CONFERENCE CALLS

FIRST TEAM SPORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FTSP)") else Response.Write("(NASDAQ: FTSP)") end if %>
Q2 1996 Earnings Conference Call Replay
Call available from now until 8/30/96 at 6:00 p.m. EDT
1-800-633-8284 (reservation number 1957244)

HEROES

CARDIOTHORAIC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CTSI)") else Response.Write("(NASDAQ: CTSI)") end if %>, a leader in minimally-invasive cardiothoracic surgery, popped up $2 to $14 1/8 with the news that a San Jose surgeon had become the first in Northern California to perform Minimally Invasive Direct Coronary Artery Bypass (MIDCAB) using the CTS MIDCAB System. This innovative "beating-heart" surgery allows surgeons to perform coronary artery bypass without opening the chest or stopping the heart, and also eases post-operative trauma and complications.

INTERPHASE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INPH)") else Response.Write("(NASDAQ: INPH)") end if %>, supplier of computer networking, mass storage, remote access and integrated service digital network products, soared $1 5/8 to $12 7/8 on news that IBM will resell the company's 155Mbps ATM (Asynchronous Transfer Mode) adapters. "IBM is an industry networking leader... the fact that they've chosen to resell Interphase ATM stands as testimony to the strong product quality and performance that has positioned Interphase as a market leader," noted Interphase President and Chief Executive Officer (CEO) Stephen Polley.

Aptex Software Inc., a subsidiary of HNC SOFTWARE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HNCS)") else Response.Write("(NASDAQ: HNCS)") end if %>, announced that the Houston Independent School District (HISD), one of the country's largest school systems, will use Aptex's VITAL ResourceMiner software to align its existing curriculum by "electronically correlating educational objectives, instructional materials and assessments." HNC was up $3 1/2 to $26. "With VITAL ResourceMiner, teachers can personalize their instruction by matching individual student needs to specific instructional resources," said Susan Sclafani, HISD's chief of staff.

Shares of INTERNEURON PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IPIC)") else Response.Write("(NASDAQ: IPIC)") end if %>, the maker of the new appetite-suppressant, Redux, plumped up $3 7/8 to $33 7/8 when Wall Street got wind of an editorial in the New England Journal of Medicine (NEJM) which argued that the benefits of the new drug outweighed the potential side effects, which include a heightened risk of Primary Pulmonary Hypertension (PPH). AMERICAN HOME PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHP)") else Response.Write("(NYSE: AHP)") end if %>, which sells Redux, was up $1 1/2 to $61 1/8 on the news.

QUICK TAKES: CABLE DESIGN TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CDTC)") else Response.Write("(NASDAQ: CDTC)") end if %> was hoisted $3 3/8 to $30 1/8 after the company warned that it expects its earnings to fall in the upper range of estimates due to record sales... Telecommunication software developer CENTIGRAM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CGRM)") else Response.Write("(NASDAQ: CGRM)") end if %> jumped $2 to $16 1/2 after posting $0.10 per share for its third quarter when $0.03 was expected... Telecom concern WESTELL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WSTL)") else Response.Write("(NASDAQ: WSTL)") end if %> surged $3 1/2 to $32 1/8 on news that Westell modems will be used in a NYNEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NYN)") else Response.Write("(NYSE: NYN)") end if %> asymmetrical digital subscriber line (ADSL) trial.

MORE QUICK TAKES: OLYMPIC FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OLM)") else Response.Write("(NYSE: OLM)") end if %> shares continued to rise, up $2 1/4 to $26 1/4, after the car loan concern received a buyout offer, ejected its CEO, and hired Donaldson Lufkin & Jenrette to help it explore a possible sale... Shares of ONYX ACCEPTANCE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ONYX)") else Response.Write("(NASDAQ: ONYX)") end if %> plowed ahead $1 1/2 to $14, apparently in sympathy with the Olympic Financial news... CONSOLIDATED FREIGHTWAYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CNF)") else Response.Write("(NYSE: CNF)") end if %> drove shares up $1 3/4 to $23 5/8 by deciding to spin off a trucking subsidiary. More details are available in today's Lunchtime News... WILLIAMS SONOMA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WSGC)") else Response.Write("(NASDAQ: WSGC)") end if %> shot up $4 3/8 to $26 on no news that Fool HQ could find... COMPUTER LEARNING CENTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLCX)") else Response.Write("(NASDAQ: CLCX)") end if %> beat estimates by $0.02, reporting $0.27 per share in its second quarter and rising $3 1/2 to $27 1/2.

GOATS

BABY SUPERSTORE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BSST)") else Response.Write("(NASDAQ: BSST)") end if %> shares fell off their rocker today, down $1 3/8 to $14 5/8, after the company announced that it was delaying reporting its second quarter earnings. Apparently, audits are not yet completed. Baby Superstores, once a high-flyer, has fallen from a 52-week high of $58 1/2. A new date to announce earnings has not yet been scheduled. This is not the first accounting problem experienced by the retailer. In February, the company also postponed its earnings release, after having discovered overstated cash balances.

State Street Capital Markets Group, a small New York securities firm, certainly didn't have the Midas touch today as the market mangled the stock of three companies which State Street took public last year. US BRIDGE OF NY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USBR)") else Response.Write("(NASDAQ: USBR)") end if %> plunged $4 5/8 to $4 5/8 (yup -- 50%!), CABLE & CO. WORLDWIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CCWW)") else Response.Write("(NASDAQ: CCWW)") end if %> was hit for $5 1/2 to $4 1/2 (down 55%), and FUN TYME CONCEPTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FUNTU)") else Response.Write("(NASDAQ: FUNTU)") end if %> was no fun at $7, down $2 on news that State Street was forced to back off from supporting these stocks amid a threat to its capital position. State Street chairman John Doukas blamed blatant, illegal "naked" short-selling for the big falls. Naked short sales occur when short sellers gamble that they will never be required to deliver the shares they sell.

Some investors are second-thinking the multi-billion dollar merger between WORLDCOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WCOM)") else Response.Write("(NASDAQ: WCOM)") end if %> and MFS COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MFST)") else Response.Write("(NASDAQ: MFST)") end if %> which was announced yesterday. Institutions continued to dump shares of WorldCom, dropping the long distance provider $1 1/2 to $21. Local loop manager MFS slipped $3 1/2 to $41 5/16 itself. Read about the merger, which effectively created a new Baby Bell, in yesterday's Lunchtime News -- AOL 3.0 for windows users can just click here.

QUICK CUTS: Remote control manufacturer UNIVERSAL ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: UEIC)") else Response.Write("(NASDAQ: UEIC)") end if %> announced that it expects to earn about half of what analysts expected, sending shares down $7/8 to $6... Capital equipment manufacturer ESTERLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESL)") else Response.Write("(NYSE: ESL)") end if %> dropped $1 1/4 to $21 5/8 after it reported earnings of $0.58 EPS, two cents below expectations. Sales of the company's equipment for manufacturing printer circuit boards have slowed considerably... JMC GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: JMCG)") else Response.Write("(NASDAQ: JMCG)") end if %> was flattened by $1 3/8 to $1 5/8 this morning after the firm terminated a merger agreement with USBA Holdings Ltd. JMC Group sells annuities and mutual fund products to customers of banks and other institutions... Chinese EK CHOR MOTORCYCLE CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EKC)") else Response.Write("(NYSE: EKC)") end if %> crashed $1 3/4 to $7 3/4 after seeing profits drop significantly due to increased competition... A day after merging with SILVER KING COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SKTV)") else Response.Write("(NASDAQ: SKTV)") end if %>, HOME SHOPPING NETWORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HSN)") else Response.Write("(NYSE: HSN)") end if %> was downgraded from "attractive" to "neutral" by PaineWebber, falling $1 to $10 3/8.

An Investment Opinion by MF Templar
FOOL ON THE HILL

3Com Restructures to Compete

3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: COMS)") else Response.Write("(NASDAQ: COMS)") end if %> clambered ahead $2 1/4 to $46 today after the company announced a major restructuring of its salesforce. The networking equipment provider will no longer break-up its salesforce by product; they will instead implement sales organizations that serve specific markets. Thus, salespeople who previously focused on local area network (LAN) switching or ATM switches will now dedicate themselves to the corporate market, or the emerging small business and consumer markets.

Chairman and CEO Eric Benhamou called the move by 3Com the "largest internal reorganization in its 17 years" and one that indicates recognition of the growing importance of "networks" to day-to-day business and living. Essentially, 3Com is being split into two divisions: 3Com Systems and 3Com Personal Products. This is not your typical restructuring, however. No one-time charges are being taken, no massive lay-offs are being announced. In fact, nobody at 3Com has even lost their job. Instead, this is a move that is being made to better reflect the business reality in which the company is operating, and to get the jump on arch-rival CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSCO)") else Response.Write("(NASDAQ: CSCO)") end if %> in a fast-growing marketplace.

Cisco Systems has had wild success over the past twelve to twenty-four months by emphasizing end-to-end switched network solutions for corporate customers, systems that require massive capital investment and significant long-term maintenance contracts to operate. The booming demand for networking equipment by small businesses and consumers has not been a priority for Cisco. However, widely available, low-cost networking products are more and more becoming a volume item that can really help to drive revenue growth, and 3Com is moving swiftly to exploit this weakness in Cisco's approach.

3Com has long played second-fiddle to Cisco Systems, and this strategic move potentially gives them a chance to one-up Cisco. The company has reported recently to Wall Street analysts that it is gaining market share in "key" markets and this reorganization will give them the ability to dominate share in the non-corporate segment, notching up further share gains. Although it is unclear what kind of effect this move will have on near-term earnings, it definitely energizes a company which has been long standing in the shadow of Cisco.

Current estimates for 3Com for this fiscal year are $2.31 EPS with analysts looking for $2.98 EPS in fiscal 1998 according to Zacks Analyst Watch. Estimates have been inching up rapidly in recent days after staying flat for the last few weeks, indicating that management's recent communication with analysts has move a few of them to build some additional upside potential in their numbers. With long-term growth estimates in the 29% to 31% range, 3Com would hit around $90 a share next year if it can trade at a multiple similar to its long-term growth rate.

The strategy is not a guaranteed slam dunk, however. Faster-moving, lower-priced components increase inventory needs and decrease gross margins, consequently reducing cash flow from product sales and increasing working capital needs. There is a reason that Cisco has not been looking at serving the consumer's need for networking products -- it would absolutely kill its margins. It has already bitten the bullet in getting into LAN and wide area network (WAN) switching, previously concentrating its efforts only in cash-cows such as routers; a move to the low end would totally crunch its cost structure. If 3Com is going to one-up Cisco by concentrating on this new market, there will be a toll, in the form of overall margins, that will have to be paid. At 3.3 times sales, there is not a lot of room for 3Com to give up ground in margins and maintain a P/E even close to its rate of growth, meaning the toll cannot be too steep or the stock will languish as a result.

The flip side to the argument against a large consumer business is that, in the end, the real revenue growth in this industry is going to come from a move into the broadest possible group of buyers -- i.e. small businesses and consumers. Products priced to move for this group with any kind of margins at all mean that the company selling them will potentially make up in volume what they lose in overall margin. This is, of course, if the company can keep a lid on costs and stay low to the ground. 3Com remains a scrappy competitor and could make this work.