The Evening News - Thursday, February 20, 1997

HEROES

NHP INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NHPI)") else Response.Write("(Nasdaq: NHPI)") end if %> rose $4 9/16 to $19 15/16 after real estate investment trust APARTMENT INVESTMENT & MANAGEMENT CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIV)") else Response.Write("(NYSE: AIV)") end if %> agreed to acquire 54.9% of the company's shares from private holders for $20 per share in Apartment Investment & Management stock. NHP, a real estate management and services company, also said that Apartment Investment & Management has proposed to acquire the rest of the shares from other holders on the same terms. The private holders also arranged for a nice kicker in that they'll receive another $3.05 per share in Apartment Investment & Management stock if the companies don't go through with the spin-off of NHP's mortgage unit. With REIT values doing so well, expect to see more stock swaps in the industry.

PACIFIC GATEWAY EXCHANGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PGEX)") else Response.Write("(Nasdaq: PGEX)") end if %> climbed $3 7/8 to $27 1/2 after the long-distance telecom carrier reported Q4 earnings per share (EPS) of $0.13, beating estimates of $0.12, on a 94% increase in quarterly revenues. The company came public this summer and has torn up the pea patch since that time, returning almost 125%. Pacific owns a number of undersea fiber optic lines, running to foreign markets where less money will be flowing into government treasuries and more into investment and services, thanks to the World Trade Organization agreement signed last weekend in Geneva. With the cash hoard the company still holds from its IPO, it is adding $7-9 million in switches and fiber each quarter, but it still has a long way to go if valuations such as price/fiber and price/potential earnings are to come in line, especially when deregulated markets will mean lower prices.

QUICK TAKES: CHAMPION ROAD MACHINERY LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CRMLF)") else Response.Write("(Nasdaq: CRMLF)") end if %> rose $3 to $10 7/8 after a unit of Swedish conglomerate VOLVO <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VOLVY)") else Response.Write("(Nasdaq: VOLVY)") end if %> offered $11.04 (C$15.00) per share to acquire the Canadian maker of road construction equipment... Israeli software developer NEW DIMENSION SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DDDDF)") else Response.Write("(Nasdaq: DDDDF)") end if %> gained $2 13/16 to $13 3/4 on reporting a 49% increase in quarterly revenues and EPS of $0.24... COEUR D' ALENE MINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDE)") else Response.Write("(NYSE: CDE)") end if %> gained $1 1/4 to $18 1/8 on reporting earnings and a $5 per ounce pickup in the price of gold, which also boosted NEWMONT GOLD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NGC)") else Response.Write("(NYSE: NGC)") end if %> $2 1/4 to $46 1/2... HMO company HEALTHSOURCE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HS)") else Response.Write("(NYSE: HS)") end if %> rose $1 to $16 as investors anticipate earnings... Oil driller UNITED MERIDIAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UMC)") else Response.Write("(NYSE: UMC)") end if %> moved up $2 to $34 1/8 after reporting fourth quarter discretionary cash flow of $40 million, up 300% from last year... INTERSOLV <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ISLI)") else Response.Write("(Nasdaq: ISLI)") end if %> gained $1 1/2 to $9 1/2 after the software developer and Year 2000 firm reported Q3 EPS of $0.16, meeting estimates... As FCC auctions open up for local multi-point distribution spectrum, investors pushed CELLULAR VISION USA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CVUS)") else Response.Write("(Nasdaq: CVUS)") end if %> $1 3/16 higher to $9 7/8... JACKSON HEWITT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JTAX)") else Response.Write("(Nasdaq: JTAX)") end if %> rose $1 to $9 3/4 after the tax preparation company reported Q3 EPS of $0.24.

GOATS

POLARIS INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PII)") else Response.Write("(NYSE: PII)") end if %> slipped $1 1/4 to $25 after Goldman Sachs issued a "market underperform" rating on the shares following the company's announcement that it will introduce a light cruiser motorcycle next spring. Long a favorite of value investors, the company dominates the snowmobile market and is also a player in personal watercraft and all-terrain vehicles (ATVs). Although it has an extensive distribution network, analysts worry that the motorcycle market doesn't offer as attractive an outlet for corporate capital. While the company insists that it's not trying to compete with HARLEY DAVIDSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HDI)") else Response.Write("(NYSE: HDI)") end if %>, it does concede that it will introduce new models as it gets to know the market. "Light cruiser" flops such as the Honda Rebel and stiff competition in the rest of the industry are worrying investors today.

U.S. CAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USC)") else Response.Write("(NYSE: USC)") end if %> was flattened $3/4 to $15 5/8 following this morning's fourth quarter earnings report. The maker of plastic and metal containers recorded an extraordinary charge for retirement of debt for acquisitions, which ran down pre-charge EPS to a $0.17 loss. Last year's cost reduction efforts were working very well, though, as operating income shot up 69% for the quarter on a 45% increase in revenues. While the container industry isn't exactly a gold mine, a lagging European economy didn't help. Nonetheless, the best way to gain strength in this market is to start with improved operating efficiency on larger revenues, which U.S. Can is doing. Interest coverage has increased from last year and the equity value of the company is 1/5 of revenues and 3.4 times earnings (both annualized) before interest and taxes (EBIT).

CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> lost $1 7/8 to $28 7/8 as competitor FORE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORE)") else Response.Write("(Nasdaq: FORE)") end if %> was upgraded by DMG Technology Group analyst Noel Lindsay, who said FORE Systems will benefit from the continuation of the UUnet buildout. Lindsay said that FORE, traditionally seen as a local area network (LAN) ATM company, is being validated as a player in wide-area ATM networking. Cascade, then, faces more competition within the telco cloud. Since its value is predicated on fat margins, the competition from FORE is worrying Cascade investors. The other issue bothering Cascade shareholders is the registration of 100,000 shares to be sold by CEO Daniel Smith. Insiders at Cascade own about half of the company, still very high for the industry.

QUICK CUTS: Enterprise software firm CITRIX SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTXS)") else Response.Write("(Nasdaq: CTXS)") end if %> lost $10 3/8 to $29 1/8 on no available news... ASTEA INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATEA)") else Response.Write("(Nasdaq: ATEA)") end if %> slid $1 1/4 to $5 1/8 after the customer help desk software company reported a quarterly loss on miniscule revenue growth of 9% in its fourth quarter... AMERCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UHAL)") else Response.Write("(Nasdaq: UHAL)") end if %> plunged $6 7/8 to $28 1/8 after the U-Haul holding company weighed in this morning with a Q3 loss of $0.72 per share... Computer systems service company AMERICAN MANAGEMENT SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMSY)") else Response.Write("(Nasdaq: AMSY)") end if %> fell $3 3/4 to $18 1/4 after reporting Q4 EPS of $0.20, missing estimates of $0.21... ISG INTERNATIONAL SOFTWARE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SISGF)") else Response.Write("(Nasdaq: SISGF)") end if %> was smashed for a $5 3/4 loss to $25 1/8 for no apparent reason... Non-traditional consumer lending company UNITED COMPANIES FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UC)") else Response.Write("(NYSE: UC)") end if %> lost another $2 3/8 to $26 after yesterday's earnings report and announcement of a proposed offering of $500 million in corporate securities... RAYMOND JAMES FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RJF)") else Response.Write("(NYSE: RJF)") end if %> lost $2 3/8 to $35 1/2 on a downgrade from Oppenheimer... Regional brokerages INTERSTATE/JOHNSON LANE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IJL)") else Response.Write("(NYSE: IJL)") end if %> slid $1 3/8 to $17 1/2, A.G. EDWARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGE)") else Response.Write("(NYSE: AGE)") end if %> lost $2 3/8 to $37 3/8, and Memphis-based MORGAN KEEGAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOR)") else Response.Write("(NYSE: MOR)") end if %> fell $1 1/4 to $20 3/4... MERRILL LYNCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> ticked down $3 5/8 to $98 3/8, PAINE WEBBER GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PWJ)") else Response.Write("(NYSE: PWJ)") end if %> slid $2 to $34 7/8, and CHARLES SCHWAB <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCH)") else Response.Write("(NYSE: SCH)") end if %> lost $2 1/4 to $38 1/8... Canadian energy company CHIEFTAIN INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: CID)") else Response.Write("(AMEX: CID)") end if %> fell $1 7/8 to $21 3/8 on releasing reserves numbers yesterday.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Wall Street Loves An Underdog

CORRECTION: Yesterday I incorrectly put STORAGE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STK)") else Response.Write("(NYSE: STK)") end if %> in with the PC hard drive manufacturers. Although Storage does make 3.5" drives, they are used for enterprise storage. Thanks to the four employees of Storage Technology and an interested shareholder or two who e-mailed me to correct this point.

Wall Street loves an underdog. Shares of CYRIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYRX)") else Response.Write("(Nasdaq: CYRX)") end if %> surged $3 7/8 to $29 3/8 today after the semiconductor manufacturer announced a new, low-cost MediaGX microprocessor that will enable personal computer manufacturers to deliver fully functional systems for under $1,000. COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> said this morning that it would include the new MediaGX chip in its Presario 2000 Series, giving immediately credibility to offering. Cyrix plans to sell the MediaGX processer in 120 and 133 megahertz units priced at $79 and $99 respectively in 1,000 unit quantities. This price also includes a Cx5510 companion chip, video drivers, and Basic Input Output System (BIOS) extensions courtesy of PHOENIX TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTEC)") else Response.Write("(Nasdaq: PTEC)") end if %>, which was up $3/4 to $19 3/8 on the day.

Although on the surface this seems to be a net benefit to Cyrix, it might augur the return to an unstable market for central processing units (CPUs). Ever since INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> was smashed in late 1994 for the original division error in the Pentium, the company has been on an incredible roll relative to its main competition. All of 1995 was characterized by increasingly bad news about delays in the development of Pentium-class chips by Intel's major competition in the microprocessor arena, Cyrix and ADVANCED MICRO DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %>. The coup de grace came in November of 1995 when Intel debuted the Pentium Pro for the high-end market. The introduction of the Pentium Pro put Intel two generations ahead of its competition in the microprocessor race for the first time ever, solidifying its market dominance over the next two years.

Considering the lagging development efforts at Cyrix and Advanced Micro, it became increasingly clear to many investors that Intel's 80%-plus share of the high-end microprocessor market was not going away. What was even more apparent was that Advanced Micro Devices and Cyrix had been relegated to the dregs of the CPU business, churning out x486 chips in competition with OPTI CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OPTI)") else Response.Write("(Nasdaq: OPTI)") end if %> and cut-rate Taiwanese manufacturers. The fact that the semiconductor industry hit a wall in late 1995 did not help the situation at all from a financial perspective, sucking cash out of both companies just when their development efforts became critical. Advanced Micro Devices plummeted to less than $20 in late 1995, and proceeded to nosedive to the $13 level in mid-1996. Cyrix has a similar chart, going below $30 shortly after the introduction of the Pentium Pro and bottoming out in the $15 range during the summer of 1996. Over the same period, Intel nearly tripled, going from the mid-$50s to its current level of $149 7/8, down $4 today.

Today’s release from Cyrix combined with rumblings from Sunnyvale, California-based Advanced Micro Devices suggests that Intel may not have completely shut down its competition. With this move, Cyrix assaults the low-end of the Pentium-class CPU market, potentially creating a new class of PCs that will stimulate further consumer demand as well as infringe on Intel’s current Pentium franchise. With 133 megahertz Pentium chips selling for around $170 and 120 megahertz Pentium chips selling for around $120, Cyrix is cutting as much as one-third off of the sticker price. As the CPU is the most expensive item in a personal computer, it makes perfect sense that CPUs priced at the level Cyrix is talking about could allow PC manufacturers to create machines that would sell for around $1,000 instead of the $1,200 to $1,500 range where low-end machines currently retail.

Combine this with the fact that Advanced Micro Devices says that it will commence production within the next few weeks on its K6 chip, and you have a potentially interesting turn in the CPU story. According to Advanced Micro, the K6 is smaller, faster, more energy efficient, easier to use, and is going to sell at a 25% discount to Intel’s Pentium Pro. Advanced Micro believes that the K6 unit volume will exceed the K5 by the third or fourth quarter, and it plans on selling a billion dollars worth in fiscal 1997. Intel’s trailing revenues of $20.9 billion clearly indicate that this $1 billion in K6s, while not devastating, could be significant. At the same time that Cyrix may reduce Intel’s margins on the low-end of the CPU market, Advanced Micro may come out and attack the high-end, allowing both companies to give Intel a little competitive love squeeze.

Intel’s heightened profits over the last two quarters have come as a direct result of stunningly high gross margins. These gross margins have risen because Intel’s product mix has been heavily weighted towards CPUs. If Cyrix’s chip meets acceptance on the low-end and Advanced Micro Devices' K6 meets the kind of goals Chief Executive Jerry Sanders has set, this could take the bloom off of the Intel rose over the next twelve months. Intel is slated to make $8.71 EPS this year and $10.25 in 1998. Seeing the combined one-two punch from Advanced Micro Devices and Cyrix shave $1.00 off of EPS this year and a $1.50 off EPS in 1998 would not be unthinkable, although it definitely is a longshot. At the very least, 1997 will prove a much more exciting year in CPUs than boring ol’ Intel-dominated 1996.

CONFERENCE CALLS

HEWLETT-PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>
(303) 446-5399 (reservation # 2348408) -- replay avail thru 2/25

AT&T Capital
Through midnight, February 25.
(800) 475-6701 code: 331034

CCB FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCB)") else Response.Write("(NYSE: CCB)") end if %> and
AMERICAN FEDERAL BANK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMBK)") else Response.Write("(Nasdaq: AMBK)") end if %>
To discuss merger agreement
(800) 839-4281, confirmation code # 313939

360 (DEGREES) COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay through 1/21

GENZYME CORP-TISSUE REPAIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZL)") else Response.Write("(Nasdaq: GENZL)") end if %>
(402) 220-6030 -- replay through 5PM on 2/25

WASHINGTON HOMES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHI)") else Response.Write("(NYSE: WHI)") end if %>
(800) 696-1588 (passcode: 174613) -- replay

SMARTALK TELESERVICES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMTK)") else Response.Write("(Nasdaq: SMTK)") end if %>
(800) 846-4265 -- replay starting @ noon for 48 hrs.

RG BARRY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RGB)") else Response.Write("(NYSE: RGB)") end if %>
(402) 222-9904 -- replay avail for 24 hours

COMPUSERVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSRV)") else Response.Write("(Nasdaq: CSRV)") end if %>
(303) 267-1036 (code: 172231)

MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRRW)") else Response.Write("(Nasdaq: MRRW)") end if %>
(201) 628-6885 replay until 2/28

SAFESKIN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFSK)") else Response.Write("(Nasdaq: SFSK)") end if %>
(800) 642-1687 code # 262152.

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Fool On the Hill

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

Brian Bauer (MF Hoops), one more Fool
Editing

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