Monday, March 4, 1996
MARKET CLOSE

INDEX:

I. Market News: Tech Stocks Remain Deflated
II. Heroes: Inhale Therapeutics, Hollywood Entert., Read-Rite
III. Goats: Alumax, Midcom Comm., Ultratech Stepper, Cognex
IV. Investment Perspective: Investor Relations Then and Now
V. Another Foolish Thing: Play and Win---Fun and Free Hours!

MARKET CLOSE

DJIA: 5600.15 +63.59 (+1.15%)
S&P 500: 650.81 +6.44 (+1.00%)
NASDAQ: 1084.88 -1.20 (-0.11%)

MARKET NEWS

The Dow continued last week's strong surge forward today, but weakness in technology stocks held the NASDAQ back. Much of the talk on Wall Street today centered around IBM Chairman Louis Gerstner's conference with analysts, where he pushed for higher valuations. Read more about this in today's Special Section in the main screen listbox. We have put together a lot of relevant information for you there---featuring news releases, links to earnings and stock reports, and our own MF Templar's take on the day's developments.

The Commerce Department's report on Personal Income and Expenditures for December and January was released today, featuring lower spending. Check out MF Merlin's review of the numbers in the Economic Indicator area of the Evening News screen.

Pop into our Chat rooms tonight! At 10pm ET MF Calbull hosts the Computer Industry Chat, where you can converse about Compaq's recent announcements, among other things. At 12am ET join MF Goldbug as he discusses gold and stocks. You can enter the chat rooms from the lower right corner of the Fool main screen.

HEROES

Inhale Therapeutics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:INHL)") else Response.Write("(NASDAQ:INHL)") end if %> exploded $4 1/2 to $16 3/4 after the development-stage biotechnology company announced a distribution agreement with Baxter Healthcare <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BAX)") else Response.Write("(NYSE:BAX)") end if %>. Inhale has been working on a way to convert medicines into powders that can just be inhaled, rather than having them injected or swallowed. Baxter plans to use Inhale's dry powder pulmonary delivery system to launch its own products. They are serious enough to invest $20 million in Inhale immediately at a 25% premium to Friday's market price. Inhale is eligible for up to $60 million more in research and development funding and milestone payments after they bring the first four drugs they have been assigned by Baxter to market.

Hollywood Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:HLYW)") else Response.Write("(NASDAQ:HLYW)") end if %> rose $1 1/2 to $10 1/2 today after Josephthal gave it a seal of approval, upgrading it from hold to buy. Hollywood crashed a few months back after it missed its earnings target, showed terrible same store sales gains and had some questions raised about how it depreciated its inventories. Hollywood is one of the largest public players in the video rental market, along with Movie Gallery <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MOVI)") else Response.Write("(NASDAQ:MOVI)") end if %>, Blockbuster Video <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX:VIA/A)") else Response.Write("(AMEX:VIA/A)") end if %> and Moovies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MOOV)") else Response.Write("(NASDAQ:MOOV)") end if %>. The stock has hung tenaciously below $10 for weeks, as no one would touch it after it blew up.

Shares of Read-Rite <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:RDRT)") else Response.Write("(NASDAQ:RDRT)") end if %> benefited from a positive profile in last weekend's issue of Barron's, rising $2 to $20 3/8 today. The maker of thin film disk drive heads is down from almost $50 a few months ago, despite strong earnings and revenue gains in the past year. When one of its biggest customers, Conner Peripherals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CNR)") else Response.Write("(NYSE:CNR)") end if %>, was acquired by another company that supplies thin film heads, many investors became concerned over Read-Rite's long term prospects. Later, Read-Rite forecast a difficult quarter because of what it called a difficult transition to a new factory, causing many bears to expect slowing sales because of what happened with Conner. The CEO maintained in the Barron's article that the June quarter looked strong and that his company will continue to grow in spite of what happens with one customer.

QUICK TAKES: PAR TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:PTC)") else Response.Write("(NYSE:PTC)") end if %> refrained from commenting on its stock after it surged $2 7/8 to $14 today. . . BOMBAY COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBA)") else Response.Write("(NYSE: BBA)") end if %> blossomed $1 to $6 1/2, possibly in anticipation of earnings to be reported on Thursday. . . LOWE'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:LOW)") else Response.Write("(NYSE:LOW)") end if %> rose $3 to $35 after reporting a same store sales gain of 9.0% and a total sales gain of 25%. . . HOME DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %> also rose $3 3/8 to $47 5/8 on the Lowe's news, as both compete in the home & garden retail segment. . . ALADDIN KNOWLEDGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ALDNF)") else Response.Write("(NASDAQ:ALDNF)") end if %> climbed $2 3/16 to $11 after it announced the acquisition of Fast Software AG for 3.15 million shares. . . REGENERON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:REGN)") else Response.Write("(NASDAQ:REGN)") end if %> rose $1 3/8 to $13 1/2 after Amgen informed the company that it planned to purchase more shares.

GOATS

Kaiser Aluminum <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:KLU)") else Response.Write("(NYSE:KLU)") end if %> withdrew its hostile bid for Alumax <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMX)") else Response.Write("(NYSE:AMX)") end if %>, causing shares of Alumax to lose $2 3/4 to $33 1/2 today in heavy trading. The third-largest aluminum company in the world had been a tasty takeover target for number four, but was an unwilling bride. With valuations in the cyclical stocks low despite their recent gains, more takeover offers of this kind are probably forthcoming. Given environmental restrictions on expansion in many industries, it is often cheaper to acquire than expand when one wants to build one's business.

Midcom Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MCCI)") else Response.Write("(NASDAQ:MCCI)") end if %> was savaged today for $5 3/4, ending up at $8 when the market closed. Midcom was forced to restate its last quarter earnings due to an overstatement of unbilled revenue during the conversion to a new billing system. Operating cash flow suddenly has become break-even from 7.5% of revenues. The new system dropped calls that it did not know how to bill, like ship-to-shore and conference calls. Midcom also had to restate earnings in the fourth quarter of 1994, which probably explains the degree of the sell-off. Midcom is now cut off from its credit line as a result of its real cash flow situation, and is looking to cut expenses in order to pay its bills.

Semiconductor equipment was getting dumped with everything else technological today. Stepper manufacturer Ultratech Stepper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:UTEK)") else Response.Write("(NASDAQ:UTEK)") end if %> was hurt the worst, down $2 5/16 to $19 1/6 in heavy trading. Cognex <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CGNX)") else Response.Write("(NASDAQ:CGNX)") end if %> also got crunched as well, losing $2 1/2 to $18 1/2. The problem? Continued evidence of a slowdown for semiconductor manufacturers has many dubious that they will continue to add equipment to their fabs.

QUICK CUTS: WEITEK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:WWTK)") else Response.Write("(NASDAQ:WWTK)") end if %> lost $1 1/4 to $1 1/2 after it reported it faced a "significant" first quarter loss and had an investment banker scrambling about looking for partners. . . INTUIT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:INTU)") else Response.Write("(NASDAQ:INTU)") end if %> tumbled again, down $5 5/8 to $44 7/8 after getting smashed on Friday for reporting that Quicken sales will be flat and PC banking costs will be higher than expected. . . Integrated Circuit <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ICST)") else Response.Write("(NASDAQ:ICST)") end if %> was hit for $1 7/8 to close at $6 1/2 after it said the third quarter will be "significantly" lower than year-ago levels. . . Anyone who bought SPYGLASS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SPYG)") else Response.Write("(NASDAQ:SPYG)") end if %> on its first day of trading now has lost money, after the stock fell $3 1/4 to $19 3/4 today. . . Internet equipment manufacturer SYNC RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SYNX)") else Response.Write("(NASDAQ:SYNX)") end if %> got crunched for the third day in a row, down $4 3/4 to $22 1/2, on no news. . . BIG B <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BIGB)") else Response.Write("(NYSE:BIGB)") end if %> lost $1 1/4 to $9 7/8 after it stated it will post fourth quarter and year end results below consensus estimates.

INVESTMENT PERSPECTIVE: Investor Relations Then and Now

International Business Machines is the past. America Online is the future. One could make this assertion in a variety of realms, from technology to human resources policies to attitude. One of the ways in which these two companies completely diverge was pointedly illustrated by two major events that happened to coincide today---IBM held an "analyst-only" conference where no transcript will be released to the public that owns it, while at the same time America Online debuted Full Disclosure.

Today's curious juxtaposition of events highlights the old investor relations school dedicated to serving the ruling class of Wall Street and the new investor relations class that has realized their primary purpose is to inform the shareholder---whether that shareholder be at Merrill Lynch, Charles Schwab or National Discount Broker. The first and foremost issue is one of information versus control. A company loses control of any information that is put out in the public sphere. When this information has to do with financial performance, many managements get legitimately nervous. But whether or not they overcome this anxiety and do something courageous depends on individual management.

With the recent passage of the "Safe Harbor" provision of HR 4256, the Private Securities Litigation Reform Act, companies can now talk about the future with more temerity without living in fear of lawsuits. If this is so, then why is IBM holding an invitation-only conference? Why is it that the only way individual investors can get access to this information is either through the soundbite-driven news media or by calling an expensive Dow Jones hotline (800-755-9461 for U.S. callers)? Because IBM wants to control their story. IBM wants only their interpretation of the facts that surround their future projections to get out to the public. IBM does not want to make available to all its shareholders all the information it can, thus doing them an incredible disservice.

What is the other extreme? Try out Full Disclosure (KEYWORD:FD). America Online's Director of Investor Relations Sara Bhatia has done a bang-up job developing this resource for investors. You now have access to online analysts' reports from participating analysts, consensus estimates by brokerage, a nice summary of what happened with America Online on any given day, in-depth information about the company and its acquisitions, all the recent press releases, transcripts of any conference calls and a calendar of events. Basically, you are as well informed about goings-on at America Online as almost any other professional investor except, perhaps, for key analysts, who probably have direct numbers to the COO or the CFO for when they have a question about depreciation or some such thing.

Frankly, as an investor I am excited about Full Disclosure and it is my hope that America Online entices other public companies to build areas like this. By putting up answers to frequently asked questions, America Online has decreased the amount they have to invest in their Investor Relations department and increased the satisfaction of their shareholders. I cannot imagine that IBM, with their closed special session for full-service brokerage analysts, can begin to compare on this level.

Although this does not directly impact on the individual companies or their stock prices, I think that this issue eventually has an effect on valuation. Stocks are priced based on the best information available about their future prospects. If one company is more efficient in disseminating information to shareholders than another, the value of that company will be bid up as a result. This is why there are great values in unknown small caps and this is why there is great value in enhancing shareholder relations and putting information in the hands of the people who own a company. Full Disclosure moves beyond the promotional advertising that peppers the Web and gives real information with real value to America Online shareholders. I can only hope that all of the other companies in my portfolio will do this as well.

YET ANOTHER FOOLISH THING: Fools on the Radio!

That's right! David and Tom Gardner are bringing their Foolish outlook to the airwaves this weekend. Tune in to the Monitor Radio's Weekend Edition---stations and times are listed in the Radio page.

Byline: Randy Befumo (MF Templar)