HEROES

News that former Fidelity Magellan manager Jeffrey Vinik has amassed a 5.9% stake in electronic design automation concern QUICKTURN DESIGN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QKTN)") else Response.Write("(Nasdaq: QKTN)") end if %> pushed its shares up $2 1/8 to $21 5/8. This revelation came as part of the routine disclosure investors are required to make when they amass more than a 5% stake in any public company. Previously, diversified storage technology firm INNOVEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVX)") else Response.Write("(Nasdaq: INVX)") end if %> made a significant move after the Vinik group announced a similar acquisition of shares. Contrary to investor expectations at the time, however, Vinik disposed of 27% of his Innovex holdings only three weeks later. Vinik gained infamy among investors by talking up MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> in a letter to fundholders in September of 1995 in spite of the fact by the time the letter saw print he was selling his stake. Investors playing follow the guru with Vinik do so at their own risk.

CMG INFORMATION SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMGI)") else Response.Write("(Nasdaq: CMGI)") end if %> gained $1 3/4 to $19 1/8 after MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> agreed to buy CMG's NetCarta Corp., a website management software company. CMG will be familiar to those who can keep track of all the acquisitions AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> has made over the last couple of years. In late 1994, America Online acquired Navisoft and Booklink from CMG for $30 million in stock. Most believe CMG did a pretty sweet deal there. Today's sale of NetCarta will bring in $20 million cash in addition to Microsoft taking a 4.9% stake in CMG for an undisclosed amount. CMG has a number of other investments and wholly-owned units, including companies such as virtual reality developer Black Sun and search engine LYCOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %>.

SIGMATRON INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SGMA)") else Response.Write("(Nasdaq: SGMA)") end if %> gained $2 1/2 to $17 5/8 adding to a strong advance yesterday. The contract manufacturer and circuit board company reported second quarter 1997 earnings of $0.44 per share, slightly more than double last year's result. Luckily for the company, there were no analysts' estimates made public, so there's less opportunity for the earnings result to be spun the wrong way. Sigmatron is a small player in its industry, but does a pretty effective job for a company its size in bringing as much of its gross margin to the bottom line as it does. Investors are jumping all over these shares, as the sequential growth in the company is very strong. Even after moving up from $12 3/4 per share, where it closed two days ago, the company is still trading at reasonable valuations for a small cap firm.

QUICK TAKES: Biotech company CREATIVE BIOMOLECULES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBMI)") else Response.Write("(Nasdaq: CBMI)") end if %> shot up $1 3/4 to $11 3/4 after announcing that it has signed a development agreement with BIOGEN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BGEN)") else Response.Write("(Nasdaq: BGEN)") end if %>... VOXWARE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VOXW)") else Response.Write("(Nasdaq: VOXW)") end if %> levitated $1 1/4 to $7 5/8 as Oppenheimer & Co. started the speech processing company with a "buy" rating... Dermatology products company ARQULE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARQL)") else Response.Write("(Nasdaq: ARQL)") end if %> gained $2 5/16 to $12 11/16 after Volpe Welte upgraded the stock from to "strong buy" from "buy"... SINCLAIR BROADCAST GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBGI)") else Response.Write("(Nasdaq: SBGI)") end if %> surged $3 1/4 to $26 1/4 after a Salomon Brothers analyst made positive comments on the company, saying that it is likely to beat estimates for several quarters... Software company FOREFRONT GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FFGI)") else Response.Write("(Nasdaq: FFGI)") end if %> rose $1 1/8 to $7 5/8 after announcing that Mitsubishi will integrate Forefront's offline browsing products with its storage hardware... TECHNICAL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCCO)") else Response.Write("(Nasdaq: TCCO)") end if %> moved up $1 5/8 to $11 1/2 after winning a contract with the U.S. Army for its cryptography software... Personnel management software company MDSI MOBILE DATA SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDSIF)") else Response.Write("(Nasdaq: MDSIF)") end if %> gained $1 1/2 to $17 after signing a $10 million deal with AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>... BEAUTICONTROL COSMETICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BUTI)") else Response.Write("(Nasdaq: BUTI)") end if %> received a share price make-over, rising $1 1/4 to $15, after announcing that it expects Q4 earnings to come in 10% above analysts' estimates of $0.30 per share... Oil and gas company STONE ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGY)") else Response.Write("(NYSE: SGY)") end if %> moved up $2 1/4 to $25 7/8 after announcing a natural gas find off the Louisiana coast.

GOATS

The world's largest manufacturer of thin-film disks pre-announced a bad quarter due to lower than expected manufacturing yields on some of its newest products. KOMAG <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KMAG)") else Response.Write("(Nasdaq: KMAG)") end if %> dropped $5 7/8 to $27 1/4 after the news broke that the fourth quarter would not meet expectations. Last week when HUTCHINSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HTCH)") else Response.Write("(Nasdaq: HTCH)") end if %> reported a much stronger than expected quarter, almost every company related to storage technology enjoyed a sharp price rise as investor attention focused on the sector. As Komag's problems appear to be company-specific, the bad news here did not carry over to competitors like HMT TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HMTT)") else Response.Write("(Nasdaq: HMTT)") end if %> and STORMEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STMD)") else Response.Write("(Nasdaq: STMD)") end if %>. In fact, Stormedia was up $2 1/8 to $16 7/8 on the news, as lower yields at Komag might mean it can finally use some of the capacity that QUANTUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QNTM)") else Response.Write("(Nasdaq: QNTM)") end if %> announced it would not need a few months ago.

BLACK & DECKER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BDK)") else Response.Write("(NYSE: BDK)") end if %> was mashed for $6 to $31 5/8 after reporting that it would not meet expectations for the fourth quarter of 1996 or the first quarter of 1997. Lower demand in the sluggish European economies combined with expenses related to factory building in Brazil, Mexico and Southeast Asia are to blame for the poor performance. Black & Decker has poured millions into improving its European operations and was expecting higher sales volume to allow it to leverage off of its lower cost structure and enjoy fat profits. A tough comparison with last year's strong sales of the SnakeLight flexible flashlight in North America did not help matters. Investors should not be confused by the fact that profits are at the same level as last year, though. Black & Decker is recording a sizable tax benefit in the fourth quarter as it now thinks it will only be taxed at the 27% nominal rate due to lower sales.

EXCEL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECI)") else Response.Write("(NYSE: ECI)") end if %> was crunched for a $4 3/4 loss to close at $23 1/4 after announcing that network problems will take a bite out of earnings this quarter. The fourth-largest residential long-distance carrier in the country said that increased customer sign-ups weren't met by the capacity upgrades they expected from their long-distance vendor. Excel is essentially a middle-man in the long-distance game, as its sales representatives scour the country selling the hundreds of millions of minutes of long-distance time the company buys at wholesale rates. As such, though, much of the fulfillment is out of Excel's hands. The network upgrade problems cost them a higher churn rate, a loss of about $40 million in revenues, and prompted the company to forecast earnings of $0.27 to $0.30 per share, below expectations of $0.43.

QUICK CUTS: Networker BAY NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> dropped $1 3/8 to $23 1/8 after the company's new CEO cautioned investors not to expect a miracle turnaround, commenting further that the company is not for sale... EMULEX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EMLX)") else Response.Write("(Nasdaq: EMLX)") end if %> slid $1 1/4 to $16 3/4 after the networking company's chief financial officer resigned to join privately-held Unplugged Communications... Chip maker CYRIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYRX)") else Response.Write("(Nasdaq: CYRX)") end if %> slumped $2 7/8 to $19 1/2 after founder and CEO Jerry Rogers announced his resignation yesterday... COPART <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPRT)") else Response.Write("(Nasdaq: CPRT)") end if %> lost $4 3/8 to $10 5/8 after the vehicle salvage company that serves the insurance industry reported a 10% decline in first quarter earnings... Specialty retailer CENTRAL GARDEN & PET CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CENT)") else Response.Write("(Nasdaq: CENT)") end if %> was trimmed for $2 3/8 to close at $19 1/2 after reporting earnings of $0.10 per share in its fourth quarter, twice what analysts had estimated... VARCO INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VRC)") else Response.Write("(NYSE: VRC)") end if %> dropped $1 5/8 to $21 1/2 even though Investor's Business Daily featured the company in its "New America" column. Potential customer GLOBAL MARINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLM)") else Response.Write("(NYSE: GLM)") end if %> lost $1 3/8 to $17 3/4, and CHESAPEAKE ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHK)") else Response.Write("(NYSE: CHK)") end if %> lost $4 5/8 to $54 7/8 as spot pricing in the oil market might not be telling the whole story for the oil market going forward.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Netscape Teams with Baby Bells

Shares of AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> saw their first bout of weakness in two weeks today after NETSCAPE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> announced its counterattack on MICROSOFT'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> Internet Explorer. Investors anxious about America Online's recent rate change and ability to provide access to subscribers reveling in the flat-fee, all-you-can-eat pricing were all keyed up to find something bad in what on the surface appeared to be just another volley in the ongoing Netscape-Microsoft war. Netscape announced a marketing agreement with five Regional Bell Operating Companies (RBOCs) to license the Netscape browser for free for their Internet access units. Although Netscape would not elaborate on their rationale, they did say that these services could reach as many as 72 million people in 26 states.

Netscape has been playing defense against late-starter Microsoft for most of the year as the Redmond, Washington-based software giant continued to frustrate Netscape management by giving away its Internet Explorer browser for free. Deal after deal signed with major online service providers like America Online had Microsoft letting them use the browser technology for free in a bid to gain market share. Netscape has seen some of its absolutely critical market share eaten up by Microsoft in the past few months and apparently is fighting mad about it. Microsoft's aggressive "give the browser away for free" plan has enabled Gates & Co. to play catch-up after almost throwing the game entirely in 1994 when they were slow to recognize the potential of the Internet as a commercial medium.

Why are they sweating market share so much at the expense of near-term licensing profits? Apparently, Netscape has realized that the business of licensing the browser to access providers for use by consumers was not working out as planned and management has decided to throw in the towel. Thirsting for those fantasy profits at the expense of real-world market share has been recognized as a bankrupt strategy by the gang in Mountain View, California. Market share is increasingly the critical variable in the economics of the server business. Internet Service Providers (ISPs) are inclined to buy server products from the same company that supplies them with the browser in order to make the most use of each particular browser's specific features and avoid any potential incompatibility. Netscape derives significant revenues from licensing its browser for use on corporate intranets and selling high margin server software products to corporations interested in running a network -- meaning that the free licensing will do little to disrupt their already attractive economics.

So then why is America Online getting thrashed? Well, that 72 million customer thing in the press release has people besides themselves with fear. What if the Bells do blow out their ISP business and become the main providers of Internet access? Could America Online be damaged? Pronouncements of America Online's demise at the hands of traditional telecommunications providers like AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> or the local Bells have been being issued for more than two years. This is in spite of the fact that for all of their efforts, AT&T and the local Bells barely have 500,000 subscribers among them and have run into significant access problems due to their skimpy Internet access power.

Skimpy, you say? Has Templar gone mad? These telecommunications companies number among the largest in the world. The biggest misconception in the online business is that you connect to the Internet or proprietary online service via the initial dial-up from the local phone provider. Access actually consists of two main parts -- the initial dial-up and then the connection of that dial-up to the TCP-IP backbone of the Internet. You dial into the Internet Point of Presence (POP) through the conventional Plain Old Telephone System (POTS) line and then the POP (or node) connects you to the Internet. Although local Bells own plenty of dial-up lines, they have had to build their nodes from scratch and connect these nodes to chunks of the Internet backbone owned by other companies.

Who owns the backbone? Names like MCI COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %>, UUNet Technologies, PSINET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSIX)") else Response.Write("(Nasdaq: PSIX)") end if %>, BBN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBN)") else Response.Write("(NYSE: BBN)") end if %>, SPRINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %>, AGIS-Net99 and America Online, through its ANS unit. Contrary to the convention wisdom, the local Bells have almost no experience maintaining a TCP-IP network of the scale necessary to provide consumer access to the Internet, and have absolutely no ownership of the TCP-IP backbone needed to hook up to in order to access the Internet. Heck, PSINet, which owns a significant portion of the Internet backbone, got out of the consumer business because it did not have the necessary resources to provide the same connectivity.

The perception that AT&T and the RBOCs have some kind of edge in the Internet access business is laughable at best. However, this may be difficult for customers struggling to get on America Online because of busy access nodes to swallow and could be a significant factor driving the stock today. As my new favorite America Online area, the aptly named AOL Insider pointed out in its daily Meg's Update, some of this might just be because people are so locked into the habit of their current access number they don't realize that there are other numbers out there that are not jammed. In the end, the fact that Internet access is so widely and deeply misunderstood simply translates into a wonderful market inefficiency to be exploited by those in full possession of the facts.

CONFERENCE CALLS

12/11/96 (Wednesday)
INTELIDATA TECHNOLOGIES CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTD)") else Response.Write("(Nasdaq: INTD)") end if %>
(Note: This call is specifically for individual investors, to update them on information recently presented to institutions and analysts)
3:00 PM EST
1-800-382-0655 -- live

FOOL FEATURES

It's tool time in today's Lunchtime News. Black and Decker announced that earnings would likely fall short of consensus estimates. MF Templar put them up on the bench and hammered out some possible outlooks.

ANOTHER FOOLISH THING

The Dow Dividend Spreadsheet

Fooldom is all about interactivity and do-it-yourself investing, right? (Answer: Right.) What fits in better with such a tradition than the Dow Dividend Spreadsheet? Developed by our own industrious MF Templar, this is a living, breathing spreadsheet -- one you can manipulate and tinker with. It offers returns and dividends for all 30 stocks in the Dow Jones Industrial Average for 35 years (1961 through 1995), as well as returns for all eight Dow Dividend Strategies -- year by year. This allows you to test out any hypothesis in your search for the ultimate investing approach. Construct what-if scenarios and test them. What if you only bought the 17th-highest-priced stock each year for 35 years? What if you bought all but the lowest-yielding stocks? What if...

The spreadsheet is available in FoolMart and will be delivered to your e-mailbox electronically in your preferred format (Excel 4.0, 5.0, 6.0, or 7.0 only).

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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