HEROES

CENTRAL TRACTOR FARM & COUNTRY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CTFC)") else Response.Write("(NASDAQ: CTFC)") end if %> plowed ahead $2 1/2 to $14 1/4 as the agricultural products and hardware store announced that investment firm J.W. Childs will purchase the company for $14.25 per share. Butler Capital Corporation, which owns a majority of the company, has already transferred about 15% of Central Tractor for $14.00 per share and will sell the remainder of its stake in the company for that price, while other shareholders will receive the higher share price. Counting long-term debt of $16 million less about $4 million in cash, the deal is valued at about 50% of sales and 17 times estimated earnings of $0.83 per share.

Printed circuit board manufacturer ELECTROSTAR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ESTR)") else Response.Write("(NASDAQ: ESTR)") end if %> jumped $15/16 to $13 15/16 after TYCO INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TYC)") else Response.Write("(NYSE: TYC)") end if %>, a diversified industrial conglomerate, announced that it will acquire the company for $14 a share. Tyco values the company at about 1.5 times sales on an annualized basis, which looks to be a very moderate value for a printed circuit board business that generated 19% operating margin through the first three quarters of 1996, compared to 14% in the same period for 1995. Tyco already has a multi-layered printed circuit board business in its electronics group, which is also the leading manufacturer of undersea fiberoptic cable. That group generates an awesome 18% operating margin, which is an accomplishment in an industry accustomed to average operating efficiency less than half that number.

PROGRESS SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRGS)") else Response.Write("(NASDAQ: PRGS)") end if %> exploded upward $3 7/8 to $20 1/8 on rumors that MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %> is looking at taking out the company. Progress makes relational database development tools and has grown through acquisitions, adding functionality to its product line and getting into niche businesses. The acquisition of Maintenance Automation exemplifies that strategy, as that company builds client/server applications for the oil refinery and healthcare industries. Such applications help companies with large infrastructures control maintenance costs and maximize the life of those infrastructures. Progress recently introduced its WebSpeed transaction server development software, which companies will use to construct intranets to smooth things like inventory management, a crucial intranet application in this day of just-in-time controls. A set of tools such as this might be attractive, especially with the company's cash and liquid investments of $100 million, for any company looking to expand its involvement in the intranet megatrend.

QUICK TAKES: Database software company ARBOR SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ARSW)") else Response.Write("(NASDAQ: ARSW)") end if %> rose $3 3/8 to $29 on continuing strength from Wednesday's upgrade to "strong buy" from "buy" from Hambrecht & Quist. The brokerage also reiterated its earnings projections of $0.47 per share for fiscal 1997... HA-LO INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HALO)") else Response.Write("(NASDAQ: HALO)") end if %> moved up $1 1/2 to $38 1/2 after the company announced on Wednesday afternoon that OFFICEMAX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMX)") else Response.Write("(NYSE: OMX)") end if %> will market Ha-Lo's specialty advertising products in its retail network... On the heels of Wednesday's gains, text-to-speech software company LERNOUT & HAUSPIE SPEECH PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LHSPF)") else Response.Write("(NASDAQ: LHSPF)") end if %> added another $1 3/4 to $19 3/4 following the company's acquisition of Berkeley Speech Technologies for $15.5 in cash... CLAIRE'S STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CLE)") else Response.Write("(NYSE: CLE)") end if %> moved up an additional $1 1/4 to $16 1/8 as the company follows through on a Wednesday upgrade to "buy" made by brokerage J.W. Charles... Storage company EMC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %> rose $2 1/4 to $32 1/4 on the strength of a mention in Business Week... CREATIVE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CREAF)") else Response.Write("(NASDAQ: CREAF)") end if %> moved up $2 1/4 to $8 1/4 after brokerage Robertson Stephens upped the CD-ROM maker to "buy" from "outperform," changed 1997 estimates to $0.92 per share, and called the shares "cheap and oversold," to be blunt about it... Healthcare information companies got a boost from a Wall Street Journal article today, which talked about them being cheap and oversold (sorry, we're very fond of the compliment). Among those benefitting from the article were HCIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HCIA)") else Response.Write("(NASDAQ: HCIA)") end if %>, up $1 7/8 to $28 3/4; MEDAPHIS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MEDA)") else Response.Write("(NASDAQ: MEDA)") end if %>, up $1 1/4 to $10 3/8; and ENVOY CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ENVY)") else Response.Write("(NASDAQ: ENVY)") end if %>, up $1 1/2 to $37 1/4...

GOATS

SFX BROADCASTING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SFXBA)") else Response.Write("(NASDAQ: SFXBA)") end if %> lost $1 to $30 3/4, while EZ COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EZCIA)") else Response.Write("(NASDAQ: EZCIA)") end if %> lost $1 1/2 to $35 as the two companies announced the cancellation of a deal under which the two would exchange radio properties in the Charlotte, North Carolina market. SFX said that the deal fell through because its station has been doing well and that it would not wait any longer for EZ and EVERGREEN MEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EVGM)") else Response.Write("(NASDAQ: EVGM)") end if %> to close a transaction among themselves, which was prerequisite to doing the larger transaction. The problem, then? EZ was to sell a couple stations that it didn't own yet, which is indicative of the frenzied pace of consolidation in the radio and broadcasting industry following the relaxation of FCC rules govering the types and numbers of properties broadcasters can own. Many of these stocks are down at least 30% from their September highs as investors sort out who can handle the sudden debt loads and business combinations and who can't. Among companies moving fast and furiously are JACOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: JCOR)") else Response.Write("(NASDAQ: JCOR)") end if %>, AMERICAN RADIO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMRD)") else Response.Write("(NASDAQ: AMRD)") end if %>, while larger CLEAR CHANNEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCU)") else Response.Write("(NYSE: CCU)") end if %> has fallen, but by a smaller magnitude.

QUICK CUTS: Analysts who might otherwise be inclined to downgrade stocks must have stayed home, while traders must be feeling more like St. Nick today, as all through the market, only the penny stocks were stirring, and even they were quiet as mice, oscillating between the bidding and the asking price.

FOOL ON THE HILL
An Investment Opinion by MF Templar

56K?

News that U.S. ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %> won over an important convert late Wednesday has added more than $8 to the stock price in two trading days. DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DELL)") else Response.Write("(NASDAQ: DELL)") end if %> reported that it would offer Robot's x2 modem technology in its line of desktop computers. Dell, which had already been using Sportster Voice 33.6 modems, will now put Sportster Voice internal modems into its Dell Dimension line of personal computers (PCs). U.S. Robotics closed up $5 1/8 to $78 5/8 in the holiday-abbreviated session on below average volume, with excitement about the news muted by the light activity on all of the stock exchanges.

Things have been hopping at U.S. Robotics ever since the communications company announced that it had developed technology that would allow computer users to download information at 56-kbits per second. This "downstream" transmission speed is about twice as fast as the 28.8-kbits per second that PC users currently enjoy. The ability to upload information would still be restricted to a 28.8-kbits per second "upstream" rate. Since the vast majority of online time is spent downloading cool stuff to view, the effective speed increase for most users would be tremendous. "x2" counteracts skepticism that U.S. Robotics would begin to see diminishing returns from its modem business as a greater percentage of users already had the fastest possible modem.

U.S. Robotics is not the only company that has developed technology that will allow this ultra-fast downstream speed. In fact, ROCKWELL'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ROK)") else Response.Write("(NYSE: ROK)") end if %> Semiconductor Systems unit was the first to announce this capability on September 10th, called K56PLUS. This release was quickly followed by similar news from MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>, LUCENT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> and relatively-obscure Phylon. The problem with all of these releases is that they each champion a separate and non-compatible standard. In the end, only one company will see its standard adopted by the majority. To strengthen its odds, Rockwell partnered up with ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASND)") else Response.Write("(NASDAQ: ASND)") end if %>, leaving investors to figure out whether Rockwell-Ascend or U.S. Robotics will emerge victorious.

U.S. Robotics is not necessarily the clear winner. As Rockwell Semiconductor Systems makes chipsets for the majority of modem manufacturers, they have a lot of clout. Add to this Ascend's presence in the infrastructure of almost all online service providers and you have a potential one-two punch that could unseat U.S. Robotics. This is why the market has reacted so positively to the news that Dell Computer would be using the U.S. Robotics technology -- as each original equipment manufacturer (OEM) you can bring under your umbrella helps you to incrementally win the standards war. A similar announcement this month about another modem manufacturer using U.S. Robotics technology also boosted the shares.

Despite the fact that it appears that the market is assuming U.S. Robotics is the underdog and consequently bids it up every time it wins over a new adherent to its standard, the facts do not necessarily support its role as the underdog. Robot's huge share and premium brand in the modem market aside, the company also has a significant presence in the infrastructure of online service providers as well with its Total Control hubs. U.S. Robotics claims that it holds more than twice the market share of Ascend in the remote access server market (its closest competitor). Although one can argue that Robot's comparison is a little stilted, as Ascend's MAX remote access server is a higher-end product than the workman-like Total Control hub, the fact remains that Robot has a pretty significant presence in the current network architecture.

What kind of network presence are we talking here? U.S. Robotics has already gotten AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>, COMPUSERVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSRV)") else Response.Write("(NASDAQ: CSRV)") end if %>, IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> Global Network, AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> WorldNet, MCI <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MCIC)") else Response.Write("(NASDAQ: MCIC)") end if %>, NETCOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NETC)") else Response.Write("(NASDAQ: NETC)") end if %> and Prodigy to supports its "x2" standard. On top of this, U.S. Robotics is rumored to be working on a new version of its Total Control remote access server with at least four times as many modems per unit as with the current version, bringing the cost per port way down -- and potentially displacing Ascend on a couple of networks that do not require the premium Ascend MAX and MAX-TNT products. U.S. Robotics's Total Control hub presently has 48 "ports," or modems, and 230 ISDN lines.

Another edge that U.S. Robotics has over the Rockwell-Ascend team is the fact that it makes its modems to be reprogrammable. Using cheap digital signal processors (DSPs) to build their modems, U.S. Robotics has most of the brains of the modem in software that can be reprogrammed. That means that if you currently own a U.S. Robotics modem, you actually might be able to just dial into a number and download the 56-Kbits per second technology without having to buy another modem. This transaction would be an incredibly high margin one that most, if not all, competitive modem manufacturers could not do by virtue of how they design their modems.

Even if U.S. Robotics does not win, the new technology effectively extends the life of the entire modem industry by two years. The fact that the company dominates this market and is building a "Communications by U.S. Robotics" brand on personal computers as a direct rip-off of the fabulously successful "Intel Inside" campaign, in my mind helps to put a lock on this. With its strong systems business becoming increasingly important to the overall bottom line, the comparative valuations between U.S. Robotics and every other networking company on the planet remain cheap on a relative basis. Currently at 2.83 times trailing sales and 24.7 times trailing earnings, the company carries 18 percent operating margins. With estimates hovering around $3.30 EPS for next year, the shares could potentially continue their rapid appreciation of the last few weeks if the possibility of its winning the standards war continues to increase.

FOOL FEATURES

Our weekend staple, Fool's Gold is back again this week. In this edition, The Fool Gives Thanks by outlining some of the equities that put smiles on our faces. The Sector Snapshot focuses on financial information providers, like Dow Jones and Dun & Bradstreet.

On Monday, the The Thirteen Steps to Investing Foolishly -- LIVE! concludes with the Thirteenth Step -- Max Out with the Fool Online. As a special added bonus, we'll have a Virtual Booksigning -- you can buy a copy of The Motley Fool Investment Guide and have it signed with a personalized inscription that you've written. Makes a great gift for friends and family.

ANOTHER FOOLISH THING

Special Holiday Gift Packs!

You can't give many better gifts to your loved ones than a nudge in the direction of financial independence. With only a few shopping days left until the Great Murksneeveling, if you haven't loaded up on gifts for your loved ones for Plankity-Plankity Day, you may be in trouble. That is, unless you hop over to FoolMart, where our holiday gnomes have assembled some special deals for you. They've put together carefully-bundled packages for college students, parents & grandparents, friends & neighbors, and Fool fanatics -- all offering you a special, limited-time discount over our regular prices. You can even mix and match and create your own bundle!

Randy Befumo (MF Templar), a Fool
Fool On the Hill

Dale Wettlaufer (MF Raleigh), another Fool
Heroes & Goats

Brian Bauer (MF Hoops), one more Fool
Editing

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