HEROES

CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> gained $2 to $58 after announcing the acquisition of privately-held Sahara Networks, a maker of Wide Area Network products. MF MOM, Leeza Rodriguez, reports that Sahara was one of the few private networking companies to make a presentation at the Alex. Brown Technology Conference. Not only were financial people asking questions, but networking competitors and potential competitors were quite interested as well. Sahara's "POP in a box" concentrates multiple data inputs (such as analog dial-up, cable modems, ATM, ethernet) and throws those into the "telco cloud," or telecommunications backbone. Fool networking observers believe these products will allow Cascade to offer more economical ATM service to end-users by using a lower cost T-1 line rather than the current required T-3 connection. Cascade expects that the telcos will like that, too.

MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> gained $2 1/4 to $32 after several brokerages, Merrill Lynch and analyst Tom Kurlak among them, issued positive comments about semiconductor companies today. Mr. Kurlak has been the most bullish of analysts on Micron for the past few months -- that Micron has filed for a shelf registration of $1 billion in debt or equity securities has some thinking that Merrill's opinion has been colored by the prospect of leading the sale of those securities. Less conspiratorial investors believe that Micron may be improving its yields, which drops the average cost per chip produced. If the company ramps up its 16 Megabit production to the level it expects this quarter and achieves a higher yield, Micron might report good numbers for the quarter. Added to recent estimate upgrades for its MICRON ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %> division, the case for Micron brightens.

Prudential Securities made bullish comments on imaging companies today, impacting ELECTRONICS FOR IMAGING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EFII)") else Response.Write("(Nasdaq: EFII)") end if %> which printed a $7 1/2 gain to $88 3/4. The company makes hardware and software which turns copiers into high speed presses. Its products benefit from the convergence of a number of different phenomena. Among those, cheap Internet access has let many talented designers market their services, allowing them to act as in-house designers for a number of firms. Secondly, as the cost of ownership of copiers improves and as those devices add features, a company can leverage those fixed costs and accomplish tasks that an outside printshop normally takes care of. Electronics for Imaging, as well as XEROX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XRX)") else Response.Write("(NYSE: XRX)") end if %>, stand to benefit from these trends.

QUICK TAKES: INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> gained $8 to $138 3/8 on a huge upward estimate revision by Salomon Brothers and general good feelings about PC sales... DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> came back $4 5/8 to $55 7/8 after yesterday's blip... GATEWAY 2000 <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GATE)") else Response.Write("(Nasdaq: GATE)") end if %> rose $2 3/4 to $53 7/8, while COMPAQ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> gained $4 to $76 3/8... IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> tacked on $5 7/8 to $159 1/8... Disk drive and component companies were boosted, too, including READ-RITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDRT)") else Response.Write("(Nasdaq: RDRT)") end if %>, up $1 7/8 to $26 7/8; WESTERN DIGITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %>, up $2 3/8 to $57 1/4; INNOVEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVX)") else Response.Write("(Nasdaq: INVX)") end if %>, up $1 1/2 to $28 1/2; and STORMEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STMD)") else Response.Write("(Nasdaq: STMD)") end if %>, up $2 1/4 to $18 5/8... Good feelings also abounded in semiconductors -- LSI LOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LSI)") else Response.Write("(NYSE: LSI)") end if %> gained $1 3/8 to $28; XILINX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XLNX)") else Response.Write("(Nasdaq: XLNX)") end if %> was up $1 1/2 to $37 1/2; ALTERA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALTR)") else Response.Write("(Nasdaq: ALTR)") end if %> climbed $6 1/8 to $77 7/8; CYPRESS SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CY)") else Response.Write("(NYSE: CY)") end if %> gained $1 1/2 to $15 1/4; and ANALOG DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADI)") else Response.Write("(NYSE: ADI)") end if %> climbed $3 to $36... In equipment and materials, MEMC ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFR)") else Response.Write("(NYSE: WFR)") end if %> gained $2 1/4 to $25 1/4; APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> rose $2 1/4 to $37 1/2; LAM RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LRCX)") else Response.Write("(Nasdaq: LRCX)") end if %> was up $1 3/4 to $29 1/2; BROOKS AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRKS)") else Response.Write("(Nasdaq: BRKS)") end if %> was up $1 1/8 at $17; KULICKE & SOFFA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLIC)") else Response.Write("(Nasdaq: KLIC)") end if %> gained $2 to $21; and GASONICS INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GSNX)") else Response.Write("(Nasdaq: GSNX)") end if %> gained $1 3/16 to $11 1/2.

MORE TAKES: STATE STREET BOSTON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STT)") else Response.Write("(NYSE: STT)") end if %> jumped $8 to $71 after BANK OF NEW YORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BK)") else Response.Write("(NYSE: BK)") end if %> filed to up its investment position in the financial services company... STARBUCKS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBUX)") else Response.Write("(Nasdaq: SBUX)") end if %> rose $2 1/4 to $30 after reporting a 2% increase in December same-store sales... Direct marketing information company ABACUS DIRECT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABDR)") else Response.Write("(Nasdaq: ABDR)") end if %> gained $3 1/2 to $25 on positive brokerage comments... HEALTHSOUTH CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRC)") else Response.Write("(NYSE: HRC)") end if %> climbed $3 to $39 7/8 as the company will join the S&P 500 Index... Chemical and technology company ARQULE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARQL)") else Response.Write("(Nasdaq: ARQL)") end if %> rose $1 1/2 to $17 after Lehman Brothers set a $29 price target for the shares... BEN & JERRY'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BJICA)") else Response.Write("(Nasdaq: BJICA)") end if %> gained $1 to $12 3/4 after naming journeyman marketing executive Perry D. Odak as CEO... TRIPOS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TRPS)") else Response.Write("(Nasdaq: TRPS)") end if %> flew $3 7/32 higher to $15 15/32 after Hambrecht & Quist started the chemical analysis company with a "buy" rating.

GOATS

Since we discussed imaging companies in Heroes, we might as well also discuss FILENET CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FILE)") else Response.Write("(Nasdaq: FILE)") end if %>, which plunged $8 3/4 to $23 today. The company makes document imaging and workflow products, including software and hardware, and also services those systems. FileNet said fourth quarter earnings will come in at $0.20 per share, down substantially from last year's $0.32 and far below estimates of $0.50. One analyst said the company "decided to build backlog" so as to manage future earnings better. Well, that's a nice position to be in, but the company's Accounts Receivable days-sales-outstanding (DSO) is enough to give pause. Explained in the Fool series "Liquid," the DSO measure tells you how quickly a company is being paid for its credit sales. With a DSO of 100 last quarter, FileNet doesn't look like it's managing its business very well. If it made a majority of sales overseas where payment terms are different, it may be understandable. But in this case, it's a good early warning sign of something wrong.

QUICK CUTS: NAUTICA ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NAUT)") else Response.Write("(Nasdaq: NAUT)") end if %> fell $2 1/8 to $24 7/8 even though the company reported Q3 earnings ahead of estimates... Container company ACX TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ACX)") else Response.Write("(NYSE: ACX)") end if %> lost $1 7/8 to $18 after Goldman Sachs removed the shares from its recommended list... UTAH MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UM)") else Response.Write("(NYSE: UM)") end if %> lost $2 1/8 to $11 1/2 after the medical device maker said Q4 and Q1 results will be unfavorable... Networking software company OBJECTIVE SYSTEMS INTEGRATORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OSII)") else Response.Write("(Nasdaq: OSII)") end if %> fell $5 1/8 to $17 after Soundview downgraded the shares to "hold" from "buy"... WET SEAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WTSLA)") else Response.Write("(Nasdaq: WTSLA)") end if %> fell another $3 3/8 to $14 3/4 after Ladenburg Thalman downgraded the shares to "long-term buy" from "buy" (oh, ok), worrying that December same-store sales were running below expectations.

FOOL ON THE HILL
An Investment Opinion by MF Templar

CYBERCRASH

CYBERCASH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %> was sucked under today, dropping $4 1/2 to $18 3/4 after an influential analyst revised his opinion about when the commercial development of the Internet would take place. Steven S. Birer, resident Internet guru at Hambrecht & Quist, wrote in a published note this morning that although CyberCash has done well meeting product goals and forming important alliances, it is essentially doing no business. Or, putting it more gently, CyberCash is ''12 months behind where our initial model anticipated that they would be at this point.''

CyberCash flew to $60 heights earlier this year on promises that it would implement crucial technologies for the commercialization of the Internet. The company's core product is the CyberCash wallet, a secure mechanism for making small purchases on the Internet. Viewing the Internet as the promised land of consumer excess, investors poured funds into CyberCash because its all-star management team and big-deal partnerships with established financial transaction providers made it win "Most Likely To Succeed" awards from all of the brokerage yearbooks. As Birer astutely pointed out today, however, a funny thing has happened on the way to the forum... or, the CyberCash emperor has no clothes.

For its core business to succeed, CyberCash depends on misinformation and the development of certain consumer behaviors. The hullabaloo about how insecure your credit card is on the 'Net is the sole reason why CyberCash has anything resembling a business at all. Its principle product is software encryption products that act as a substitute for direct credit card transactions over the Internet. Whether we are talking about its Electronic Credit Card, CyberCoin or the soon to be released Electronic Check services, all of these products stand to succeed only in that they supplant conventional means of doing business that are viewed by mass society as "unsafe" over the Internet.

How unsafe is your credit card over the Internet? Is it any more unsafe than when you hand it to a waiter in a restaurant? Think about it for a minute. That waiter disappears with your credit card for a good five to ten minutes. Could he call the 800 number for Hammacher Schlemmer and buy a roller coaster for his small child? Could he call up the 800 number for Tiffany's and get a dagger bracelet for $12,000? Could he run a couple of extra imprints and go on a shopping spree? Copy down all the relevant information and use it to get cash-advances over the phone from various consumer debt services? Wake up, people! Your credit card is in more danger every day from handing it to clerks running registers than it ever could be over the Internet. It reminds me of the disproportionate attention paid to airplane accidents, in spite of the fact that statistically car accidents are much more dangerous and normally just end up maiming you.

The other crucial component to the basic CyberCash business is a consumer's willingness to make purchases over the Internet for small items. For certain specialty, boutique environs like the Motley Fool, this might make sense. For the most part, however, consumers have shown very little interest in making small ticket purchases over the Internet. The reason why this is important is for large ticket purchases, the company involved can easily subsidize the cost of a phone call or a fax. The Motley Fool does all of its business using phone, fax or America Online's proprietary ordering system. This has remained cost efficient in spite of the fact that many of these orders are for fairly low dollar amounts. If this organization can overcome the high cost of transactions without requiring some software solution, why would any other business need one?

Time and time again in my analysis of the transaction market, the basic reality that you can do business just fine utilizing existing tools without requiring fancy middleware puts a real damper on the potential for products like this. Regardless of who your signed partners are, if the only reason that you would even think about some middleware solution is because the Internet is "unsafe," you are always vulnerable to the latest, greatest encryption fix. Credit cards are ubiquitous and everyone feels comfortable using them. As long as websites are willing to subsidize increasingly cheap long-distance (phone or fax) or consumers are comfortable with encryption standards used in the average web browsers, the need for the middleware disappears entirely. Add to this that the vast majority of people online use America Online, a company that has its own proprietary network that does not send information over the Internet, and the utility decreases even further.

Essentially, Birer is soft-pedaling the fact that the market for consumer transactions over the Internet is not developing in the way that CyberCash and its original adherents imagined. Rather than waiting for the latest, greatest middleware to suck its share of dollars out of the transaction, commerce has gone on using conventional means that have ubiquity, and consequently familiarity, to do business. Why OPEN MARKET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMKT)") else Response.Write("(Nasdaq: OMKT)") end if %> is up $1 1/2 to $15 1/2 today in the face of CyberCash's crash is difficult to account for, although they do have a business-to-business element to their product line that provides different functions. However, from this viewpoint, middleware for small transactions over the Internet seems like a very, very small business.

ANOTHER FOOLISH THING
Painless Stock Valuations

Learn to value stocks painlessly! In the Industry Decathlon primer, MF Bogey takes readers by the hand and walks them through five stock valuation methods and ten financial ratios, demonstrating how to compare a bunch of companies in your industry of choice and find the most promising one. This is very useful stuff, folks! Check it out at keyword: FoolMart on America Online or at our website (). You might also be interested in his weekly Industry Decathlon report, delivered by e-mail or fax. In it, Bogey examines a different industry each week and runs its top players through his decathlon to discover which one company looks the most attractive.

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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