HEROES
After announcing their agreement to merge today, BABY SUPERSTORE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BSST)") else Response.Write("(NASDAQ: BSST)") end if %> traded up $5 to $24 7/8 and TOYS R US <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOY)") else Response.Write("(NYSE: TOY)") end if %> moved $2 5/8 higher to close at $31 1/2. Baby Superstore investors will receive 0.8121 shares of Toys for each Baby owned. Well, almost all investors. As part of the deal, Baby Chairman Jack Tate will only receive 0.5150 shares of Toys R Us. Tate will immediately undergo a diminution of his wealth, from shares worth about $19 apiece yesterday to about $16 today. The move might be a smart one, though, as the paper value of his wealth is no stranger to volatility. This move may put his investment fortunes, and those of other Baby shareholders, on a smoother footing. (For background, check out Templar's analysis in the special Baby Superstore/Toys R Us merger collection).
REMEDY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RMDY)") else Response.Write("(NASDAQ: RMDY)") end if %> sprang out of the box, moved up $8 1/2 and closed at $87 on news released last night that the company would grow revenues and earnings more than 100% in the quarter ended September 30th. Such growth would turn out to be more than 25% above analysts' estimates for the quarter of $0.24 per share. In the same quarter last year, Remedy achieved EPS of $0.15, so it appears that the company's Help Desk software might be the real deal in a market saturated with flash-in-the-pan products.
YAHOO! <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: YHOO)") else Response.Write("(NASDAQ: YHOO)") end if %> jumped $2 1/8 to $21 3/4 on positive ratings news. Ratings? You thought that was a television term, didn't ya? Well, online companies such as Yahoo rely heavily on user demographics and eyeball valuation metrics (much the same as television outlets) for their main revenue stream -- advertising. Yahoo reported one billion web views in its recent quarter according to PC Meter, a company which conducts ratings "sweeps" much like its TV counterpart, Nielsen.
Having announced the building of new manufacturing facility this morning, DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DELL)") else Response.Write("(NASDAQ: DELL)") end if %> rose $5 1/2 to $82 3/8. While the actual growth rate of the PC industry has not changed greatly in the last year, investor expectations have soured. This has been a somewhat manic-depressive market which Dell nonetheless continues to outperform: "We have been growing at more than twice the computer industry's average over the last five years," said Chairman and CEO Michael Dell. Judging by Dell's ability, investors believe that they will continue to manage growth well and maintain or build market share.
QUICK TAKES: MARK IV INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IV)") else Response.Write("(NYSE: IV)") end if %> rose $1 7/8 to $23 1/2 after the industrial holding company reported a large restructuring and a charge to be taken in the coming quarter for shuttering one-million square feet of space. Evidently, investors are happy with the way acquisitive CEO/Chair Sal Alfiero has handled the situation... OAKLEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OO)") else Response.Write("(NYSE: OO)") end if %> jumped $4 1/2 to $46 1/2, basking in the cool (cOOl?) rays of an Oppenheimer "buy". The Oppenheimer analyst set a price target of $60 for the next 12 months and estimated that Oakley would grow at a 25-28% clip over the next five years.
GOATS
RESTRAK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RTRK)") else Response.Write("(NASDAQ: RTRK)") end if %> issued an earnings warning for the coming quarter and was stuck with a $7 1/2 drop to close at $9 1/2. Ouch. The company reported that earnings will come in within the range of analysts' estimates but that their revenues will fall below what the company expected. Restrak says that demand for its human resources software is healthy but that it failed to close on some business that it thought would be put to bed in the current quarter. When the market cuts something in half, the way it did with Restrak today, investors might be right to wonder about the company's ability to close similar deals in the future.
DSC COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DIGI)") else Response.Write("(NASDAQ: DIGI)") end if %> dropped $4 3/8 to $18 3/4 today after the company reported that earnings will likely fall far below expectations. Citing consolidation within the wireless and telecommunications industry, FCC rulemaking holdups, and arbitration proceedings in the changing telephony market, the switchmaker and transmission equipment company told a tale of flat sales and declining gross margins. Judging by the stock's fall from grace more than a year ago to a new 52-week low, one might reasonably conclude that this is just a new line of explanations for old problems.
Snowsnakes! Blame it on the snowsnakes! MARKER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MRKR)") else Response.Write("(NASDAQ: MRKR)") end if %> wiped out and fell $1 1/4 to $7 3/4 today as snowboarding demi-god Tom Sims pulled his license agreement from Marker's Sportsystem Ltd.. The snowboarding world is fiercely loyal to its own and might see as "uncool" Marker's alleged copying of some of Sim's product ideas without proper acknowlegement or compensation. Equally as damning, Sims apparently thought the snowboards Marker was turning out under the Sims name were below the standards of demanding riders. Oof, dude.
QUICK CUTS: INTELLIGENT MEDICAL IMAGING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMII)") else Response.Write("(NASDAQ: IMII)") end if %> was cut almost in half, dropping $6 3/4 to $7 1/2 after announcing it will lose a major distributor and that it may not have any sales for the next couple quarters. Argh... PHOTON DYNAMICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PHTN)") else Response.Write("(NASDAQ: PHTN)") end if %>, a flat panel equipment maker, fell $1 1/4 to $6 as the company announced that revenues will come in at the low end of expectations.
FOOL ON THE HILL
An Investment Opinion by MF Templar
Two Companies, Two Press Releases
SUMMIT MEDICAL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUMT)") else Response.Write("(NASDAQ: SUMT)") end if %> plunged $5 3/4 to $7 this morning right at the open, leaving individual investors perplexed as to what was going wrong at the developer of medical database software. There was absolutely no news on the wires, although shareholders who owned their stock through a full service brokerage that covered the company might know. Why? It appears that although the company tried to send out a press release yesterday after the bell, it got hung up at the press release service and never hit the wires. However, the company had already told analysts who follow the firm to expect light third quarter revenues, explaining the tumultuous drop.
Investors should not fret too much about it, however. In order to maintain cosmic balance, ORTHOLOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OLGC)") else Response.Write("(NASDAQ: OLGC)") end if %> saw fit to release a press release commenting that its fiscal third quarter looked pretty weak as well. This appears to be at odds with earlier statements made by the company. Back on September 16th, the company responded to a news report that projected just such an announcement, "clarifying" that it was "not able to determine the full impact of [the purchase of Sutter Corporation] on the company's third quarter earnings." The stock didn't budge then, but was walloped today for $4 1/6 to close at $7 5/16, trading more than 11.6 million shares. This was 19 times normal volume, taking the top volume spot on the Nasdaq National Market. To put this in perspective, Orthologic traded about 2.5 million more shares than INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTC)") else Response.Write("(NASDAQ: INTC)") end if %>, the normal resident of top spot on the Nasdaq daily volume ranking.
These two situations raise substantial issues about corporate governance and responsibility. In the first case, Summit Medical Systems inadvertently appears to have violated the affirmative obligations of its listing requirements by giving material information to those who would trade on it long before the rest of the market caught wind of what was going on. Although it is perfectly fine to call the analysts that follow your company and tell them what is going on, if you are telling them before the rest of the market knows you actually get in trouble with your listing exchange and the Securities Exchange Commission. Certainly, Summit's claim that the press release service screwed up has merit. It does not remove the fact that all investors should have known at the same moment that revenues would be 35% below expectations for the third quarter, resulting in a loss, and that the fourth quarter would come in with earnings about 50% below current expectations.
In the case of OrthoLogic, the situation is equally perverse. When a company gets aggressive and puts out a press release flaming a news report speculating that earnings will be lower than expected in the current quarter, one would hope they are not just doing it for laughs. Shareholder confidence is not built by slamming news reports that later turn out to have been accurate, even if you are only putting "out of context statements" in context and "clarifying." Although OrthoLogic did blame the earnings shortfall announced today on a slower than expected ramp-up of its direct sales force and not the Sutter acquisition, the mere fact that the company was on the soapbox a mere seventeen days before pre-announcing a bad quarter is just not cool. Orthologic anticipates earning two to four cents per share on revenues of $10.4 to $10.8 million, below the current mean of $0.08 EPS.
Should Summit Medical or OrthoLogic be viewed as guilty of some violation of ethics? This is pretty unclear given the scant information available on both situations. Summit Medical, only one of a number of healthcare informatics concerns to be brought down in recent days, did try to put out the press release. That the company did not make sure that it hit the wires is where it erred -- unfortunately, Summit misfired on a day where the stock would drop almost 50%. Irate investors can probably call the company (800) 767-0766 and voice their opinion to the company's chief financial officer. As for OrthoLogic, finding fault in the situation is actually a little more difficult. Although the firm did take it upon itself to respond to a "misleading news story," it did outline in the Safe Harbor clause at the end one of the reasons the stock could go down was difficulties with the salesforce. As any Madge investor knows, transitions from indirect to direct salesforces can be murder. However, the company did go and open its mouth when it did not absolutely have to, using the new Safe Harbor provisions to protect what were in retrospect some potentially misleading comments. Anyone who wants to shake OrthoLogic's tree about this can call (602) 437-5520.
FOOLISH FEATURES
We've got merger mania here at Fool HQ today -- the Fool's Lunchtime News features the Baby Superstore/Toys R Us merger. We've also got a full-blown special on the merger, Baby Superstore/Toys R Us Merger, which you can find in our FoolWire section. We'll also have a FoolWire on the merger of Foundation Health and Health Systems.
CONFERENCE CALLS
DSC COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DIGI)") else Response.Write("(NASDAQ: DIGI)") end if %> Earnings Warning
1-800-925-1782
ECHLIN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECH)") else Response.Write("(NYSE: ECH)") end if %>
1-800-683-1535 (password:
Aftermarket)
Dale Wettlaufer (MF Raleigh),
a Fool
A Fool Named Horse
Selena Maranjian (MF Selena),
a Fool
Heroes & Goats & Editing