HEROES

NCR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCR.WI)") else Response.Write("(NYSE: NCR.WI)") end if %> surged ahead $4 1/8 to $40 1/2 in its second day of trading. The distribution of shares to AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> shareholders begins at the end of this month, but investors interested in AT&T as a free-standing business can buy the "T.WD" shares now trading on the NYSE. NCR steps out into the world again on its own, the last of the spin-offs in AT&T's restructuring announced last year. Unfortunately, the company is a black hole as far as the earnings statement goes. Last year, it lost more than $400 million from operations before a restructuring charge, and through nine months of 1996 has lost $116 million. There are some choice business units here, but in every business segment NCR faces much stronger competitors. Some investors are probably hoping for further restructuring.

In other restructuring news, TENNECO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TEN)") else Response.Write("(NYSE: TEN)") end if %> fell $6 to $45 1/2 as the company completed the merger of its natural gas pipeline with EL PASO ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EPG)") else Response.Write("(NYSE: EPG)") end if %>. Shareholders received new Tenneco shares, which reflect the value of its auto parts and packing materials businesses, and 0.093 shares of El Paso, a coast-to-coast gas pipeline. Holders also received one share of NEWPORT NEWS SHIPBUILDING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NNS)") else Response.Write("(NYSE: NNS)") end if %> for every five old Tenneco shares they held -- that business contributed one fifth of Tenneco's sales and 14% of 1995 operating profits. Putting this all together, Tenneco holders yesterday had a $51 1/2 stock; today they hold three companies worth $45.50 + $4.29 + $3.20, or $52.99. Shareholders made a 2.9% gain -- they whipped the market!

BINKS MANUFACTURING <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BIN)") else Response.Write("(AMEX: BIN)") end if %> gained $3 1/8 to $33 3/4 after the maker of finishing and coating products, such as paint guns, spray booths, and paint robots announced a restructuring. The company will cut half its workforce while affecting only 6% of its sales, meaning that productivity almost doubles. Binks will also drop a substantial number of its products, concentrating on its value-added offerings. In the era of just-in-time manufacturing, laying up thousands of items in inventory doesn't pay -- few distributors want that business and few manufacturers of this size can really handle it. The company says it will save $15 million in operating expenses next year and $31 million in 1998 -- on $254 million in sales; that's huge, especially with an enterprise value around $140 million.

QUICK TAKES: Natural resources company IMC GLOBAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IGL)") else Response.Write("(NYSE: IGL)") end if %> gained $2 to $38 7/8 after announcing that its joint venture with FREEPORT MCMORAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTX)") else Response.Write("(NYSE: FTX)") end if %> will sell phosphates to China... BOSTON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BSTN)") else Response.Write("(Nasdaq: BSTN)") end if %> surged $4 3/8 to $23 3/8, saying it signed a $60 million hardware/software supply contract with SBC COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %>... Healthcare information company ENTERPRISE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESIX)") else Response.Write("(Nasdaq: ESIX)") end if %> gained $2 3/8 to $18 1/2 after Lehman Brothers initiated coverage of the company with a "buy" rating... PHYSICIAN COMPUTER NETWORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCNI)") else Response.Write("(Nasdaq: PCNI)") end if %> rose $1 3/16 to $9 13/16 on a "buy" rating from the same analyst... STORMEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STMD)") else Response.Write("(Nasdaq: STMD)") end if %> moved up $2 1/2 to $18 3/8 as competitors KOMAG <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KMAG)") else Response.Write("(Nasdaq: KMAG)") end if %> and HMT TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HMTT)") else Response.Write("(Nasdaq: HMTT)") end if %> have both reported problems this week... Controversial dietary products maker NUTRITION FOR LIFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NFLI)") else Response.Write("(Nasdaq: NFLI)") end if %> rose $1 15/16 to $16 7/16 after a strong quarterly earnings performance and news that the SEC has called off its inquiry into trading in the company's shares... ESS TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESST)") else Response.Write("(Nasdaq: ESST)") end if %> added $2 1/8 to $27 1/4 on yesterday's news of an MPEG digital video design deal with SONY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNE)") else Response.Write("(NYSE: SNE)") end if %>.

GOATS

VERITAS DGC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VTS)") else Response.Write("(NYSE: VTS)") end if %> melted $2 5/8 to $21 1/4 after the oil services company reported handsome operating results for its first quarter. The company turned in a sizable 180% increase in earnings per share on a 28% gain in revenues. Operating margins increased nicely and offshore seismic information gathering activity nearly doubled. All of these operational improvements occurred in spite of some work delays and bad weather in the area of a few of its contracts. However, investors might have problems with the nearly $50 million increase in long-term debt over the last quarter and the 18% increase in the company's sharecount that is planned. As sweet as the operations are looking and as strong as energy has been, a few investors had trouble swallowing a $124 million addition to enterprise value.

Computer peripherals company IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> lost $2 1/4 to $19 7/8 after Morgan Stanley reduced its fourth quarter earnings estimate to $0.17 from $0.19 per share, which brought down its 1996 full-year estimate to $0.45. The firm had the highest estimate on the stock for the fiscal year. It's not that Zip and Jaz aren't the coolest storage devices around -- rather, Morgan Stanley believes that consumers are waiting until after the Christmas season to make computer purchases, which follows consumer spending patterns of this decade. Rather than rushing out to make one of the largest consumer goods purchases that the regular American makes over the course of the year or a lifetime, many intelligently wait after Christmas to hit the malls or pick up the phone to order.

QUICK CUTS: WET SEAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WTSLA)") else Response.Write("(Nasdaq: WTSLA)") end if %> fell $1 1/4 to $19 5/8 after the women's retailer said it is interested in acquiring 508 bankrupt County Seat Stores, a proposal that County Seat called "grossly inadequate"... Eyewear company LUXOTTICA GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LUX)") else Response.Write("(NYSE: LUX)") end if %> lost $6 1/2 to $58 1/4 as Merrill Lynch cut its rating to "neutral," reflecting the weakness of other sunglasses makers... WMS INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMS)") else Response.Write("(NYSE: WMS)") end if %> slid $1 3/4 to $23 7/8 after an Illinois judge issued a restraining order involving a WMS slot machine alleged to infringe upon the patents of INTERNATIONAL GAME TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IGT)") else Response.Write("(NYSE: IGT)") end if %>... Energy company ENRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ENE)") else Response.Write("(NYSE: ENE)") end if %> lost $2 3/4 to $41 3/8 on confusion whether it has regulatory approval to complete the acquisition of PORTLAND GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PGE)") else Response.Write("(NYSE: PGE)") end if %>... YESS ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YESS)") else Response.Write("(Nasdaq: YESS)") end if %> slumped $ 2 1/16 to $6 3/8 on worries that its V-Link wireless toy may violate federal regulations... Computer consultants CIBER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIBR)") else Response.Write("(Nasdaq: CIBR)") end if %> lost $6 1/8 to $28 7/8 as the company's chief executive officer will sell close to one million shares... TICKETMASTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TKTM)") else Response.Write("(Nasdaq: TKTM)") end if %> fell $2 to $12 1/2 after reporting earnings per share (EPS) of $0.11... TV network/movie studio/theme park/ruler of the world WALT DISNEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> fell $1 7/8 to $70 1/4 as its looks like President/co-ruler of the world Michael Ovitz is on the way out... IPC INFORMATION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPCI)") else Response.Write("(Nasdaq: IPCI)") end if %> lost $2 1/8 to $15 1/4 after the financial software firm reported a 64% decrease in fourth quarter EPS... Internet search engine companies fell after a negative Wall Street Journal story today -- LYCOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> lost $1 1/2 to $13 5/8, while EXCITE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> ticked down $1 1/4 to $11 3/4.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Lucent's Spin-Off Standard

The April 1996 debut of LUCENT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> is a textbook case of how to do a stock spin-off. AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> sold about 20% of the telecommunications equipment manufacturer to the public, followed a few months later by a spin-off of the remaining majority stake to individual AT&T shareholders. By establishing a liquid market for the securities before the spin-off, AT&T not only got a nice slug of cash from the offering, but also enabled spin-off shareholders to enter into a stable pricing environment instead of a volatile initial public offering situation.

In a series of brand-building advertisements, Lucent has pasted the broadcast airwaves with its new corporate logo. The mission here appears to be to create awareness of the new entity, pitch the heritage of Bell Labs to potential equipment customers, and get individuals excited about the stock. The strong price surge that shares of Lucent have seen over the past eight months to the $50 level is testament to the success of this effort. Unknown nine months ago, Lucent has become a "must-own" company for many individuals and portfolio managers, joining the ranks of GENERAL ELECTRIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> and DISNEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %>. Heck, AT&T Chief Executive Robert Allen probably never anticipated that Lucent might actually displace AT&T as a core holding in a lot of portfolios.

Lucent makes telephone equipment ranging from the actual phones to the huge pieces of infrastructure used by phone companies to provide basic service. Besides the fact that the management of Lucent has world-renowned Bell Labs at its disposal, one of the key reasons that the stock has soared is because the market for large-scale telecommunications equipment looks absolutely great to many market mavens. With Lucent detached from AT&T, it can now aggressively sell to Regional Bell Operating Companies (RBOCs) starved for switching capacity without them fearing the spectre of buying from a potential competitor -- the situation that existed when Lucent was part of AT&T.

The specific bottleneck that most Lucent analysts are jumping up and down about is congestion at the Class 5 switches used to route voice and data traffic by the RBOCs. The reason why Lucent is trading at 25 times next year's earnings is because the RBOCs are getting creamed at their Class 5 switches by booming Internet traffic. The rise of flat-fee, all-you-can-eat pricing has people on the Internet an average of 30 minutes and rising, compared to a median duration of three minutes for voice traffic. As the RBOCs need to maintain that guaranteed dial tone at the 99% level, it would appear that they need to buy a lot of Class 5 switches in the next few months to achieve this, which is bullish for Lucent.

Lucent looks to be a solid 15% grower, at least to the eyes of the portfolio managers who have anointed it a "must have" stock. However, if this is all premised on the explosive sales growth of Class 5 switches, some of this optimism might be characterized as "irrational exuberance." Path dependent thinkers are locked into the notion of Lucent providing the fix, but with companies like ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> aggressively marketing its MAX TNT (The Next Thing) carrier-class wide-area network switch to telecommunications providers, Lucent might actually be looking at more competition in its core equipment market than it ever could have imagined. As Leeza Rodriguez (MF MOM) in the AOL Networking industry area has been saying for months in her Networking Weekly Updates, networking and telecommunications equipment products are converging.

The implication of this convergence is that companies like Ascend and CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> are going to start poaching in the home territory of names like Lucent and ALCATEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALA)") else Response.Write("(NYSE: ALA)") end if %>. This is an important point, as it changes the traditional competitive dynamic and creates flux where there once was stability. Take the MAX-TNT switch, for instance. The switch enables Internet traffic to bypass the Class 5 switch in many cases, allowing the Bells to solve their Class 5 congestion problems for $18,000 a switch instead of Lucent's $1.8 million a switch. Although you do need a lot of MAX-TNTs to cover the same amount of traffic as one Lucent Class 5 switch, if you look at the magnitude of the price differential it becomes clear that the RBOCs could stand to experiment with the MAX-TNT before laying down the bucks for a Class 5 solution. Lucent is hardly a company dependent on one market, but at 25 times forward earnings for a 15% grower, the company will need to achieve the same consistent performance that a COCA-COLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> has provided over the decades to continue its upward ascent. (Of course, this comes from a guy who thought the book-to-bill this month would be below the previous month, so take it with a grain of salt.)

CONFERENCE CALLS

12/12/96 (Thursday)
ORACLE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %>
(800) 633-8284 (code: 2223286) -- replay

FOOLISH FEATURES

In the nautical theme, today's Lunchtime News bids bon voyage to the book/bill ratio. The Semiconductor Industry Association has sent the ratio on a permanent vacation. The new ship pulling into SIA's port will be a monthly report of global semiconductor sales, sans booking portion.

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.

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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