Today's Lunchtime News examined the DRAM market and Micron Technology's rise today. A Special Section today will focus on AT&T's announcement that it will fall short of analysts' expectations for the next two quarters. You'll find all our Special Sections, FoolWires and earnings reports on either the Evening News or FoolWire & Special Reports screens. In tonight's Fool on the Hill, MF Templar takes a look at semiconductors. Enjoy!
Today:
JUNO LIGHTING INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JUNO)") else Response.Write("(Nasdaq: JUNO)") end if %>
800-475-6701 (passcode: 316617)
Discussing quarterly earnings.
3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %>
1-800-633-8284 (reservation # 1974669)
Discussing quarterly earnings.
Tomorrow:
STATE OF THE ART <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SOTA)") else Response.Write("(Nasdaq: SOTA)") end if %>
800-633-8284 (conference ID: 2015379#)
12:00 noon and 2:00 p.m. EDT **only**
To discuss earnings warning for third quarter.
GMIS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GMIS)") else Response.Write("(Nasdaq: GMIS)") end if %> jumped out of the blocks and never looked back today, closing up $6 3/16 at $23 5/16. The provider of healthcare information software is merging with industry giant HBO & CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBOC)") else Response.Write("(Nasdaq: HBOC)") end if %>. GMIS' payor data and decision support tools, as well as the fact that its software is used in decisions affecting 60% of all private-insured individuals, attracted HBO. The merger calls for GMIS shareholders to receive 0.42 HBO shares for each GMIS share they hold. Based on HBO's closing price of $62 1/2 (down $1 1/4), that's $26.25 in HBO stock.
CREATIVE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREAF)") else Response.Write("(Nasdaq: CREAF)") end if %> leapt $1 1/8 to $6 7/8 as it weaved a web of positive announcements on its new internet strategy. The formerly highflying maker of the Soundblaster sound card detailed its plans to bundle every cool Internet audio solution into one package. The new tools will also include full Internet telephone capabilities. Chairman and Chief Executive Officer (CEO) Sim Wong Hoo noted that, "The best of the Internet has yet to be realized. It has the potential to be a full multimedia environment if combined with the right technology.
CHAMPION ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHB)") else Response.Write("(NYSE: CHB)") end if %> lumbered up $1 7/8 to $20 1/4, moved to Goldman Sachs's "recommended list" from "market outperformer." Champion announced last month that it would merge with REDMAN INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDMN)") else Response.Write("(Nasdaq: RDMN)") end if %>. The ratio on the pending merger cedes 1.24 Champion shares for each Redman share, which will result in a share count of 50 million after consummation of the deal. Recently-released financials show that the company has run-rate sales and earnings of of $774 million and $32.9 million, respectively (annualized off the last six months). Redman, for its part, was up $2 1/4 to $24 3/4.
QUICK TAKES: COMPUTER TASK GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TSK)") else Response.Write("(NYSE: TSK)") end if %> moved up $2 3/4 to $31 1/4. In its usual fashion, the programming services and consulting company lagged the upward move of its peers in the "Year-2000" group of stocks... UNITED AIR SPECIALISTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UASI)") else Response.Write("(Nasdaq: UASI)") end if %> jumped a clean 50%, or $2 1/4, to finish at $6 3/4. CLARCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CLC)") else Response.Write("(NYSE: CLC)") end if %> and UAS have signed a definitive agreement to merge, with United Air shares each becoming 0.36986 of a share of CLARCOR stock... DATALOGIX INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLGX)") else Response.Write("(Nasdaq: DLGX)") end if %> popped up $1 15/32 to $7 23/32 as ORACLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> will purchase the portion of the company that it does not already own. The deal is valued at $94 million.
The drop in ALTERNATIVE RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALRC)") else Response.Write("(Nasdaq: ALRC)") end if %> stock, which fell $3 3/4 to $27 3/4, spurred one analyst to say that its recent activity is "way overdone." The company provides information-technology personnel and has recently shifted its emphasis from shorter-term, less-profitable contracts to longer-term, more-profitable national accounts. It has been giving guidance that while this transition will affect third quarter revenues, it expects to meet earnings estimates. The stock has fallen $7 3/4 since Friday's close.
ADTRAN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADTN)") else Response.Write("(Nasdaq: ADTN)") end if %> had its shares clipped $3 1/2 to $51 after an analyst at SoundView Financial indicated that orders for its high-speed digital communications equipment could drop temporarily due to lower demand from BELLSOUTH CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BLS)") else Response.Write("(NYSE: BLS)") end if %>. The firm supplies telephone companies with equipment which enables them to send fast signals over yesterday's state-of-the-art technology -- copper wire. The Baby Bells are big buyers, as their local connections are still made up largely of copper wire.
Appearances are apparently very important to Wall Street. PROFIT RECOVERY GROUP INTL. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRGX)") else Response.Write("(Nasdaq: PRGX)") end if %> shares fell $5 3/4 to $12 after the company canceled a scheduled appearance at a Robertson Stephens conference today. A contact at another firm said the appearance was canceled because of a scheduling conflict, but traders seemed to take a different view of the reason behind the cancellation, and responded accordingly. The Atlanta-based company provides accounts payable and other audit recovery services.
QUICK CUTS: Shares of AT&T CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> were cut $5 1/2 to $51 5/8 after the company warned of lower-than-expected earnings for this quarter and next... DELL COMPUTER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> shares fell $4 13/16to $80 1/8 after an analyst at Bear Stearns downgraded the stock of the from "buy" to "attractive"... MICROGRAFX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MGXI)") else Response.Write("(Nasdaq: MGXI)") end if %> shares dipped $1 15/16 to a 52-week low of $6 7/16 after the software publisher pre-announced earnings which will fall well short of consensus estimates... Stock of MOSSIMO INC.<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGX)") else Response.Write("(NYSE: MGX)") end if %> was smashed, down $3 1/2 to $30 1/2. The clothing manufacturer announced yesterday that it would report poor earnings... AAMES FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAM)") else Response.Write("(NYSE: AAM)") end if %> shares fell $4 1/8 to $48 7/8 when the home-equity financer announced that it would make a public offering of an additional 1.5 million common shares... In-flight entertainment provider INTERACTIVE FLIGHT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FLYT)") else Response.Write("(Nasdaq: FLYT)") end if %> watched its shares descend $1 1/16 to $13 5/8 after announcing a loss of $0.43 a share for the third quarter.
FOOL ON THE
HILL
An Investment Opinion by Randy Befumo
(MF Templar)
Is the Invesntory Correction Over?
"THE INVENTORY CORRECTION IS OVER!" These were the jubilant cries from the trading floor today. Investors scrambled to bid up the prices of semiconductor chip manufacturers today on news that the price for memory components was firming up in the spot market. Shares of dynamic random access memory (DRAM) manufacturers benefited the most, with shares of MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> up a surprising $3 1/2 to $31 1/2 and TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> rising $5 5/8 to $57 3/8. However, they were hardly lonesome in today's ascension. INTERNATIONAL RECTIFIER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IRF)") else Response.Write("(NYSE: IRF)") end if %> popped up $1 7/8 to $14 1/8, MEMC ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFR)") else Response.Write("(NYSE: WFR)") end if %> rose $2 1/8 to $24 7/8, NATIONAL SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NSM)") else Response.Write("(NYSE: NSM)") end if %> climbed $1 1/2 to $20 5/8, and LSI LOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LSI)") else Response.Write("(NYSE: LSI)") end if %> pushed ahead $1 3/4 to $24 3/4. The chipmakers were not alone, either -- semiconductor equipment companies benefited as well. Bellwether APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> surged $1 3/4 to $27 3/4, KLA INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> levitated $1 1/2 to $22 1/2, KULICKE & SOFFA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLIC)") else Response.Write("(Nasdaq: KLIC)") end if %> swam forward $1 3/8 to $11 3/4, NOVELLUS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> moved up $4 3/8 to $42 7/8 and LAM RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LRCX)") else Response.Write("(Nasdaq: LRCX)") end if %> pitched forward $2 7/8 to $26 1/4.
TODAY'S SURGE. Positive comments from Morgan Stanley analyst John Marren at the firm's morning call for brokers set off the firestorm of buying early today. Marren cited information that the "spot" market for DRAMs had firmed up considerably in the past two weeks and that customers were beginning to stretch out their lead times for orders. The spot market is the large global market for components that have already been made. When companies need to buy extra inventory in a hurry or get rid of it because they don't want it on the books, they go to the spot market. A lead time is the amount of time it will take to fill a customer's order, so when lead times grow longer, demand is increasing and supply is tightening. Marren confirmed rumors yesterday that the spot price for 16 meg DRAM was up about 20% from a low of $8 hit recently to $10 yesterday. Some readers have noticed that the price for SIMMs and DIMMs, memory modules used in most computers, have been creeping up over the past few days, as well. Independent of Marren, the analyst at Montgomery Securities raised his rating on Texas Instruments to "buy" from "hold," adding fuel to the buying fire.
PRICES ARE FIRMING, BUT REMAIN LOW. In today's Lunchtime News, the focus was on putting today's news in the context of the recent quarterly earnings release from Micron Technology. (The full conference call synopsis from that event is available in the Motley Fool's online area. Any e-mail subscribers who would like a copy can just send [email protected] an e-mail and I will be happy to send them a copy of MF Raleigh's excellent work.) In the conference call, Micron CEO Steve Appleton said that the average selling price (ASP) for 16 meg DRAM in the fourth quarter was about $12, meaning that today's firming prices are still below the average prices Micron saw last quarter. However, readers should remember that the spot market is an illiquid, inefficient pricing mechanism. It tends to be very volatile and should only be taken as a cursory indicator. The real deal is the contract prices, which you only get on a quarterly basis from the American memory companies. More information will be available when Texas Instruments reports its quarterly earnings on October 12th. Until then, we can only surmise that contract pricing for 16 meg is about where it was last quarter, given the prices in the spot market. Noting that after backing out a one-time charge, Micron lost $0.06 EPS on 33% lower revenues, this is not exactly a great price.
WHY IS DEMAND CLICKING UP? The speculation is that the Japanese consumer electronics giants are really serious about penetrating the personal computer market and are gearing up to do just that. This sudden influx of added demand is causing the blip in the spot market for DRAM, at least according to John Marren at Morgan Stanley. Marren stressed that he saw prices firming for the next two months before dipping down again. Dan Niles at Robertson Stephens disagreed in a recent report upgrading Texas Instruments to a "buy" on September 13th. Niles saw DRAM prices improving in the fourth quarter. Can the two viewpoints be reconciled easily? Although Niles definitely looks pretty brilliant after today, it is unclear from our information why he saw the shift coming in the fourth quarter. If indeed this movement is because of an inventory build-up for the Japanese entry in the PC market, then Marren's thesis that prices will fall back down in about two months may well prove correct. Tom Kurlak's call on August 7th to raise Micron from "neutral" to "accumulate" also looks pretty savvy in retrospect, a call premised on the fact that we had reached the bottom of the inventory correction.
THE CHAIN OF EVENTS. The past few weeks have seen a slew of information and it might be helpful to review everything that has happened in order to get a better sense of the big picture. It was only September 11th when MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> and MEMC ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFR)") else Response.Write("(NYSE: WFR)") end if %> both got crushed for preannouncing bad quarters, with Motorola trading down near $47.The book-to-bill, which had been reported the evening before, had come in slightly higher than expected, with sequential orders up for the first time in months. Year over year, orders were still down a shocking 38%. A surprise news release from INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> fired up the market for semiconductor stocks on September 17th, after the semiconductor giant reported that third quarter revenues would be up 5% over the prior quarter instead of flat as previously expected. The stocks have been doing well since then, with today's news only adding fuel to the fire. A look at actual bookings and billings according to the Semiconductor Industry Association shows that there are gonna be a few quarters before many of the companies can show positive comparisons. Have the stocks over-discounted this? What about the semiconductor equipment stocks? Will they lag the recovery in the chip sector? One good quarter does not give management the confidence to spend precious capital on machines. Finally, what about the demand overhang? Is there still gypsy capacity that could start pumping out 16 meg DRAM in the next few weeks, rocking the delicately-balanced boat? Fool HQ will continue to ponder the imponderable tonight and will report back tomorrow with any conclusions.