HEROES

BTG INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BTGI)") else Response.Write("(Nasdaq: BTGI)") end if %> jumped $2 1/8 to $21 3/8 as former Fidelity bond fund, oops, Magellan fund manager Jeff Vinik is put into the Pied Piper role again today. This time he's bought nearly 9% of a company with very little product "moat." BTG re-sells personal computers (PCs), software, and some value-added services to the government. The company only produced operating margins of 4% and a 1.7% net margin last quarter in one of the best quarters in recent memory for government PC value-added re-sellers. Even though the company recently paid down debt, it's still a leveraged commodity business.

Another influential market force, CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>, drove the shares of INTERLINK COMPUTER SCIENCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INLK)") else Response.Write("(Nasdaq: INLK)") end if %> up $3 15/16 to $15 5/8 today. The networking dreadnought agreed to license Interlink's TCPaccess software for MVS mainframes and to take a 9% stake in Interlink. Since Cisco has committed to do a slew of acquisitions each year and has a virtually bottomless war chest to do so, investors would understandably salivate over this deal. The deal also signifies that the mainframe is far from dead, as massive storage and computing power is needed for corporations constructing intranets to access hundreds of terabytes of information. If Cisco needs to go outside its own organization for this functionality, investors figure that they'll pay up for the company where Cisco shops.

QUAKER OATS CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OAT)") else Response.Write("(NYSE: OAT)") end if %> gained $2 1/8 to $38 1/8 today as rumors are circulating that the company will sell its beverage division, including the Snapple and Gatorade product lines. Rumor has it that the company is asking $3-4 billion. That's a pretty ambitious price considering that the company's total equity value stands at $5.2 billion. The whole Snapple affair still leaves a bad taste in the mouths of investors -- a few years ago Quaker bought the company after previous management had done damage to the brand name. While Quaker runs the beverage division profitably, many think it's probably the outstanding Gatorade franchise that makes those numbers. However, Quaker's food division accounted for almost three-quarters of the company's operating income this year, so some company would have to be psyched to pay that big premium just for the beverages.

QUICK TAKES: Personal finance software king INTUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> rose $3 5/8 to $33 5/8 as takeover rumors continue to swirl around the company... DSP COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DSPC)") else Response.Write("(Nasdaq: DSPC)") end if %> rose $3 1/8 to $21 3/8, gaining back most of what it lost yesterday after saying at the Montgomery Securities conference that its gross margin should fall back into a more normal range in coming quarters... Environmentally friendly telco infrastructure builder MASTEC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MASX)") else Response.Write("(Nasdaq: MASX)") end if %> rose $4 to $47 after brokerage Jeffries & Co. initiated coverage of the company with a "buy" rating... MICRODYNE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCDY)") else Response.Write("(Nasdaq: MCDY)") end if %> gained $1 3/8 to $8 1/2 after the networking company won a government contract... Men's sportswear company CUTTER & BUCK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBUK)") else Response.Write("(Nasdaq: CBUK)") end if %> rose $1 1/16 to $12 13/16 after reporting a tripling in second quarter earnings per share... CIBER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIBR)") else Response.Write("(Nasdaq: CIBR)") end if %> came back $2 3/8 to $32 1/4 after the company announced that it will increase its shares outstanding by 11% in a two million share offering... Healthcare information systems company NATIONAL HEALTH ENHANCEMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NHES)") else Response.Write("(Nasdaq: NHES)") end if %> jumped $1 3/8 to $9 1/8 after reporting third quarter earnings of $0.15 per share... SIGNATURE RESORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIGR)") else Response.Write("(Nasdaq: SIGR)") end if %> gained $3 7/8 to $36 1/2 after announcing that it has signed a Virgin Islands development pact with Westin Hotels and Resorts... Healthcare software company ENTERPRISE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESIX)") else Response.Write("(Nasdaq: ESIX)") end if %> gained another $2 1/2 to $21 following yesterday's award of a "buy" rating from Lehman Brothers... FORCENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FGAS)") else Response.Write("(Nasdaq: FGAS)") end if %> climbed $4 1/8 to $34 1/4 on news that the company has signed a contract to buy Alaskan oil properties from Marathon Oil.

GOATS

SAFETY 1ST INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SAFT)") else Response.Write("(Nasdaq: SAFT)") end if %> lost $2 to $10 1/4 after the babyproofing products company said it expects a third quarter sales increase of up to 16%, but also expects to post a loss for the quarter, though they did not quantify the loss. In last year's third quarter, the company posted a $0.35 per share loss. The blame for the loss rests upon the shoulders of lower product margins, probably due to the fact that many add-on safety components, such as drawer locks, are made of molded plastic -- and higher petroleum costs have eaten into the margins of many such companies. The company has also been hurt by disappointing sales of its carbon monoxide sensors. Other manufacturers, such as FIRST ALERT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALRT)") else Response.Write("(Nasdaq: ALRT)") end if %>, have also been hit by poor sales of carbon monoxide sensors, which seem to do well only after a 60 Minutes expose.

Wipeout! @#(%^! MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRRW)") else Response.Write("(Nasdaq: MRRW)") end if %> fell $1 3/4 to $7 after being cut to "hold" from "buy" by Dain Bosworth, who said the snowboard industry is feeling sluggish this year. The weakness in Morrow reflects what has already happened to snowboard maker RIDE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RIDE)") else Response.Write("(Nasdaq: RIDE)") end if %> this year when that company was able to make the revenues line look great, but still came out of the snow season with increased inventories, no earnings, and no increase in book value for its shareholders. This year, Morrow has shown good growth but says that the market is becoming crowded -- which doesn't help its premium-priced offerings. Poor snowfall in California, its largest market, has also hurt results, which prompted the company to forecast flat revenues for the coming quarter.

QUICK CUTS: Videoconferencing systems company PICTURETEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCTL)") else Response.Write("(Nasdaq: PCTL)") end if %> fell $1 7/8 to $25 despite winning a PC Magazine Editor's Choice award... ZOLTEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZOLT)") else Response.Write("(Nasdaq: ZOLT)") end if %> lost $3 1/2 to $40 after Merrill Lynch downgraded the carbon fiber company... Storage peripherals company IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> lost $1 1/4 to $18 3/4 as SEAGATE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> Chair Al Shugart said the company will no longer do contract manufacturing for Iomega... PINNACLE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCLE)") else Response.Write("(Nasdaq: PCLE)") end if %> lost $2 to $11 1/4 after the video editing systems company said Q2 revenues will fall and that the company will incur a "significant" operating shortfall for the quarter... Retailer AMERICAN EAGLE OUTFITTERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AEOS)") else Response.Write("(Nasdaq: AEOS)") end if %> fell $2 5/8 to $16 7/8 after Alex. Brown cut its rating on the company to "buy" from "strong buy"... QUANEX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NX)") else Response.Write("(NYSE: NX)") end if %> fell $1 7/8 to $25 1/2 even though the steel company reported a 17% increase in primary (not fully diluted) earnings per share yesterday... Air cargo handler KITTY HAWK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KTTY)") else Response.Write("(Nasdaq: KTTY)") end if %> lost $2 1/8 to $10 3/8 as investors fear that the FAA will ground retrofitted 727 cargo aircraft... CITATION COMPUTER SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CITA)") else Response.Write("(Nasdaq: CITA)") end if %> lost $1 1/4 to $7 1/2 as Burns Pauli Mahoney analyst Frank Latuda said the healthcare information company's salesforce situation is unstable... Digital advertising systems company SEACHANGE INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEAC)") else Response.Write("(Nasdaq: SEAC)") end if %> lost $5 to $30 3/4 after Morgan Stanley started coverage with a "neutral" rating a month after bringing the company public.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Slow Growth at Oracle?

Shares of database giant ORACLE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> finished the day down $3 1/4 to $44 after reporting second quarter earnings that were 3.6% below consensus estimates last evening. The company's stock traded as low as $42 15/16 during the day on six times normal volume, and closed down significantly from the recent high of $51. Oracle has been one of the names that has exploded over the past two weeks as tons of capital has poured into the "blue-chip technology" stocks, money that has driven companies as diverse as INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> and DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>.

Oracle's disappointment when viewed through the lens of number-crunching was not terribly significant. The company reported a 36% increase in revenues, the same as it reported last quarter, and a 31% increase in operating profits. Oracle's business tends to escalate throughout the year, however, meaning that the momentum investors saw the business this year in the second quarter is not as powerful as it was last year. The sequential increase in revenues in 1995 was 25.3%, compared to 24.6% last year. Operating margins, which fell in the first quarter of 1996 compared to the first quarter of 1995, were flat in the fiscal second quarter comparing this year's 21.4% to last year. Despite the earnings shortfall of one penny per share, the company appears to be on track to earn around $1.28 per share for this fiscal year, meaning the company is trading at 34.4 times forward earnings.

The fact that Oracle did not beat earnings estimates came as a blow to the momentum-style investors that have crowded into the large "technology" names in the past few weeks. As a leading producer of enterprise software, its results were somehow viewed as indicative of potential results from companies like Intel Corp., which closed down $4 1/2 to $132 3/8 after having a sizzling performance yesterday when a key analyst upgraded his earnings expectations for next year. The investment focus over the past few weeks has been on companies that have been anointed the chosen of the technology group, as much a move to perceived safety as any kind of sensible investment strategy. When it suddenly appeared that these names might not represent the absolute level of security every portfolio manager dreams about, the selling began in earnest for the first time in days.

The story may be that Oracle was down big today and is down big from its recent high, but for a company that is basically flat over the past three weeks after having risen 50% this year, it is hard to say that things appear dire. What is somewhat worrisome is the overall trend among large software, network and personal computer-related companies of flat or decelerating revenues. This is the first full year in a while where these companies did not manage to accelerate the base rate of growth in spite of the size of their trailing revenues, and unless they gently transition into the Vahalla of high operating margin, slower growth companies like COCA-COLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> and KELLOGG'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: K)") else Response.Write("(NYSE: K)") end if %>, things could get volatile.

One potential change on the horizon that could shake up the industry and create even more volatility is the so-called paradigm shift of the network computer. Oracle, in conjunction with SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>, has been making a lot of noise lately about something called the network computer (NC), or the "thin client." Oracle makes software products focused on providing key information management services for business computer networks. As a consequence, the company has developed a network-centric view of the world that has suggested to them that the personal computer (PC)is only an intermediate stage in the evolution of computer systems, not the final destination. Oracle's vision is a world of computer terminals that lack the expensive accouterments of a PC like a hard drive or a high-speed central processing unit (CPU). Rather, they believe a much simpler device with a significantly lower total cost of ownership is where companies will begin to migrate in the future to serve their internetworking needs.

Now, let's understand one thing -- the NC is a direct poke at Microsoft's dominate share of the desktop PC market. As much as Oracle Chief Executive Larry Ellison and Sun Chief Executive Scott McNealy want to turn it into some kind of moral issue about "choice," the reality is that they want to turn the overall corporate technology market towards their strengths and away from Microsoft's by causing the "lock-down" of Windows on the PC to break apart. For all the attention this generates, any reasonable estimates of how much this actually changes the financial picture for any of the companies affected has yet to occur. The network is the future, but whether we are networked via evolution through Microsoft or revolution through Oracle and Sun will not be known until the future is today.

Much like the hype around the NC, the excitement that is controlling the share price of Oracle today appears to be much ado over something that is unclear. Certainly, at 34 times earnings for a 36% grower you are nearing fair valuation, but the sustainable operating margins in excess of 18% and the rapid acceleration of networking needs caused by the Internet mean that that this company could conceivably earn a premium multiple. With an arsenal of $878 million in cash and a stock that is viewed as valid currency, this is a company that can continue to grow profitability by exploiting database-related businesses it has barely begun to scratch the surface of, like human resources and network commerce stuff. Sure, Oracle fell more than 7% today and is down nearly 15% from its high, but it is flat against three weeks ago and is up from a split adjusted $3 in 1992. Things are not desperate yet.

CONFERENCE CALLS

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 today's Lunchtime News, MF Templar examines how the tax tail can wag the investment dog, especially toward the end of the year. If you're considering selling something for a tax loss, you should definitely read this first.

If it's the weekend, that can only mean one thing -- Fool's Gold. This weekend's edition features Rogue's treatise on EDGAR (Electronic Data Gathering And Retrieval), the SEC's public online database of required filings. Other items of note in this week's edition are the Weekend Research Center, a Fribble on Beating the S&P, and a Sector Snapshot on Genomics, the study of the genome, the DNA "map" that makes each species different.

ANOTHER FOOLISH THING

Special Holiday Gift Packs!

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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

THE DAILY NEWS CAN BE DELIVERED DIRECTLY TO ANY INTERNET E-MAIL BOX.Wettlaufer (MF Raleigh), another Fool
Heroes & Goats

Brian Bauer (MF Hoops), one more Fool
Editing

THE DAILY NEWS CAN BE DELIVERED DIRECTLY TO ANY INTERNET E-MAIL BOX.