Earnings Central keeps growing, and growing, and growing. Today we've got Conference Call write-ups for Sun Microsystems and S3, with write-ups for Microsoft, Checkpoint, Keithley, and Allied Signal on their way.
MF Merlin's Economic News today reports on the Treasury Department's June report on the Federal Budget. 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 focuses on Microsoft's fourth quarter results. Enjoy!
07/22/96 (Monday)
MICROSOFT (MSFT)
1-800-857-3623 (password: MSFT)
07/22/96 (Monday)
MCAFEE ASSOCIATES (MCAF)
1-800-857-6632 (password: McAfee)
07/22/96 (Monday)
PARADIGM TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRDM)") else Response.Write("(NASDAQ: PRDM)") end if %>
1-800-625-5288 (code: 119741)
07/22/96 (Monday)
ALLIED SIGNAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ALD)") else Response.Write("(NASDAQ: ALD)") end if %>
1-800-633-8284 (code: 1841499)
Natural gas giant ENRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ENE)") else Response.Write("(NYSE: ENE)") end if %> scooped up all of the outstanding shares of electric utility PORTLAND GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PGN)") else Response.Write("(NYSE: PGN)") end if %> this morning in a stock-for-stock transaction that values each share of Portland General at the same price as each share of Enron, causing Portland to surge $6 3/4 to $34 7/8 and Enron to fall $2 to $39 3/4. As part of the deal, Enron is going to issue $2.1 billion in new equity and take over Portland's $1.1 billion in long-term debt. Enron called this a strategtic buy and does not intend to become a large holder of electric utilities. In other natural gas consolidation news, ATMOS ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATO)") else Response.Write("(NYSE: ATO)") end if %> purchased UNITED CITIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UCIT)") else Response.Write("(NYSE: UCIT)") end if %> in its own stock-for-stock deal, valued at around $340 million. Shares of United Cities rose $2 7/8 to $19 7/8 while Atmos slumped $3 1/4 to $22 5/8.
A SPATE OF MERGERS: As if the above mergers and acquisitions were not enough, other companies decided that they wanted to get into the act today. DT INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DTII)") else Response.Write("(NASDAQ: DTII)") end if %> surged $4 to $22 1/4 after it purchased privately-held Mid-West Automation for $77 million, a deal that it sees as immediately accretive to earnings ... Shares of TELEBIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TBIT)") else Response.Write("(NASDAQ: TBIT)") end if %> soared $1 15/16 to $12 13/16 after CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSCO)") else Response.Write("(NASDAQ: CSCO)") end if %> announced it was buying the company for $13.35 a share in cash ... WASHINGTON MUTUAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WAMU)") else Response.Write("(NASDAQ: WAMU)") end if %> shot up $4 7/8 to $35 after it announced $1.2 billion stock deal for privately-held American Savings Bank.
The mysterious explosion of Trans World Airlines Flight 800 has yet to be explained by authorities, but this has not stopped speculators from bidding up the shares of bomb detection firms. MAGAL SECURITY SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MAGSF)") else Response.Write("(NASDAQ: MAGSF)") end if %> staged a $3 1/4 to $7 rally today after it was highlighted by Westergard Publishing and National Securities in separate reports. Magal is an Israeli company that manufacturers systems that detect explosive devices in luggage, packages and other parcels. INVISION TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INVN)") else Response.Write("(NASDAQ: INVN)") end if %> was up $3 to $21 as it produces similar systems. Magal is no stranger to strong surges after explosions -- the stock hung at $11 a share for a number of months after the World Trade Center explosion. This is also similar to the short-lived surge in shares of surveillance security system manufacturer COHU <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: COHU)") else Response.Write("(NASDAQ: COHU)") end if %> after the April 19th bombing of Oklahoma City.
QUICK TAKES: LIZ CLAIRBORNE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LIZ)") else Response.Write("(NYSE: LIZ)") end if %> rose $1 3/4 to $30 3/4 this morning after reporting earnings that were 10.7% higher than consensus expectations... Regional airline SKYWEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SKYW)") else Response.Write("(NASDAQ: SKYW)") end if %> reported second quarter earnings 46% above consensus expectations and rose $1 7/8 to $18 1/4... News that ADAC LABS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ADAC)") else Response.Write("(NASDAQ: ADAC)") end if %> will supply nuclear imaging systems to COLUMBIA/HCA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %>'s 340 hospitals for the next two years pushed shares of Adac up $3 1/4 to $19 1/4... AVANT! <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AVNT)") else Response.Write("(NASDAQ: AVNT)") end if %> rose $2 1/2 to $25 3/4 after the company announced a $50 million contract... CARDIOTHORACIC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CTSI)") else Response.Write("(NASDAQ: CTSI)") end if %> was rated a "strong buy" today by Piper Jaffray, causing shares to rise $1 to $11 3/8... TEL-SAVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TALK)") else Response.Write("(NASDAQ: TALK)") end if %> rose $2 1/2 to $23 1/2 today after beating consensus estimates by 40%...
UNITED TRANSNET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UT)") else Response.Write("(NYSE: UT)") end if %> dropped $7 5/8 to $11 7/8 after the company reported that it will lose five cents a share in its upcoming fiscal second quarter, well below last year's results of thirteen cents a share. This surprise loss comes less than eight months after the company's initial public offering and its acquisition of six ground and air courier companies. The company will only grow revenues over the year by an anemic 8%, not the kind of growth investors expect out of a company that was valued at 30 times trailing earnings this morning.
INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTC)") else Response.Write("(NASDAQ: INTC)") end if %> may not have been up today, but it sure made sure shares of VOCALTEC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VOCLF)") else Response.Write("(NASDAQ: VOCLF)") end if %> would be down. VocalTec was waxed for $1 1/2 to $6 1/4 after Intel told the world it was developing Internet phone software. This was pretty much the last blow for VocalTec, which has been beset by all sorts of bone-crunching disappointments since it first came public. Demand for Internet phones is just not anything like the speculative investors who drove CAMELOT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CAML)") else Response.Write("(NASDAQ: CAML)") end if %> up to $7 a share expected -- one of the reasons why Camelot is now trading at $1 1/2.
STRASOPHERE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TOWV)") else Response.Write("(NASDAQ: TOWV)") end if %> was walloped for $1 1/8 to $3 1/2 after the gaming company reported a much larger than expected loss. Salomon Brothers did not mince words about its disappointment when it cut the shares to "hold", stating that the risk of a bankruptcy at Stratosphere was real given the dismal attendance at its Las Vegas casino. GRAND CASINOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GND)") else Response.Write("(NYSE: GND)") end if %>, which owns some of Stratosphere, fell $1 3/4 to $20 1/4 as well today, partially on the fact that it's earnings results were two cents light of estimates of $0.47 EPS.
QUICK CUTS: NEWBRIDGE NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NN)") else Response.Write("(NYSE: NN)") end if %> imploded $5 7/8 to $43 1/2 this morning after UBS Securities downgraded the shares this morning ... Not all acquisitions worked out today, as secure transactions software developer PREMENOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRMO)") else Response.Write("(NASDAQ: PRMO)") end if %> dropped $2 3/4 to $9 1/4 after grabbing Prime Factors... MICROCOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MNPI)") else Response.Write("(NASDAQ: MNPI)") end if %> continues to get mashed, today down $1 3/8 to $7, after reporting disappointing earnings last week of only two cents a share ... IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> continues to hit up against strong selling volume, down $2 5/8 to $19 7/8 today after the disappointing spin on the upcoming third quarter that management gave in the second quarter conference call... FORE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FORE)") else Response.Write("(NASDAQ: FORE)") end if %> continues to get pounded after last week's earnings, losing $4 1/4 to $25 1/4... INDIVIDUAL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INDV)") else Response.Write("(NASDAQ: INDV)") end if %> was blasted for $1 7/8 to $10 1/4, apparently because it was one of the last Internet content plays left standing... Semiconductor equipment manufacturers with price/sales ratios in excess of 2.0 continue to get pounded, with INTEGRATED MEASUREMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMSC)") else Response.Write("(NASDAQ: IMSC)") end if %> collapsing today on a downgrade, falling $5 1/4 to $13.
An Investment Perspective
by Randy Befumo (MF Templar)
FOOL ON THE HILL
Microsoft Beats Estimates
MICROSOFT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %> pumped out an extraordinary quarter at around 5:00 PM EDT. The Redmond, Washington software giant squeezed out revenues of $2.26 billion compared to $1.62 billion a year ago, a 39.5% increase. Earnings per share grew by 50% to $0.87 EPS, two cents higher than consensus expectations. With this quarter's result, Microsoft hits a $3.48 EPS run-rate -- meaning that if it can repeat this quarter three more times, it will earn $3.48 and be valued at about 34 times earnings.
The highlights? Microsoft's business in the Far East increased 53%, far and away above the overall revenue growth that the company booked. Revenue from the Desktop Applications group exceeded $1.0 billion in the fourth quarter and clearly remains the engine of Microsoft's tremendous growth. Revenue from its server and server application business doubled and remains a dagger poised at the heart of all of its competitors.
Just looking at the numbers, it is hard to imagine a more impressive company. Expenses, with the single exception of research and development, continue to increase at a much slower rate than revenues. Earnings, however, continue to accelerate at a pace that is quite a bit better than revenues. The combination is a financial double-whammy that makes Microsoft a tremendous engine of growth. Certainly, one can argue what the fair price is for Microsoft, but there is no denying that it is one of the best-managed, best-run companies that has ever existed on the planet.
For a multi-billion dollar company to grow revenues 40% in one quarter and earnings per share by 50% is just absolutely staggering. I mean, they had majority market share in most of their cash cows to start the year. Unlike true consumer-space, technology-space appears to support continued trends toward higher and higher market shares, eventually driving competition into extinction.
In spite of the long-term picture I outlined above, what the financial community is going to be grappling with in the wake of the conference call is the caution expressed by chief financial officer (CFO) Mike Brown in the conference call. Yes, Mike Brown is a worrywart. Yes, he warns people every quarter to be conservative. But this time he said he was really serious, highlighting the shift in the company's basic operating model from one of total revenue recognition for a sale to one of pro rata revenue recognition, meaning that Microsoft recognizes revenues over fixed period of time when it makes a contract type sale.
The reason why pro rata recognition is important is that servicing and support is a cost that exists over the life of the contract, and rather than recognizing it in the future without tying the revenues, it becomes prudent instead to maintain this linkage. This was significant for Microsoft just this year, with unearned revenues growing from $50 million in the first quarter to more than $450 million at year's end all because of sales of pro rata recognized 32-bit operating systems like Windows95 and Windows NT. Office 97 will also be recognized on a pro rata basis, meaning that more of Microsoft's core products will be accounted for in this way next year, suggesting that revenue growth will probably not be as strong next year even with a strong acceptance of Windows NT 4.0.
For more details of the Microsoft story, check the Fool's Conference Call Synopsis being cobbled together by your truly right now.
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