The Lunchtime News today featured Motorola, which got drubbed following yesterday's less-than-stellar earnings announcement. Speaking of earnings announcements, we'll soon have an Earnings Central collection for conference call coverage on International Paper, Dow Jones & Co., Abbott Labs, Helen of Troy, Ascend, and Motorola. But wait, there's more -- it's not sold in any store. Now how much would you pay? Well, Outdoor Systems (OSIA) paid Gannett (GCI) a cool $690 million for their billboard advertising division. We've got a call into Outdoor Systems, and hope to have the full story available this evening.
MF Merlin's Economic News today discusses the Bureau of the Census's report of advance data on large retailers' profits for the first quarter of 1996. 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. Enjoy!
Note: The Fool is wondering if any of our readers are networked into west-coast brokerage Robertson Stephens. We are interested in sending a Foolish correspondent to cover the Robertson Stephens Semiconductor Conference and are wondering if any Fools out there can lend a hand in this effort. Please e-mail Randy Befumo (MF Templar) if you can help out in this matter.
HEROES
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ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASND)") else Response.Write("(NASDAQ: ASND)") end if %> gained $3 3/4 to $60 7/8 this morning after reporting second quarter earnings yesterday that exceeded Street expectations by more than 31%. The company's MAX product family continues to dominate the networks of Internet Service Providers (ISPs). Soon-to-be-acquired NETSTAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NTSR)") else Response.Write("(NASDAQ: NTSR)") end if %> rose $3/4 to $20 1/2. Find out more details in the Foolish Conference Call Synopsis. Yesterday it was announced that Ascend will be added to the Nasdaq-100 Index, replacing STRATACOM (STRM), which is being acquired by CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSCO)") else Response.Write("(NASDAQ: CSCO)") end if %>. The index is composed of the Nasdaq's largest non-financial stocks and serves as a benchmark for large growth stocks.
Shares of HEALTH RISK MANAGEMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HRMI)") else Response.Write("(NASDAQ: HRMI)") end if %> shot up $1 1/2 to $12 1/2 after the company's subsidiary, The Institute for Healthcare Quality (IHQ), made some key announcements. IHQ signed on some new clients and upgraded existing clients for its QualityFIRST (R) Best Practice Healthcare Guidelines software, which supports HMO personnel with medical decision-making. HRM Chief Executive Officer (CEO) Marlene Travis added that, "In addition to recommending optimal care, the guideline reporting function provides profiles of physician practices and patterns of care, measures and documents outcome-based improvements in care, and it has a feedback feature that incorporates outcome findings and changes in medical practice to enhance future patient care."
OUTDOOR SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OSIA)") else Response.Write("(NASDAQ: OSIA)") end if %> surged $11 7/8 to $48 1/8 today after it paid a cool $690 million for GANNETT CO.'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GCI)") else Response.Write("(NYSE: GCI)") end if %> billboard advertising division. Gannett will use the proceeds to pay down its debt, while Outdoor systems gets to significantly boost its market position. Moody's Investors Service announced today that Outdoor Systems's B2 bond rating is now on review for a possible review, noting that, "Outdoor Systems is already highly leveraged."
QUICK TAKES: Shares of drugstore chain FAY'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FAY)") else Response.Write("(NYSE: FAY)") end if %> charged $1 3/8 to $10 after investors got wind of discussions about a possible buyout by J.C. PENNEY'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JCP)") else Response.Write("(NYSE:JCP)") end if %>... Footwear concern WOLVERINE WORLD WIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WWW)") else Response.Write("(NYSE: WWW)") end if %> howled up $1 1/2 to $33 1/2 after beating analyst estimates by two cents in its second quarter... SEAWAY FOOD TOWN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SEWY)") else Response.Write("(NASDAQ: SEWY)") end if %> reported third quarter earnings at roughly twice year-ago levels, and was rewarded with a $2 3/8 to $18 3/4 rise... WIRELESS TELECOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: WTT)") else Response.Write("(AMEX: WTT)") end if %> rang up $3 1/8 to $14 1/4 after a "long-term buy" nod from the Cabot Market Letter's telephone hotline yesterday... VITESSE SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VTSS)") else Response.Write("(NASDAQ: VTSS)") end if %> beat estimates by a penny today, reporting $0.18 per share and sending shares up $2 1/8 to $23 1/8... Electronic RFI filter and power entry product manufacturer CORCOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CORC)") else Response.Write("(NASDAQ: CORC)") end if %> reported second quarter earnings of $0.33 per share, compared with $0.19 in the year-ago period, rising $2 to $10 1/2 for its trouble... Fool portfolio holding MEDICIS PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MDRX)") else Response.Write("(NASDAQ: MDRX)") end if %> was up $3 1/2 to $46 1/2 on no apparent news. Medicis folder denizens suggested earnings anticipation, short covering, and a recent plug in a momentum stock newsletter.
GOATS
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MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> served up a big disappointment yesterday, reporting earnings of $0.54 a share versus consensus expectations of $0.68 a share, and was crushed $8 5/8 to $57 7/8 today as a result. The telecommunications giant really disappointed Cowen & Co. analyst Albert Lin, who had upped his estimates to $0.85 a share just a few days ago on stronger-than-anticipated demand for Motorola's new StarTAC wearable cellular phone. Apparently, Lin did not account for Motorola's hemorrhaging semiconductor business in his business model, which saw revenues drop 34% year-over-year partly as a result of plummeting prices for memory chips. Investors can find out how the cellular phone business fared in contrast to the semiconductor business by reading our very own Foolish Conference Call report, available in today's Special Section on Motorola.
ION LASER TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ILT)") else Response.Write("(AMEX: ILT)") end if %> fell $2 to $13 1/8 today after the company announced that it would petition the United States Patent Office for an "expedited review of its proprietary laser-based tooth whitening procedure." The company had previously filed for patent protection for its proprietary tooth-whitening process, but apparently the process was taking too long for the company's tastes. The stock's decline today suggests that some investors might be questioning whether patent approval will arrive soon enough to protect Ion Laser's products. Foolish investors are advised to check out the active Ion Laser message board for more details.
CERION TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CEON)") else Response.Write("(NASDAQ: CEON)") end if %> plunged $4 1/8 to $4 7/8 after it announced that STORMEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: STMD)") else Response.Write("(NASDAQ: STMD)") end if %> had canceled all of its outstanding purchase orders -- a not-too surprising development considering that MAXTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MXTR)") else Response.Write("(NASDAQ: MXTR)") end if %> had canceled all of its orders to Stormedia not too long ago. The company stated that the cancellation could have a negative impact on its third quarter results and the results of subsequent quarters, but that it would not affect its second quarter results. Cerion also said that the cancellation has not changed its plans to add a second facility, and that it would "actively pursue all avenues to replace the lost business." The question now apparently is which of Cerion's suppliers are vulnerable to the loss of Cerion's business -- in other words, who's next?
QUICK TAKES: CONMED <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CNMD)") else Response.Write("(NASDAQ: CNMD)") end if %> dropped $9 to $13 1/2 today after the medical device manufacturer pre-announced second quarter earnings of $0.27 EPS to $0.29 EPS on sales of $31.8 million, well below the $0.32 EPS which analysts expected... COMPUTER HORIZONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CHRZ)") else Response.Write("(NASDAQ: CHRZ)") end if %> was mashed for $8 3/4 to $20 1/4 after warning of second quarter results a full $0.06 to $0.09 below analyst expectations... Continuing the bad pre-announcing parade, COMMUNITY CARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CCAI)") else Response.Write("(NASDAQ: CCAI)") end if %> fell $3 13/16 to $7 13/16 after it reported that it would take some one-time charges for restructuring in the upcoming quarter, in which it estimates meeting analyst forecasts... CHILDTIME LEARNING CENTERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CTIM)") else Response.Write("(NASDAQ: CTIM)") end if %> stumbled $1 1/2 to $7 7/8 after announcing the opening of three new childcare centers. Apparently, investors were not very enthusiastic about the costs associated with the new locations... Shares of GEOSCIENCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GSCI)") else Response.Write("(NASDAQ: GSCI)") end if %> closed off $2 9/16 to $10 11/16 after the company forecast lower-than-expected earnings on revenues of $26 million.
An Investment Opinion by MF Templar
FOOL ON THE HILL: The Spirit of the Law
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The Securities Reform Act of 1934 was a good thing. The landmark piece of legislation did more than patch up the holes left in the imperfect Securities Exchange Act of 1933 -- it pushed into new ground, enriching the fertile soil that has nourished generations of individual investors.
Not very knowledgeable about the Securities Exchange Act? Well, you are quite familiar with the law's results. The legislation established the Securities Exchange Commission (SEC) and gave it authority over the world of equities. It set up the system of SEC filings for proxy statements as well as quarterly (10-Qs) and annual results (10-Ks). The law finally regulated insider trading, making "insiders" and large investors report changes in their holdings and forcing the significant investors to clearly state their intentions in federal filings (8-Ks). The Act gave the Federal Reserve the ability to regulate the amount of margin that investors could use to prevent any future outbreaks of speculation like those in the years 1927 to 1932.
The most important aspect of the Securities Reform Act of 1934, the new law of the land, was that it set disclosure requirements for companies. No longer could publicly-traded companies hide their balance sheets from the public's knowledge or only give large investors the straight poop on what was going on. This made imminent, practical sense as the owners of shares in these companies were in fact owners of the companies. To deny individual investors access to information about companies that they owned while giving it to a professional class of investors was not only unfair -- after 1934, it became *illegal*.
The sad fact is that many public companies have forgotten what the spirit of the SEC law was all about. Hiding behind paper-thin justifications, they make it a practice to shut individual investors and legitimate media organizations out of news-making events. The Act is quite clear on one subject -- all investors should have the same access to timely information that could impact the valuation of a security. You cannot deliver information to a select group without violating the spirit of the law.
A few cases in point. The first is the quarterly ritual of the conference call. What's a conference call? Well, after an earnings report, some managements get together on the phone with investors and tell them what happened during the quarter to the company that they own. So what is wrong with this? Nothing, if done correctly. A conference call is a perfectly legitimate practice if all investors have equal access to the information before they can trade on it. This means that ideally conference calls should be held after the market closes and a recording should be made that can be accessed by any investor before the market opens the next morning. The company should take it upon themselves to communicate to their *owners* that the call is available in the quarterly press release that they send to shareholders and public with the media. All investors don't *have* to be on the original call if they have access to a recording before the market opens the next day.
The sad reality is that most companies fail to uphold this standard. Many companies purposely limit the amount of people that can attend the call, only letting sell-side brokerage analysts and professional investors with significant positions in the stock in on the call. These companies fail to make recordings of the call, deny legitimate media organizations access to the call to inform the public, and sometimes even have the audacity to hold the call during market hours, meaning that they create a de facto privileged class of investors that can trade on information that may not have been made public in any press release.
Two quick examples: the Bank of New York recently told analysts crucial information about its credit card portfolio in a conference call during market hours, with the information only hitting the wires after the market closed, leaving individual shareholders in the dust. The SEC is currently investigating this occurrence, as it was a clear and flagrant violation. Unfortunately, it happens all the time. A large majority of conference calls happen during market hours and have restricted access, meaning that people who *own* the company or who have a legitimate interest in the informing the public about what happened in the conference call are denied the opportunity to listen in.
The second example probably will be relevant to quite a few more Fools. Recently the electronic component company XILINX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: XLNX)") else Response.Write("(NASDAQ: XLNX)") end if %> informed our conference call correspondent, Debora Tidwell (MF Debit) that they had "made a mistake" and "could not allow us access" to their call *or* their replay. Lori Owen of Xilinx stated that they limit the call to their *largest* shareholders only, effectively shutting out anyone who is not a professional money manager from the call -- regardless of the fact that they are *legal* owners of the company even if they control one single solitary share. Xilinx wouldn't even say when they were holding their actual call, although the recording was at 6:30 PM EDT. This raises the ugly possibility that they could be giving crucial information to large shareholders *during* market hours that individual investors are not getting.
Fortunately, Xilinx's policy is pretty rare. As many Fools know, we provide timely and regular coverage of many conference calls, writing accurate synopses with the single-minded intent of capturing management's message. We do this here at FoolNews because no one else does and because it should be done to level the playing field for individual investors. The simple fact is that not all individual investors can make these conference calls and not all companies can afford to pay for unlimited lines in to their call. But they can afford to have a recording, and they can afford to admit legitimate media organizations which represent readerships above a minimum threshold. Or they can just not have the call, because it violates the law.
What can an individual investor do? Call the company you own and make sure that you or a media organization that you trust to give you the story has access to the quarterly conference call. It's your company -- you own it. In the end, the Board of Directors is designed to speak for you and the Investor Relations Department has the single, solitary task of listening to you -- not giving you PR. If you are specifically an *owner* of Xilinx, you can contact them by mail, by e-mail or by phone via the following information:
Xilinx, Inc
2100 Logic Drive
San Jose, CA 95124
(408) 559-7778
email: [email protected]
Companies that do not let every investor have access to the information in a conference call are violating the spirit of the Securities Reform Act of 1934 -- if not the letter of the law as well.
ANOTHER FOOLISH THING: A New Primer -- On Valuation!
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At long last -- a new Fool primer! We are pleased as punch to introduce The Industry Decathlon primer, where MF Bogey takes readers by the hand and walks them through five stock valuation methods and ten financial ratios. While demystifying the Balance Sheet, Statement of Cash Flows, and Income Statement, Bogey demonstrates how to compare a bunch of companies in your industry of choice and find the most promising one. This is very useful stuff, folks! Check it out at keyword: FoolMart on America Online or by e-mailing [email protected]. AOL for windows 3.0 users can just click here! And...
Once you learn about Bogey's nifty new methodology for uncovering exciting stocks, you might also be interested in his weekly Industry Decathlon report, delivered by e-mail or fax. In it, Bogey examines a different industry each week and runs its top players through the series of valuations and financial ratios to discover which one company looks the most attractive. If you're interested, e-mail MF Bogey at: [email protected] or call him at 1-888-FAX-FOOL from 9am to 6pm EDT. You can check out a sample issue by clicking on the "Index" button at the bottom of most Fool screens and scrolling down to "Industry Decathlon".
Randy Befumo (MF Templar), a Fool
Fool On the Hill
Selena Maranjian (MF Selena), another Fool
with Prem Kumar (MF Prem), one more Fool
Heroes & Goats & Editing
(c) Copyright 1996, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.
Transmitted: 7/10/96