The Evening News - Thursday, March 6, 1997

ARIAD PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARIA)") else Response.Write("(Nasdaq: ARIA)") end if %> moved ahead $1 1/4 to $8 after announcing a joint venture agreement with Hoechst Marion Roussel, a chemicals division of the $35 billion German Hoechst Group. The agreement calls for the two companies to commit $85 million over five years to the discovery of gene sequences for genetic and pharmaceutical therapies. Hoechst will make a $24 million initial investment in Ariad and will invest another $25 million at Ariad's option. The joint venture will use the gene sequence and genomic database of INCYTE PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INCY)") else Response.Write("(Nasdaq: INCY)") end if %>.

ALLWASTE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALW)") else Response.Write("(NYSE: ALW)") end if %> rose $2 1/2 to $9 1/4 after the industrial waste hauler and remediation company agreed to merge with PHILIP ENVIRONMENTAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEV)") else Response.Write("(NYSE: PEV)") end if %>. The stock swap deal will exchange 0.611 shares of Philip for each Allwaste share. Including the assumption of debt of $133 million, the transaction values Allwaste at $540 million. The combined company will be the largest integrated resources recovery and industrial services firm in the country. These are companies that do things like cleaning oil sludge out of storage tanks, dredging, and waste hauling.

HARTE-HANKS COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HHS)") else Response.Write("(NYSE: HHS)") end if %> added $3 to $29 3/4 on announcing that it will explore strategic alternatives for its KENS-TV station in San Antonio, its six daily newspapers, and its non-daily publications. The company will focus on its direct marketing services, which, along with its localized "shoppers" offerings, accounted for 75% of its $672 million in revenues last year. Its core business will be devoted to direct marketing strategies, research, and fulfillment, among other services. The company has done a good job creating value since coming public once again in 1993. The company believes the next step lies in isolating its growth markets, where smaller companies such as AMERICAN BUSINESS INFORMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABII)") else Response.Write("(Nasdaq: ABII)") end if %> and ABACUS DIRECT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABDR)") else Response.Write("(Nasdaq: ABDR)") end if %> are winning higher valuations, and where competitors such as METROMAIL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ML)") else Response.Write("(NYSE: ML)") end if %> can be met head-on with more focus.

QUICK TAKES: Systems software company UNISON SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UNSN)") else Response.Write("(Nasdaq: UNSN)") end if %> gained $1 1/4 to $7 1/2 despite a Cowan & Co. downgrade to "buy" from "strong buy"... On reporting favorable preliminary results from a Phase I/II study of a vaccine for prevention of rotavirus disease in infants, VIRUS RESEARCH INSTITUTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VRII)") else Response.Write("(Nasdaq: VRII)") end if %> gained $1 1/16 to $8 9/16... CROP GROWERS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CGRO)") else Response.Write("(Nasdaq: CGRO)") end if %>, an agricultural insurance company, gained $1 13/32 to $9 29/32 after agreeing to be acquired by Fireman's Fund Insurance for $10.25 per share in cash... TETRA TECH INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WATR)") else Response.Write("(Nasdaq: WATR)") end if %> moved up $1 3/4 to $15 1/2 on the strength of two Department of Energy contracts announced earlier this week... Industrial process instrumentation company TRANSMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TRNS)") else Response.Write("(Nasdaq: TRNS)") end if %> moved up another $1 15/16 to $14 15/16 after yesterday announcing a $22 million acquisition... NATIONAL EDUCATION CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NEC)") else Response.Write("(NYSE: NEC)") end if %> rose $1 7/8 to $15 1/2 after the publisher yesterday announced a contract with the IRS... Consumer electronics retailer BEST BUY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %> moved up $1 1/8 to $9 3/4 on reporting better-than-expected February same-store sales results, which were nonetheless down 3%... CIRCUIT CITY STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CC)") else Response.Write("(NYSE: CC)") end if %> gained $1 3/4 to $33 1/2 after reporting a 4% decline in February same-store sales and a 17% rise at its CARMAX GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMX)") else Response.Write("(NYSE: KMX)") end if %> -- which drew an upgrade to "near-term accumulate" from Merrill Lynch... UNITED AUTO GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAG)") else Response.Write("(NYSE: UAG)") end if %> rose $1 1/8 to $22 3/8 after announcing the acquisition of three Ford dealerships for $23 million... Trade school operator DEVRY INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DV)") else Response.Write("(NYSE: DV)") end if %> gained $1 1/8 to $21 5/8 on saying that it will reduce by 10% the size of a proposed offering of stock... POHANG IRON & STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PKX)") else Response.Write("(NYSE: PKX)") end if %> added $1 1/8 to $20 5/8 after the South Korean steel producer reported 1996 results yesterday and saying it expects an 8% increase in 1997 revenues.

Integrated steel producer INLAND STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IAD)") else Response.Write("(NYSE: IAD)") end if %> lost $1 1/8 to $18 5/8 after Morgan Stanley downgraded the shares to "underperform" from "neutral." Inland was recently criticized by institutional holders who have been bucking for the spin-off of the company's RYERSON TULL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RT)") else Response.Write("(NYSE: RT)") end if %> steel service center operations. The downgrade from Morgan Stanley was more reflective of the analyst's outlook for the industry in the second quarter, as the research report pointed to this being the peak part of the season. The analyst was also concerned about pricing pressures due to the strong dollar.

ORACLE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> dropped $3 3/16 to $39 9/16 as UBS Securities downgraded its rating on the shares to "hold" from "buy" because of product transitions and near-term concern about European markets. Analyst Joseph Farley said that the company is nearing "inherent limits in its business model and that its revenues included an increasing contribution from lower margin businesses." Lower-margin revenues worried investors last quarter, too. Farley also mentioned the longer-term threat of MICROSOFT's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> SQL server encroaching on Oracle's core business. COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %>, which has also experienced European softness of late, dropped $3 7/8 to $40 1/8 today. On Tuesday, Oracle CEO Larry Ellison spoke about network computers at the Millenium Conference in San Francisco.

QUICK CUTS: Healthcare benefits information company HEALTH RISK MANAGEMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HRMI)") else Response.Write("(Nasdaq: HRMI)") end if %> slipped $2 3/4 to $10 1/4 after announcing that it has called off its planned merger with HEALTHPLAN SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HPS)") else Response.Write("(NYSE: HPS)") end if %>... ASPECT TELECOMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASPT)") else Response.Write("(Nasdaq: ASPT)") end if %> plunged $4 5/8 to $22 after LUCENT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> sued the company alleging patent infringement on four products... Desktop publishing software company CAERE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CAER)") else Response.Write("(Nasdaq: CAER)") end if %> slid $1 3/4 to $8 5/8 on a Van Kasper & Co. downgrade... HMT TECHNOLOGY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HMTT)") else Response.Write("(Nasdaq: HMTT)") end if %> lost $2 1/4 to $17 after fellow disk media company STOREMEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STMD)") else Response.Write("(Nasdaq: STMD)") end if %> forecast weak Q1 revenues... Seismic instruments company INPUT/OUTPUT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IO)") else Response.Write("(NYSE: IO)") end if %> was "out" today, falling $2 1/2 to $17 1/8 after announcing that Q3 sales will be down significantly and that it expects quarterly EPS of $0.10 to $0.15, missing estimates of $0.28... ALLERGAN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGN)") else Response.Write("(NYSE: AGN)") end if %> lost $3 1/8 to $30 1/4 on a Merrill Lynch downgrade following an earnings warning issued last night by the pharmaceuticals company... CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> lost $2 3/16 to $26 1/16 after an SEC filing to sell 108,000 shares by VP Michael Champa popped up on news terminals today.

Was NETSCAPE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> the first company founded to promote software designed to view the World Wide Web? A survey of most technophiles would arrive at this popular but inaccurate conclusion. Naperville, Illinois-based SPYGLASS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPYG)") else Response.Write("(Nasdaq: SPYG)") end if %> was founded in 1990 by University of Illinois graduate Tim Krauskopf to commercialize the school's technology. This broad license showed either a great deal of forethought or just plain luck on Krauskopf's part, as the ubiquitous browser had not even been conceived yet. The Conseil European pour la Rescherche Nucleaire (CERN) had only just developed the hypertext transfer protocol (http) that made the World Wide Web possible in 1989, and would only release it to the rest of the world in 1992.

CERN's hypertext concept was revolutionary. The blue underlined text that could link you to other sites and launch you to a completely new avenue of thought forced software developers to think of the Internet in a visual way that had not been conceived before. Out of this vision was borne a graphical http browser called Mosaic, developed at the University of Illinois's National Center for Supercomputing Applications (NCSA) in 1993. Krauskopf's license, however, was no longer a sure bet. Spyglass was suddenly forced to compete with fellow Illinoisan Marc Andreessen and his start-up company Mosaic Communications to commercialize the product -- a battle that Spyglass managed to win. A defeated Andreessen went off to build a better browser, while Krauskopf and Spyglass senior executive Doug Colbeth were left to develop a plan to make money off of the browser.

The Spyglass plan was pretty straightforward. Instead of trying to become a consumer software company that had to build up a customer service infrastructure to handle end-user complaints, the management decided it would be much more efficient to simply license the browser to other companies so that they could create consumer Internet access devices. While Andreessen was working with Silicon Valley venture capitalist and SILICON GRAPHICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGI)") else Response.Write("(NYSE: SGI)") end if %> founder Jim Clark to build Netscape Communications, Spyglass was busy cutting deals with companies like IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %>, AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>, DIGITAL EQUIPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEC)") else Response.Write("(NYSE: DEC)") end if %>, COMPUSERVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSRV)") else Response.Write("(Nasdaq: CSRV)") end if %>, and NEC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NIPNY)") else Response.Write("(Nasdaq: NIPNY)") end if %>. The biggest deal Spyglass made was with MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, licensing its browser technology to form the basis of Internet Explorer. Spyglass came public in 1995 at a split-adjusted price of $14 and change, riding high on the Microsoft connection.

After reaching a high of $34 7/8 in May of 1996, Spyglass has completely crashed as it has become clear to Wall Street that the company would not make a fortune off of Internet access from the personal computer (PC). With Netscape maintaining an 80%-plus share of this product category and Microsoft giving away its browser in competition, there were just not a lot of revenues being generated from the Spyglass technology in this particular niche. Spyglass announced on January 2nd that it would lose $0.10 to $0.14 per share in its fiscal first quarter as the company did not expect to recognize anything but the minimum royalty due under the license agreement with Microsoft. Since early January, shares have fallen from $14 to the current level of $9 and change, completely crushed over the past twelve months.

Spyglass's problem remains the lack of future visibility for Internet-enabled devices outside of the PC. Despite strong product introductions from Spyglass licensees like WebTV, it is hard to get investors to believe that significant revenues will come from Web-enabled televisions, phones, network computers and other types of low-cost Internet access devices. Spyglass's crucial decision in 1994 to license its technology to original equipment manufacturers (OEMs) rather than going straight for the existing consumer software market has turned the company into a bet on how the uncertain future of Web access technologies will take shape. Spyglass has been expounding the Internet access device vision since October of 1996, stating that the transition from the traditional PC base to a larger possible market of Internet devices would wreck havoc on near-term financial results.

What could a transition to network access devices mean for Spyglass? The following is from a recent study that was done by the International Data Corporation:

  Worldwide Network Computer Unit Shipments By 
  Device Type Accessing the Internet or Intranets
 
                                   CAGR (%)
                         1996    1997     2001   1997-2001
   
PCs (Internet-enabled)  25,388  35,898   92,804    26.8%
NC Clients                199     565     6,754    85.9%
NetPCs                    n/a     143     2,970   113.7%
Screenphones               72     370     7,565   112.6%
Smart handheld devics     213     607     7,679    88.6%
NetTVs                     90     415    12,350   133.6%
Game consoles              92     780     9,125    84.9%
Others                      2      21     1,901   208.4%

(From the International Data Corporation (IDC) study,
"The Enterprise Network Computer (NC) Market, 1996-2001" )

While International Data still sees the Internet-enabled PC as dominating the total market of Internet-enabled devices, they see growth beginning to flag in that segment and exploding in all of the other segments -- the market that Spyglass is concentrating on. International Data sees 48.3 million non-PC Internet access devices by 2001, a huge number of devices for Spyglass to try to exact a few pennies of royalties from, and a market that neither Microsoft nor Netscape seems to be currently interested in. With 12.7 million shares outstanding, Spyglass has a current market capitalization of $125.4 million. Netting out the company's $41 million in cash and short-term investments, including a $7.5 million payment due from Microsoft that will be recognized in the next quarter, the company is currently valued at $84.4 million, or 5.3 times its current quarterly revenue run-rate (the last quarter multiplied by four to annualize the number). Although not cheap by standard valuation parameters, investors who believe they have a handle on the non-PC Internet access device might want to give Spyglass a critical look in order to ascertain whether there is potential value in the shares at this level.

ZITEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZITL)") else Response.Write("(Nasdaq: ZITL)") end if %>
Emerald Research Conference Call
(706) 645-9291 code 292069

SAFEGUARD SCIENTIFICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFE)") else Response.Write("(NYSE: SFE)") end if %>
replay after 4:00 PM EST
(706) 645-9291 code 298209 - available through 3/7

DAYTON HUDSON CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DH)") else Response.Write("(NYSE: DH)") end if %>
(800) 633-8284 (reservation # 2471412) -- replay avail until 5PM EST

ORTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORTL)") else Response.Write("(Nasdaq: ORTL)") end if %>
(402) 220-5186 -- replay through 3/7

ECHLIN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECH)") else Response.Write("(NYSE: ECH)") end if %>
(re: recent changes at the company)
(800) 683-1535 (password: New company) -- replay thru 3/7

GENZYME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %>, GENZYME TRANSGENICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GZTC)") else Response.Write("(Nasdaq: GZTC)") end if %>
(402) 220-4884 -- replay available through 3/12

DOLLAR GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DG)") else Response.Write("(NYSE: DG)") end if %>
(402) 220-1032 (code: 971032) -- replay through 3/7 @ 6:00 PM EST

ANNTAYLOR STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %>
8:30 a.m. EST
(719) 386-9000 (access code 298113) -- first airing
(402) 351-9977 -- playback of recording

03/07/97 (Friday)
GENZYME TISSUE REPAIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZL)") else Response.Write("(Nasdaq: GENZL)") end if %>
Re: Carticel
(402) 220-4882 -- replay available through 3/14

DOLLAR GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DG)") else Response.Write("(NYSE: DG)") end if %>
(402) 220-1032 (code: 971032) -- replay through 3/7 @ 6:00 PM EST

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Randy Befumo (MF Templar), a Fool
Fool On the Hill

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Heroes & Goats

Brian Bauer (MF Hoops), one more Fool
Editing