Fooldom is reporting today on more earnings announcements than you can shake a stick at. By this evening we'll have conference call reports for Aseco, Credence Systems, AnnTaylor, Hewlett-Packard, Gap, Barnes & Noble, Ancor and Game Financial Corp. For some of these, we'll also offer further Foolish interpretation.
MF Merlin's Economic News today covers the Commerce Department's April report on housing starts and building permits and the Labor Department's report on new claims for state unemployment benefits. You'll find the Economic News, as well as all our Special Sections, FoolWires, and earnings reports, on either the Evening News or Stock Research screens. In tonight's Fool on the Hill, MF Templar looks at Diana Corp. and StreamLogic. Enjoy!
IP Timberlands <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IPT)") else Response.Write("(NYSE: IPT)") end if %> shot up $1 3/4 to $13 1/2 today after going "ex-dividend". The day after a company pays a dividend, the market maker adjusts the price by subtracting the value of the dividend paid. With IP Timberlands massive 15% yield, the stock got whacked after paying its normal 50 cent dividend and a special $9.75 special distribution. Thus the company closed at $22 yesterday but opened only at $11 3/4 this morning as a result. Investors believed that a bargain had been created and piled into the shares.
Number Nine Visual Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NINE)") else Response.Write("(NASDAQ: NINE)") end if %>, a pioneer in PC graphics, inspired a lot of confidence among investors today by announcing several key new executives. In the just-created post of Vice President of Engineering is Beverly Schultz, formerly of Avid Technology and Digital Equipment. Number Nine's Chairman and Chief Executive Officer (CEO) Andrew Najda expressed confidence that Schultz would help the company reinforce its "technology leadership role in the graphics industry." Perhaps of more interest to many Fools is that Iomega's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> former Vice President of Operations, John Thompson, is taking the helm as Number Nine's new President and Chief Operating Officer (COO). The market's reaction? Shares were bid up $1 3/4 to $8 3/8.
In continuing proof that the sum of the parts can equal more than the whole, US Long Distance <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USLD)") else Response.Write("(NASDAQ: USLD)") end if %> surged $7 1/2 to $40 today after talking to analysts about the pending spin-off of its billing services operation. Shareholders will receive one share of the new Billing Information Concepts Corp. for each share of US Long Distance they hold. The company has been consistently valued as a long distance provider and the billing business has been completely lost until recently. The jump today is a recognition by investors that the value of the billing unit is much greater than previous assumptions about US Long Distance surge
QUICK TAKES: A+ NETWORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACOM)") else Response.Write("(NASDAQ: ACOM)") end if %> soared $4 3/4 to $20 1/2 after Metrocall <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MCLL)") else Response.Write("(NASDAQ: MCLL)") end if %> signed a definitive agreement to acquire the paging and telemessaging concern in a two-step transaction, initially buying 40% for $21.10 a share. . . The Street appears to have great expectations for the earnings of Westell Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WSTL)") else Response.Write("(NASDAQ: WSTL)") end if %>, which reports after the bell tonight, as shares rose $9 1/4 to $84 1/2. . . Cryptographic specialist TECHNICAL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TCCO)") else Response.Write("(NASDAQ: TCCO)") end if %> soared $2 to $10 3/4 after announcing a $3.9 million deal with AT&T to provide secure communications equipment for a foreign government's underground command center. . . Alex. Brown & Sons upped MESA AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MESA)") else Response.Write("(NASDAQ: MESA)") end if %> to "strong buy" from "buy", moving the company's shares up $1 13/16 to $12 7/8. Analyst William Wrightson thinks the company's fundamentals are stronger than the market currently believes. . . Wireless network and information technology company TCSI CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TCSI)") else Response.Write("(NASDAQ: TCSI)") end if %> announced a 3-for-2 stock split this morning. The shares rallied $2 3/8 to $33 1/4 after this vote of confidence from the board of directors. . . COMPUSA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %> announced today that it will acquire computer direct reseller PCs Compleat for three million shares of CPU stock, which rose $5 1/8 to $44 7/8. . . GLAXO WELLCOME <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLX)") else Response.Write("(NYSE: GLX)") end if %> rose $2 1/4 to $26 on the -- um, positive? -- upgrade from "sell" to "hold" by UBS Securities.
Hewlett Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> released its second quarter earnings today, reporting orders up 24.7%, revenues up 33.8% and earnings per share up 24.5%. Good, right? Not quite, as shares dropped $8 1/2 to $105 1/4. The net income of $1.37 per share was eight cents shy of estimates, and gross margins fell from 37.3% last quarter to 34.2% this quarter. The company stressed that its computers and printers are increasing their market share, and blamed falling margins on product delays, lower margins on PCs, and competitive pricing pressures. To make matters worse, Cowen & Co. cut H-P from "strong buy" to "buy".
Computer game developer Activision <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATVI)") else Response.Write("(NASDAQ: ATVI)") end if %> released a new game today. The new game, "MechWarrior2: Mercenaries", is actually a 'prequel' to last year's hit "MechWarrior2" and features "stunning 3-D graphics, realistic sound effects, and exhilarating first-person gameplay," according to Chairman and CEO Bobby Kotick. Perhaps investors had hoped for something more original? They sent shares down $1 1/4 to $13 3/4.
Data storage device developer Network Appliance <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NTAP)") else Response.Write("(NASDAQ: NTAP)") end if %> dropped $2 1/4 to $36 1/2 in spite of the fact that it reported earnings of $0.17 EPS compared to estimates of about $0.12 according to Zacks Analyst Watch. Network Appliance's revenues were up 222% over the year-ago quarter, with the President and CEO waxing enthusiastic about the company's growth, new products, increasing market demand, and international expansion. He also mentioned the company's newest product, the NetApp F540, as the industry's fastest high-capacity file server.
QUICK CUTS: Shares of VALUJET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VJET)") else Response.Write("(NASDAQ: VJET)") end if %> remained in turmoil, down $7/8 to $13 7/16, as more information about the devastating Florida crash continues to hit the news media. . . Recent initial public offering (IPO) FEMRX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FMRX)") else Response.Write("(NASDAQ: FMRX)") end if %> retreated a little, down $1 1/4 to $15 1/2, after yesterday's news that the Food & Drug Administration had cleared the company's Flo-Stat fluid management product for marketing. . . PARAGON GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAO)") else Response.Write("(NYSE: PAO)") end if %> dropped $1 1/2 to $15 5/8 after reporting a disappointing $0.38 EPS operating result for the quarter, compared to $0.40 EPS last year. . . Turnaround HARVARD INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HAVA)") else Response.Write("(NASDAQ: HAVA)") end if %> dropped $2 7/8 to $15 5/8 after the automotive component manufacturer reported lower third quarter results than had previously been expected.
Diana Corp.: Provisioning the Internet?
Another day, another massive surge in the value of Diana Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %>. Rising $12 1/8 to $84 1/2, today's gains were no doubt fueled by the massive short interest that has developed in this wholesale food distributor cum networking company. Speculation centered today around whether or not Diana would continue its transformation from a food distributor into a networking concern by acquiring StreamLogic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: STLC)") else Response.Write("(NASDAQ: STLC)") end if %>, a company that was in talks with Diana to develop products for Internet Service Providers. With StreamLogic's shares rising $1 1/8 to $6 7/8, it appears that many are speculating that this deal could turn into an acquisition if everything goes well.
For most of the decade, Diana has owned the Atlanta Provision Company, the largest wholesaler of seafood, beef and pork in Atlanta, Georgia. The company has been unsuccessfully trying to unload this business for five years now, to no avail, according to sources that follow the company. The checkered history of the executives who run Diana as well as the fact that there is little apparent tangible value in the company right now have attracted a hoard of short sellers, who at one point are reputed to have sold about 40% of the outstanding shares short. What is it about Diana that keeps the shares driving higher?
Can you say networking or Internet? Since announcing its planned sale of the wholesale food distribution business, Diana Corp. has become a holding company that owns or has a majority interest in a number of connectivity equipment concerns, including C&L Communications, Sattel Communications and Valley Communications. Diana owns C&L Communications outright, a nationwide distributor of telecommunications equipment located in San Antonio, Texas. C&L Telecommunications distributes call controllers and products used in digital networks as well as offering support. The company ranks as the largest distributor of Canadian-based Newbridge Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NN)") else Response.Write("(NYSE: NN)") end if %>. The company has had flat profit growth in 1995 in spite of 24.5% revenue growth due to an increase in sales personnel in the U.S. and Mexico.
Diana's take on C&L is that there is "an industrial revolution taking place in the world and communications are in the forefront. . . C&L is associated with leading manufacturers who provide outstanding products. . . " Without a long dissertation on why the information revolution is not inherently industrial or a revisitation of the recent ups and downs of ill-starred Newbridge Networks, suffice to say that distributor of telecommunications and networking equipment could probably see 20% to 25% topline growth if they were any good at all.
Sattel Communications is a 80/20 partnership between Diana and Sattel Technologies and is the exclusive U.S. distributor of a number of switching and transmission systems manufactured by Sattel Technologies, a privately-held company that makes products for the public switched telephone network (PSTN). Currently Sattel Communications focuses on peddling Sattel's DSS class4/class5 exchanges. The DSS exchanges digital exchanges that provide local, tandem and combined applications and can take anywhere from 96 to 20,000 lines. The final network "jewel" in Diana's crown is its majority interest in Valley Communications, one of the largest network installation and service companies in California. And, surprise, surprise, the company is a value-added reseller of networking equipment.
Most who are short on the stock saw this as a bunch of hot air until recently, when privately-held Internet access provider Concentric agreed to take a look at Sattel's DataNet units, with a price tag ranging from $150,000 to more than $1 million each. Ticker Tape Digest (http://home.goodnet.com/ttd/), a bonafide Internet newsletter, is reputed to have said this deal was worth $100 million to Diana, or $9 a share. Given that Sattel is making the switches and that Sattel apparently sold Diana 30% of the interest in their joint venture for $5 million, I find this a little difficult to believe. Although Diana brings a number of networking distribution channels to the table with its morass of subsidiaries, there is nothing about this company that is truly technological. Diana actually agreed, stating that the Concentric deal would be worth $40 million to the company.
Given that Diana's market cap at the close today was around $300 million, investors are betting that Diana can work its way up to compete with the big leagues of networkers. With an official agreement to provide 21 Concentric sites pending until June 30th, it is difficult to really tell how much the deal would be worth to Diana. Diana's cryptic release talked about an average selling price for DataNet units of $2 million, meaning that at most the company could garner $42 million in revenues from this deal.
DataNet's claim to fame is that it reduces dial-up costs by 75% -- a tasty amount for struggling, cash-flow negative Internet access providers. Apparently, people have seen Ascend Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASND)") else Response.Write("(NASDAQ: ASND)") end if %>, which has a piece of connectivity equipment that has a 90% market share, get rewarded with a tremendous market value based mostly on acquisition-value and believe that Diana is the same story with this nifty little switch. Is the product legit? Who knows, honestly. As near as I can tell there are none in use to judge by -- not necessarily the greatest sign. What is a fact is that Diana has signed on to distribute this product, meaning the fat margins will more than likely remain with Sattel proper and not the joint venture, explaining why Sattel was willing to let 30% go for only $5 million. People who want to get a closer look at Sattel can check out their web site at http://www.sattel.com. In the end, I think the interesting thing to watch and wait for is when those insiders start to sell their shares, signaling that the momentum train is about to pull into the station.
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