card Services Corporation, the AT&T Solutions consulting and systems-integration organization, and AT&T Wireless Services (formerly McCaw Cellular Communications). In 1994, the combined services units of AT&T had more than $49 billion in revenues, still the world leader in this market, even after the break-up.

The second company, the communications equipment unit, will be focused on AT&T's product and systems businesses and the Bell Laboratories division. As with the services unit, this new company will launch as the world leader in its industry. Total sales for these units in 1994 were roughly $20 billion. AT&T is considering an IPO for 15 percent of the shares of this new company in the first half of next year.

The third business will be the most radically changed. AT&T is getting out of the PC business and will be shedding its Global Information Solutions unit (which grew out of AT&T's purchase of NCR five years ago). The new company will focus on transaction-intensive computing for three primary industries in order to create a smaller and more focused computing business: financial, retail, and communications. A major cost-cutting effort will take place as well, with the elimination of 8,500 jobs. To cover these restructuring costs, AT&T will take a $1.5 billion charge against third-quarter earnings, reducing 1995 earnings by approximately $0.66 per share.

Finally, AT&T will sell its remaining portion (more than 80%) of AT&T Capital Corp., the largest equipment leasing and financing company in the country. Proceeds from the sale of AT&T Capital and the potential IPO would be used to retire current AT&T debt in order to give all three new companies a solid financial foundation for competition in their respective industries.

AT&T shares soared on the news, rising $6 to $63 5/8, as investors took the announcement as a pro-active move toward making the company more responsive, flexible, and competitive.

CALENDAR: Thursday's Economic Events

---Initial Unemployment Claims (8:30)
---Weekly Fed Data (4:30)

Byline: Befumo/Sheard (MF Templar/MF DowMan)