The earnings extravaganza is underway! The Fool is featuring reports on earnings announcements, as well as some conference call reports, on Motorola, Advanced Micro Devices, International Paper, and Blyth Industries. A new FoolWire covers Viasoft and Cellstar, which have both lost key executives. Economic News today looks at the Labor Department's revision of business productivity estimates for the fourth quarter and for all of 1995.
The semiconductor Book-to-Bill ratio for March came in at 0.80, well below expectations, but semiconductor stocks didn't plummet in response. Check out our Special Section on the Book-to-Bill. You'll find all earnings reports, Special Sections, FoolWires, and the Economic News on the Evening News screen. MF Templar examines Motorola in his Investment Perspective tonight.
Waterhouse Investor Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHO)") else Response.Write("(NYSE: WHO)") end if %> found itself a new owner today when Canadian-based Toronto-Dominion Bank offered $38 a share for the discount brokerage. Waterhouse shares surged $3 1/4 to $36 1/4 -- a pretty nice gain, considering the stock was in the mid-$20s last month. By combining Waterhouse with Toronto-Dominion's Canadian discount brokerage, Green Line Investor Services, the Canadian bank ends up as one of the largest discount brokerages in the world. Founder Lawrence Waterhouse, who owns 23% of the common stock, ends years of high volatile stock moves caused by finicky investors and a lack of serious institutional attention.
Chattem <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CHTT)") else Response.Write("(NASDAQ: CHTT)") end if %> reached to stop that painful itch today, picking up the Gold Bond line of medicated powders and anti-itch creams for 1.1 million shares and the outstanding debt of Martin Himmel Inc. Chattem rose $1 3/4 to $6 3/8 as the company announced it would earn somewhere between $0.90 to $1.00 per share as a result of this acquisition. Chattem stated only days earlier that it would earn about $0.35 EPS in fiscal 1996 as a result of $0.15 to $0.20 EPS in costs related to the relaunch of its pHisoderm skin cleanser.
Cliff's Drilling <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLDR)") else Response.Write("(NASDAQ: CLDR)") end if %> continued the gains in the oilfield equipment industry today when it acquired ten drilling rigs from Viking Supply Ships of Norway. Cliff's gushed up $4 7/16 to $21 1/2 as a result of the purchase. The company will pay $110 million in cash and give the shipping company 1.2 million in Cliff common shares. The rigs are designed for offshore work and are good to depths of 200 feet. This comes only days after BJ Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %> was set on fire after it paid $125 million to acquire the assets of Canadian oilfield equipment concern Nowsco.
UUNet Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: UUNT)") else Response.Write("(NASDAQ: UUNT)") end if %> rose $3 3/4 to $35 today after Laidlaw Securities began covering the Internet service provider and issued a "buy" rating. The connectivity provider was knocked down to the mid-$20s back in February when AT&T announced its WorldNet Internet service. The value of UUNet's extensive and high-quality network infrastructure has sparked a number of takeover rumors, as many believe that it would be cheaper to buy UUNet than to build a similar network. Competitor PSINet <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PSIX)") else Response.Write("(NASDAQ: PSIX)") end if %> leapt $1 1/8 to $8 1/2 as well, after the company revealed it would not need to raise additional capital and planned to be cash flow positive by the fourth quarter.
QUICK TAKES: DATAWARE TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DWTI)") else Response.Write("(NASDAQ: DWTI)") end if %> got a $1 3/8 boost to $8 after it announced it was developing a CD-ROM/electronic catalog for retailers. . . J RAY MCDERMOTT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JRM)") else Response.Write("(NYSE: JRM)") end if %> rose $2 to $21 5/8 after Halliburton announced a joint venture with the company would receive a $20 million British pound contract to fabricate "process topsides". . . WESTELL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WSTL)") else Response.Write("(NASDAQ: WSTL)") end if %> surged $8 1/2 to $58 after Bell Atlantic announced the impending availability of its Asymmetric Digital Subscriber Line (ADSL) service to consumers. . . NETSCAPE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NSCP)") else Response.Write("(NASDAQ: NSCP)") end if %> rose $3 1/4 to $52 1/2 after it cut a deal with General Electric to jointly offer electronic data interchange (EDI) services over the 'Net.
Viasoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VIAS)") else Response.Write("(NASDAQ: VIAS)") end if %> took it on the chin for $2 1/8, falling down to $25 7/8 after its chief financial officer (CFO) said "Adios!" His having only been in the position for two weeks and leaving only two weeks before the company reports earnings does not make the situation look so hot. The CEO did later add that CFO Holland was "terminated for cause." Looking even worse, though, is CellStar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLST)") else Response.Write("(NASDAQ: CLST)") end if %>, which tanked $2 5/8 to $10 3/4 after its newly-hired CFO left on permanent vacation after two weeks on the job. The cellular phone reseller would only say that they are already in the process of finding another qualified candidate. We cover this story in more depth in a FoolWire accessible on the right of the Evening News screen.
From the Dan Dorfman File: Foxmeyer Health <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FOX)") else Response.Write("(NYSE: FOX)") end if %> fell $1 1/2 to $18 3/8 after Cardinal Health <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAH)") else Response.Write("(NYSE: CAH)") end if %> said it was not in talks to buy the company's drug distribution business. Dorfman reported on Monday that Bergen Brunswig <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBC)") else Response.Write("(NYSE: BBC)") end if %>, McKesson Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCK)") else Response.Write("(NYSE: MCK)") end if %> or Cardinal Health were all potential buyers of the pharmaceutical subsidiary. The purchase price Dorfman talked about on Monday was $750 million plus the assumption of about $550 million in debt for the whole enchilada, after which Foxmeyer would use the proceeds to buy back about half of its outstanding shares.
ValuJet <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VJET)") else Response.Write("(NASDAQ: VJET)") end if %> will slow its growth this year, news that caused the stock to fall $3 7/8 to $22. Could this have anything to do with the fact that the airline has given out more free flights to some passengers than they have ever paid for? Increasing run-ins with the Federal Aviation Administration (FAA) are the explanation the company gave in a 10-K filing. The FAA is on record saying it will increase its monitoring activities because of ValuJet's relative youth and fast growth.
QUICK CUTS: PHYSICIAN COMPUTER NETWORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PCNI)") else Response.Write("(NASDAQ: PCNI)") end if %> continued to sink after its already-announced a 5.1 million secondary offering, down another $2 1/4 to $10 today. . . DATA I/O <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DAIO)") else Response.Write("(NASDAQ: DAIO)") end if %> lost $7/8 to $5 1/2 after it predicted flat earnings for its next fiscal quarter. . . NEXSTAR PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NXTR)") else Response.Write("(NASDAQ: NXTR)") end if %> was off $2 1/2 to $23 after news of its new AIDS drug sent the shares soaring yesterday. . . TRANSACTION SYSTEMS ARCHITECTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TSAI)") else Response.Write("(NASDAQ: TSAI)") end if %> fell $4 7/8 to $50 1/2 after the company hit a 52-week high yesterday.
INVESTMENT PERSPECTIVE:
Calling Motorola
Continuing to defy any reasonable expectations, manufacturers of semiconductors and semiconductor equipment hung tough for most of the day. Shares only succumbed to inflation jitters late in the day. Bellwether Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> regained its star status for the afternoon, however, rising $3 3/4 to $56 1/4 after posting "better-than-expected" earnings.
A look beneath the surface of the earnings reports reveals that things are not as rosy as they might seem. The actual results for the one of the world's blue-chip communications and electronics manufacturers are less exciting than the "10% above estimates" everyone was reporting. Motorola made $0.63 EPS in the fiscal fourth quarter, compared to $0.61 EPS in the same quarter a year before. A beneficial tax rate and some serious executive-suite cost-cutting is what really accounts for the surprise. Most of Motorola's core markets are still lagging and gross margins have been reduced considerably.
Most surprising was the news that Motorola would cut back on capital spending. The Schaumberg, Illinois giant will now only fork over $3.5 billion for new capacity instead of the $4.4 billion it was talking about last quarter. Most of the cuts are coming from the "semiconductor group" and consist of significant pushouts in orders for new semiconductor equipment. Capital spending will be down sequentially from the $4.2 billion Motorola spent last year, suggesting that semiconductor equipment orders will be off even more.
Slashing sales, general and administrative (SGA) expenses from 18.1% of sales to 15.4% of sales surprised the Street. Just about every analyst covering the company will be issuing new estimates in the coming days to account for the cost-cutting Motorola has accomplished. This three percent savings blunted the beating overall margins took -- otherwise the profit margins would have been about 2.8% instead of the 5.5% they reported.
Weak sales in North America and Europe, price competition in the cellular phone business, and weakness in semiconductor prices were what were weighing on Motorola's bottom line. The company stressed that it was not exposed to the volatile DRAM market, but did say orders only increased 9% versus the 16% increase in revenues -- not a good sign.
In my eyes, Motorola has not really discounted the risk inherent in its next fiscal quarter. Although the company has cut costs, in the end the way to profits is to grow revenues -- something that seems more and more dubious for next quarter. Although some believe new product launches in late '96 will reignite the cellular market, the looming notion that is "Personal Communications Services" (PCS) still hangs over Motorola's head. However, Motorola is the wireless communications franchise and picking up shares in the low $50s makes sense if you believe that the company can maintain its 15% to 20% historical growth rate.
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Byline: Randy Befumo (MF Templar)