Today's Lunchtime News In the Lunchtime News, Apple South turned rotten for investors today, announcing that earnings will be soft. Earnings Central has new calls from 3Com and Food Lion, with calls from Adobe and Corel coming soon. The 3Com story is explored in a Special Section.
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 closer look at DRAM pricing. Enjoy!
Today:
COREL CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COSFF)") else Response.Write("(Nasdaq: COSFF)") end if %>
after 6:00 p.m. EDT
(416) 626-4151 (passcode: 9464) -- replay
Discussing earnings report
ADOBE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADBE)") else Response.Write("(Nasdaq: ADBE)") end if %>
after 7:00 p.m. EDT
1-800-633-8284 (code: 1972478) -- replay
Discussing earnings report
Tomorrow:
GENZYME TISSUE REPAIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZL)") else Response.Write("(Nasdaq: GENZL)") end if %>
after 7:00 p.m. EDT through 5:00 p.m. EDT on 10/4
(402) 220-6020 -- replay
Discussing new data from the Carticel Patient Outcomes Registry
WCI STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WRN)") else Response.Write("(NYSE: WRN)") end if %> heated up like a blast furnace today, rising 24%, or $1 3/8, to $7 today. The Renco Group, Inc., owner of approximately 84 percent of the company, announced last evening that it is considering taking the company private. According to the Cleveland Plain Dealer, WCI's stock price has been flagging in the face of a good year for the steel industry. Judging by Renco's past performance with steel company buyouts, though, it might be looking to pull off another coup in that industry. The current market cap of WCI, even after today's jump, is only 58% of its working capital (current assets minus current liabilities). This suggests that Renco could pay itself back very soon for the $41.5 million it would take to buy the rest of WCI.
IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IOMG)") else Response.Write("(Nasdaq: IOMG)") end if %> jumped $4 1/8 to $24 1/8 while a number of material items affected trading. Evidently, investors like the news of a new software release that will make Iomega drives more functional. The fact that the company is diversifying its sources of revenue on higher-margin items has been roundly applauded. Adding to the upward pressure, over 22% of shares available for trading were held short at the beginning of the week. Lastly, the company is on a roll with its OEM strategy, giving confidence to investors focusing on the goals set out by Iomega's CEO.
LORAL SPACE & COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOR)") else Response.Write("(NYSE: LOR)") end if %> fired its booster rockets today, trading up $2 3/8 to $15 5/8. Loral Space, itself spun off when LOCKHEED MARTIN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LMT)") else Response.Write("(NYSE: LMT)") end if %> bought Loral Corp. earlier this year, is acquiring the satellite operations of AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>, called SkyNet, for $712 million. Investors are cheering the decision, as the acquisition will put Loral Space in a better position to compete with GENERAL MOTORS HUGHES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GMH)") else Response.Write("(NYSE: GMH)") end if %>. The GM division recently agreed to buy PanAmSat <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPOT)") else Response.Write("(Nasdaq: SPOT)") end if %> at a pretty hefty price.
QUICK TAKES: PROTEIN DESIGN LABS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PDLI)") else Response.Write("(Nasdaq: PDLI)") end if %> should end up as the top gainer on the Nasdaq today, having exploded upward $9 7/8 to $26, or 61%. The company and F. Hoffmann-La Roche announced a key developmental drug had passed one of the final milestones in the FDA approval process. The drug stifles the body's negative reaction to an implanted kidney... COLE NATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CNJ)") else Response.Write("(NYSE: CNJ)") end if %> advanced $3 7/8 to $23 5/8, announcing that it has reached an agreement with Grand Metropolitan to purchase that company's Pearle Vision Centers for $165 million... DISCREET LOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DSLGF)") else Response.Write("(Nasdaq: DSLGF)") end if %> vaulted forward $2 1/4 to $8 1/4 on the strength of a "strong buy" recommendation and yesterday's announcement of a new digital editing package... AMWAY ASIA PACIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAP)") else Response.Write("(NYSE: AAP)") end if %> rose $4 1/8 to $33 7/8 on a Merrill Lynch analyst "near-term" buy rating... SNYDER OIL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNY)") else Response.Write("(NYSE: SNY)") end if %> traded up $1 1/4 to $11 3/4 on reports that its Australian investment, Command Petroleum Holdings, is in merger talks. Snyder, which is trading within a few dollars of its three-year low, owns 32.6% of Command Petroleum.
CHECKPOINT SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKP)") else Response.Write("(NYSE: CKP)") end if %> plunged $6 7/8 to $27 5/8, issuing a warning for the coming quarter's earnings. It pointed first to the damage done by Hurricane Hortense in explaining the coming shortfall from estimates (after all, an "Act of God," in legal parlance, is an excellent defense in securities lawsuits). The real problem might lie in the slowing (temporary, cyclical, or saturated) growth of the markets into which Checkpoint sells its security systems.
CHECK POINT SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHKPF)") else Response.Write("(Nasdaq: CHKPF)") end if %> sagged $2 3/8 to $30 1/8. Investors Business Daily ran a favorable item on firewall technologies which featured the company and Check Point itself announced secure support for SYBASE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYBS)") else Response.Write("(Nasdaq: SYBS)") end if %> servers. In a bizarre twist of irony, Check Point actually traded down, which makes some wonder if traders weren't thinking CHECK POINT SOFTWARE when they were trying to dump CHECKPOINT SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKP)") else Response.Write("(NYSE: CKP)") end if %>.
The stock of APRIA HEALTHCARE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHG)") else Response.Write("(NYSE: AHG)") end if %> could have checked into the emergency room, after falling $3 3/8 to $17 3/8 in heavy trading today. Because of troubles integrating the computer systems of Abbey Healthcare Group and Homedco Group, which merged last year to form Apria, earnings will fall short for the quarter and the year. The company is getting staff up to speed on information systems, the earnings impact of which is expected to be largely confined to the current quarter. There are other Medicare issues that are worrying investors, though.
APPLE SOUTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APSO)") else Response.Write("(Nasdaq: APSO)") end if %> turned into Apple Sauce today, falling $7 7/8 to $13 today. The chief franchisee of APPLEBEES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APPB)") else Response.Write("(Nasdaq: APPB)") end if %> announced that it would not meet earnings for third quarter of fiscal 1996. Instead of going out to eat this summer, many diners stayed home and watched the Olympics. In addition, two hurricanes and a management revolt in the midwest were one-time events that will hurt Q3 earnings. For more details, check out today's Lunchtime News.
QUICK CUTS: TCSI CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCSI)") else Response.Write("(Nasdaq: TCSI)") end if %> fell off a cliff, trading down $5 1/4 to $15 1/2 on rumors that it won't make its quarterly earnings estimate. Though its business is not confined to the objected-oriented database market, the recent downfall in the shares of BUSINESS OBJECTS (BOBJY) might explain some of the market's neurosis on TCSI... US SATELLITE BROADCASTING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USSB)") else Response.Write("(Nasdaq: USSB)") end if %> slid $2 3/4 to $22 as investors may fear increasing competition in the satellite broadcasting market... SELFCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SLF)") else Response.Write("(AMEX: SLF)") end if %> fell $1 5/8 to $12 7/8 after reporting losses before charges that were much larger than last year's second quarter results.
FOOL ON THE
HILL
An Investment Opinion by Randy Befumo
(MF Templar)
A Fake DRAM Increase?
CHIP STOCKS ON FIRE. People really want to believe in the chip stocks. A bonfire of volume continued to rage today as investors attempted to get in while the getting appeared good. News from INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> that they would beat downgraded expectations, a perceived "positive" earnings surprise from MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %>, and comments from Micron that they were sold out of 16 meg capacity until November were the kindling. Industry gossip that Texas Instruments, Hitachi, NEC and Samsung were also sold out of 16 meg capacity until November over the past few days was the gasoline. Prominent reports yesterday from John Marren at Morgan Stanley, Mike Gumport at Lehman Brothers, and Brett Hodess at Montgomery Securities ignited the fire. DRAM prices have rebounded more than 20% in the "spot" market to $10.
LEHMAN ANALYST GUMPORT POSITIVE. Apparently, the blaze has shaken many sleeping semiconductor analysts awake. Michael Gumport at Lehman focused on the companies again today in a note, citing big activity in the spot market. Gumport maintains that most DRAM configurations are up at least 5% to 10% in the spot market since last Friday on a large surge in activity. Gumport was unsure about the sustainability of prices, but believed that a 30% increase in unit volume was possible over the next six months. Micron has confirmed it is sold out of 16 meg in x4 configurations until November, with spot prices on these parts up 22%. His thesis is that improving earnings over the next six months will pick up as volume lags, making his recommendation on the shares positive.
CONTRARIAN VIEWPOINT WITHIN LEHMAN. European semiconductor analyst Chris Heminway at Lehman Brothers dominated the firm's morning call today with a discussion of the impact of all this news on SIEMENS AG <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMAWY)") else Response.Write("(Nasdaq: SMAWY)") end if %> and PHILIPS ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHG)") else Response.Write("(NYSE: PHG)") end if %>. Heminway stressed that although final demand for products containing chips has remained strong and the resurgence of unit volume seems secure, current pricing is probably not sustainable given the sheer amount of capacity that is still out there. Heminway does not believe that the oversupply in DRAM will be corrected until the third or fourth quarter of 1997 at the earliest, meaning that the current short-term rise in the shares of TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> and Micron Technology could be unsustainable.
A FAKE DRAM INCREASE? This contrary viewpoint within Lehman Brothers is buttressed by a report received from a spot DRAM trader in the Pacific Rim. The source confirmed that spot DRAM pricing was up but suggested that this was because of the temporary shutdown of Korean companies due to a holiday. Stating that there would be more shipments of DRAM at below $10 per 16 meg chip, the source stated that there are currently no buyers for the units above $11. Additionally, two new fabs in Taiwan will begin shipping 16 meg chips in the next few months, adding to supply. The source closed by questioning whether or not Micron could make money even if the average selling prices stayed at $10, given that they were at $12 during the last breakeven quarter -- surprise or no surprise.
QUARTERLY PREANNOUNCEMENTS TRICKLE IN. DALLAS SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DS)") else Response.Write("(NYSE: DS)") end if %> reported that they would not meet current estimates for their next fiscal quarter today amidst the general uproar in the semiconductor stocks. This comes as no surprise, given the negative picture painted by the overall bookings and billings numbers of the industry. Like it or not, more disappointments are probably coming over the next few weeks as more and more semiconductor companies begin to close their books on the third quarter. Although Micron did manage to beat consensus by a few pennies, not many other semiconductor manufacturers have 80%-owned units they can consolidate in their overall numbers and pump their product through. (Micron owns 80% of MICRON ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %>, a personal computer manufacturer.) Although there is a lot of activity and excitement surrounding the semiconductor manufacturers, on balance the intermediate term picture still remains middling to poor according to most assessments of the data.