I. Market News: Technology Stocks Struggle Again
II. Heroes: Nashua, Engelhard, CCH, Nanometrics, Boston Technology
III. Goats: Oakley, Morrison's, First Alert, Read-Rite, Lechter's
IV. Investment Perspective: Intel Has to Carry Client
V. Calendar: Tuesday's Economic Events

MARKET CLOSE

DJIA: 5070.88, up 22.04 (RECORD)
S&P 500: 601.32, up 1.32 (RECORD)
NASDAQ: 1029.32, down 0.85

MARKET NEWS

Another day when Blue Chips partied and technology stocks felt the hangover. Both the DJIA and the S&P 500 closed at record levels today, but the technology-laden Nasdaq slipped on continued worries that semiconductors and computers aren't enjoying the rapid expansion of a few quarters ago.

HEROES

The Street received news of Nashua's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:NSH)") else Response.Write("(NYSE:NSH)") end if %> realignment positively, pushing shares of the paper and office products giant up $1 5/8 to $15 3/8 today. Nashua reported last week that it was realigning its Commercial Products group into three separate divisions---Specialty Coated Products, Label Products and Imaging Supplies. The new Commercial Products division will also include a fourth division, Tape Products, which had been independent. Nashua will take a charge in its fiscal third and fourth quarters for this restructuring.

Engelhard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:EC)") else Response.Write("(NYSE:EC)") end if %> continued to fight its way back after a devastating drop last week. Rising $1 1/4 to $23 3/8, investors apparently were revisiting reports that Engelhard's PremAir smog-reduction system is not as effective as was expected. In joint testing with Ford Motor Company <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:F)") else Response.Write("(NYSE:F)") end if %>, PremAir reduced ozone levels by 80% instead of the expected 90%. Englehard has responded to this by changing PremAir's catalyst formulation to cut the cost of the product from $550 to $50. Given these changes, PremAir still has a solid chance, according to the company, of becoming a commercially profitable venture. As well, Englehard remains a diversified concern and not a one-product wonder.

CCH Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CCHIA)") else Response.Write("(NASDAQ:CCHIA)") end if %> doubled today, soaring $26 7/8 to $54 5/8, on news that the company will be purchased for $55 in cash by Dutch-based Wolters Kluwer NV. CCH, which provides tax and business law information, software and services, is a natural fit for Wolters, a leading professional publisher. The combined entity will have about $3.0 billion in revenues. CCH Inc. also has class B shares that trade under the symbol CCHIB, controlled by the family that founded CCH.

Nanometrics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:NANO)") else Response.Write("(NASDAQ:NANO)") end if %> clawed its way back up today, rising $1 1/4 to $6 1/2 after the company reported that a "large seller" dumped around 10,000 shares of the thinly traded company. Nanometrics makes optical measurement and inspection systems and is effectively a very speculative KLA Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:KLAC)") else Response.Write("(NASDAQ:KLAC)") end if %>, attempting to serve the same margins. As the Chairman of the company owns 70% of its 7.5 million shares, there are only about 2.0 million available to the public, meaning the stock can be very volatile. Efficient markets, indeed.

A disaster two weeks ago is today's Wunderstock. Boston Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BSTN)") else Response.Write("(NASDAQ:BSTN)") end if %>, whose shares once graced the Fool Portfolio, rose $3 3/8 to $15 1/4 today after it announced a new deal with AT&T Corp. The company will take a $21 million charge in its fourth quarter related to start-up costs in its agreement with AT&T. As part of the agreement, Boston Technology will supply AT&T with Access NP network services platforms worth about $15 million over the first six months. By comparison, Boston did about $100 million in revenues over the past four quarters. These platforms will be used as part of AT&T's much ballyhooed AT&T Learning Network and give telephone messaging to 110,000 primary and secondary schools in the U.S. AT&T received warrants to buy roughly five million shares in Boston Technology at $14 as part of the deal.

GOATS

Investors did not need shades to look at bright futures today for sunglass companies. Oakley Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:OO)") else Response.Write("(NYSE:OO)") end if %> slumped $2 5/8 to $31 3/8 today after news of Sunglass Hut's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:RAYS)") else Response.Write("(NASDAQ:RAYS)") end if %> slumping same-store sales growth overcome that stock. Sunglass Hut, which had been pumping out numbers in the mid- to high-single-digit range is now only showing about 2-4% increases. Sunglass Hut plunged $5 to $21 3/4 as well on this news. Oakley's spokesperson could think of no other reason for the decline today.

Morrison's Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:RI)") else Response.Write("(NYSE:RI)") end if %> was bushwhacked today by Schroder Wertheim, cut from "outperform" to "neutral." The stock slumped $1 to $17 as the analyst cited "continued soft sales trends." Apparently Schroder Wertheim is dubious about whether or not the proposed split of Morrison's Inc. into three separately traded companies will unlock any hidden value in the company. The Ruby Tuesday's unit and the fast-growing Mozzarella's Cafe appear to be well positioned in the specialty dining group if it ever emerges from the blue funk it has been in for the past two years. The other two spun-off companies will deal with Morrison's cafeteria operations and Morrison's institutional food operations.

First Alert <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ALRT)") else Response.Write("(NASDAQ:ALRT)") end if %> tumbled $5 1/8 to $8 1/2 after the company reported that retail carbon monoxide detector reorders have not developed as fast expected in November, meaning that cuts in earnings per share will be coming from brokerage analysts. Last year at this time, tennis star Vitas Gerulaitis was killed by carbon monoxide, causing a sales spike that left many distributors with a lot of inventory. Investors may have overreacted, though, failing to take into account that small growth companies tend to have very bumpy earnings. The company will compound its bad quarter by taking a $0.08-per-share write-off for its first-generation carbon monoxide sensor inventory. If First Alert can produce numbers anything like its 21% 5-year growth rate, however, today's price is a steal.

Read-Rite <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:RDRT)") else Response.Write("(NASDAQ:RDRT)") end if %> tumbled $4 1/4 to $21 3/4 today, with the only news that might affect it being Europe's approval of the Seagate-Conner merger. Read-Rite has been smashed over the past weeks because one of its large customers, Seagate, is buying a company that could supply it with the same products that Read-Rite has provided it in the past. The real question would seem not to be what short-term problems Read-Rite might encounter as a result, but what are the long-term growth prospects for the storage industry? Does the industry currently have too much capacity? Are customers wanting smaller hard drives with less memory? Read-Rite would appear to be getting smashed by tax-loss selling and might prove interesting for low-PE investors.

Lechter's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:LECH)") else Response.Write("(NASDAQ:LECH)") end if %> was toppled today, down $1 1/4 to $7 1/8, as a result of Goldman, Sachs' removing the issue from its recommended list. The rating on Lechter's was cut to "moderate outperform," whatever that means. This comes on the heels of Alex. Brown cutting the stock from "buy" to "neutral" last week. The rationale for the downgrade? The analyst in question could not be reached for comment. Shares of the household products retailer have been under increasing pressure as a result of softness in the retail industry, however, and any concerns about a weak Christmas might prompt such a rating cut.

INVESTMENT PERSPECTIVE: Is Packard Bell Plaguing Intel?

Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:INTC)") else Response.Write("(NASDAQ:INTC)") end if %>, down $3 to $60, pulled the Nasdaq down all by its lonesome today, exacerbating the sell-off that has pulled the technology-laden index eight percent below its all-time high set in September. The bad news? Intel had to convert part of its accounts receivable balance for one of its five largest customers into a loan, meaning that the customer in question is having difficulties paying its bills. This sparked a broad-based sell-off in the technology stocks as investors saw this as another sign of a cyclical peak in the technology stocks.

Accounts receivable is an item on a company's balance sheet that goes under the Current Assets section. It is everything that a company has shipped but for which it has not yet been paid. Normally collections on accounts receivable are measured in days, and for all intents and purposes, accounts receivable can be considered as good as cash, less allowances for doubtful accounts.

The significance of Intel's converting part of its accounts receivable into a loan is that it raises the question of its accounts receivable across the board. With Intel shifting $470 million into a loan, roughly 14% of its entire accounts receivable as of September 30th, the vulnerability of Intel's nifty profit stream to a write-down of bad accounts receivable becomes a real possibility. The customer is having difficulties making payments and the reasons for these difficulties are unclear, creating a lot of speculation about whether anyone else in the computer industry will start to have similar problems and whether Intel will be left exposed as a result of this particular decision.

"Intel has a customer with a particular need [that we are trying to accommodate]," said company spokesman Howard High today. Who is the problem customer? Once again, the industry is pointing the finger at low-price wonder Packard Bell, suspected as the culprit behind Cirrus Logic's slowed revenue growth as well. Packard Bell is choking because no one is buying their low-end products and apparently they have cut their orders to Cirrus Logic for video chips and have asked Intel for extended payment terms for their central processing unit and motherboard purchases. Packard Bell has serious cash flow problems which might drive them to cut prices even further to drive revenues, sparking an industry price war.

An industry price war would be detrimental to Packard Bell's competitors like Compaq <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CPQ)") else Response.Write("(NYSE:CPQ)") end if %>, Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DELL)") else Response.Write("(NASDAQ:DELL)") end if %> and Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:GATE)") else Response.Write("(NASDAQ:GATE)") end if %>. It would also potentially backfire on Intel in the short-term, as other computer makers cut their prices, become less profitable and demand similar terms from Intel. The result would be slowing earnings growth because of the increased allowances for accounts receivable.

Obviously, this is the starkest and worst-case scenario. Another possible scenario is that Packard Bell rights itself by shrinking its operations or folds completely, presenting a nice opportunity either way for the other PC manufacturers. Packard Bell carries the perception of lower quality and cannot command any sort of premium pricing, unlike Compaq. As Packard Bell operates through the conventional retail distribution set-up and is not a mail-order firm like Dell and Gateway, it has fewer opportunities to cut costs to survive.

Perhaps the problems roiling the technology industry are the result of the death of non-name-brand retail technology products. Almost every other technology company from Intel to Microsoft has built on brand-name recognition that allows some sort of excitement or premium pricing for their products. Packard Bell has not. In the final analysis, Packard Bell might simply be a dinosaur and the rest of the computer industry might chug along without it.

CALENDAR: Tuesday's Economic Events

---November Consumer Confidence (10:00)

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