The Evening News - Tuesday, March 11, 1997

HEROES

Maryland bank FIRST CITIZENS FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FCIT)") else Response.Write("(Nasdaq: FCIT)") end if %> gained $3 7/8 to $28 5/8 on agreeing to merge with PROVIDENT BANKSHARES CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PBKS)") else Response.Write("(Nasdaq: PBKS)") end if %> in a deal valuing each First Citizens share at 0.73 Provident shares, or $31.30 based on last night's closing price. The deal is priced closer to the valuations of recent small bank acquisitions, such as PINNACLE FINANCIAL's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PNFI)") else Response.Write("(Nasdaq: PNFI)") end if %> acquisition of CB BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBCO)") else Response.Write("(Nasdaq: CBCO)") end if %>, where price/book ratios have been in the 2.0 to 2.5 range. Another way to look at small bank mergers is to get to know the bank's services business and the layout of its branch structures, which requires some on-the-ground Foolish research. Finally, one mathematical ratio to look at is the price/assets ratio -- First Citizens is going off at 15% of assets, while CB was valued at 18.9% of assets.

VEECO INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VECO)") else Response.Write("(Nasdaq: VECO)") end if %> makes a return appearance in the pantheon of heroes today as it rose another $2 3/8 to $31 3/8 following yesterday's better than 20% jump. The company announced yesterday an agreement to acquire Wyko Corp., a company that makes optical inspection equipment for the disk drive and semiconductor industries. Veeco will issue three million shares of stock for Wyko, bringing outstanding shares to just under nine million. The acquisition will bring the company into the same markets as the proposed KLA INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> combination with TENCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TNCR)") else Response.Write("(Nasdaq: TNCR)") end if %>. In a separate agreement, Veeco will acquire certain assets and personnel of Materials Research Corp., which will add to the company's offerings to the disk drive components industry. Alex. Brown raised the company to "strong buy" from "buy" this morning.

In a trend that may be gathering some momentum, WORLDWIDE VALUE FUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VLU)") else Response.Write("(NYSE: VLU)") end if %> gained $2 1/8 to $24 after the closed-end mutual fund's Board approved a conversion to open-ended status, which would immediately bump up the price of shares to their actual net asset value. An open-ended mutual fund increases its shares when a new investor comes on board and retires shares when an investor cashes out. Minus a sales commission, or a "load," a shareholder in an open-ended mutual fund receives net asset value for shares (their pro-rata portion of the fund's net assets) upon leaving the fund. Not so for holders of a closed-end mutual funds -- the number of shares does not change when an investor buys in or cashes out, and the value of those shares is decided by market forces, since they are traded like a stock. When the fund coverts, the shares become worth more if they had been trading at a discount to net asset value, which was $24.66 per share for the Worldwide Value Fund as of Mar. 1.

QUICK TAKES: SUPREME INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUPI)") else Response.Write("(Nasdaq: SUPI)") end if %> gained $2 1/4 to $16 after the sportswear company reported Q4 earnings of $0.36 per share on a 61% increase in quarterly sales... Medical laser company LASERSCOPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LSCP)") else Response.Write("(Nasdaq: LSCP)") end if %> ascended $1 5/16 to $9 5/16 on announcing the extension of a relationship with QLT PHOTOTHERAPEUTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QLTIF)") else Response.Write("(Nasdaq: QLTIF)") end if %> to develop photodynamic therapy (PDT) systems for treating cancer and other diseases... SPECTRIAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPCT)") else Response.Write("(Nasdaq: SPCT)") end if %> gained $1 1/2 to $13 1/4 after Oppenheimer raised the wireless telecom components company to "buy" from "market performer"... Physician practice management company AMERICAN ONCOLOGY RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AORI)") else Response.Write("(Nasdaq: AORI)") end if %> gained $1 to $10 1/8 after announcing an agreement with IMMUNEX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMNX)") else Response.Write("(Nasdaq: IMNX)") end if %> to "improve the cost effectiveness of cancer treatments delivered to patients by AOR's network of 237 oncologists"... OFFICE DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ODP)") else Response.Write("(NYSE: ODP)") end if %> rose $2 1/4 to $19 3/8 on numerous indications that the company may still be able to come to an agreement with STAPLES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %> to acquire a number of its locations... GRAHAM-FIELD HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GFI)") else Response.Write("(NYSE: GFI)") end if %> rose $1 1/8 to $12 1/2 after the medical products company reported Q4 EPS of $0.08 (before charges), up from $0.03 last year, but below estimates of $0.11... COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> gained $2 to $40 3/8 after making multiple product announcements today.

GOATS

BORDERS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BGP)") else Response.Write("(NYSE: BGP)") end if %> fell $3 5/8 to $42 after the books and music retailer reported fourth quarter earnings of $1.63 per share, which beat estimates of $1.58. Since the full year's earnings per share (EPS) were $1.40, the operator of Waldenbooks, Borders, and Planet Music obviously makes its year during the holiday season. Considering the company's fiscal year 1998 earnings guidance of $1.80 per share (on a pre-2-for-1 stock split basis), investors became a little antsy in comparing this morning's price/earnings (P/E) ratio of 33 with the forward annual growth rate of 28.5%. Without an upward revision in the company's guidance, some decided to check out of the shares.

Wireless telecom equipment distributor TESSCO TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TESS)") else Response.Write("(Nasdaq: TESS)") end if %> tumbled $12 3/8 to $20 1/8 after forecasting Q4 EPS of $0.09 to $0.14, below estimates of $0.24, due to the end of its relationship with equipment manufacturer ANDREW CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANDW)") else Response.Write("(Nasdaq: ANDW)") end if %>. Investors have known about this since last summer, though, and it looked like the company was making the transition when it reported in its second quarter that Andrew cable products had declined to 14% of revenues from 28% in fiscal 1996. While the company didn't break out revenues by vendor last quarter, it was clear that profits were slipping somewhat (backing out the effects of starting up European operations). The company said that it expects to grow sales and gross profits by 60% for fiscal 1997 -- the plunge today comes from investors' realization that sales will fall about 12-13% sequentially.

RIGHTCHOICE MANAGED CARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIT)") else Response.Write("(NYSE: RIT)") end if %> sagged $3 1/2 to $13 3/8 as the managed care company and its parent, Blue Cross/Blue Shield of Missouri (BC/BS), broke off merger or alliance talks with BJC Health, an operator of hospitals and long-term care facilities. RightChoice and BC/BS face regulatory problems right now, in that a Missouri court has ruled that BC/BS will face a $200 to $500 million "toll charge" for operating outside the rules of its tax-free status in running a for-profit HMO. RightChoice now has over 1.85 million members, which generated over $650 million in corporate revenues in 1996. The company said it would not be averse to looking at realizing its value in some other deal, but that the fit with BJC Health was a poor one -- just to make sure we know who broke up with whom.

QUICK CUTS: Specialty healthcare provider UNISON HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UNHC)") else Response.Write("(Nasdaq: UNHC)") end if %> dropped $4 13/32 to $5 7/32 after announcing that it will restate earnings for the first nine months of fiscal 1996... IDT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IDTC)") else Response.Write("(Nasdaq: IDTC)") end if %> slid $1 3/8 to $6 after the Internet service provider and telecom company agreed to pay $100,000 for using illegal copies of software from companies such as MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, according to The Record... Healthcare insurance company SAFEGUARD HEALTH ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFGD)") else Response.Write("(Nasdaq: SFGD)") end if %> fell $2 3/8 to $12 5/8 on reporting Q4 EPS of $0.05, missing estimates of $0.22, due to reserves for increased dental claims... ROBOTIC VISION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROBV)") else Response.Write("(Nasdaq: ROBV)") end if %> lost $1 3/4 to $12 after Alex. Brown downgraded the shares to "neutral" from "buy" despite the company's announcement yesterday that the FCC will co-fund development of an onboard de-icing system for commercial aircraft... Electronics distributor and semiconductor design services company WYLE ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WYL)") else Response.Write("(NYSE: WYL)") end if %> lost $5 to $33 3/8 on pre-announcing Q1 EPS that fell below last quarter's and last year's results... U.S. SURGICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USS)") else Response.Write("(NYSE: USS)") end if %> lost $4 to $39 1/4 after Cowen & Co. lowered its Q1 revenue estimate due to a strong dollar; the company also announced the acquisition of EndoTex Interventional Systems's aneurysm repair technology... Home equity lender AAMES FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAM)") else Response.Write("(NYSE: AAM)") end if %> fell $2 3/8 to $30 after Piper Jaffray cuts its rating on the stock due to "valuation concerns."

FOOL ON THE HILL
An Investment Opinion by MF Templar

3COM/U.S. ROBOTICS, Part 1

The proposed merger of 3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> and U.S. ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USRX)") else Response.Write("(Nasdaq: USRX)") end if %> has engendered mixed reactions among investors, ranging from happy acceptance to outright paranoia. A chorus of jubilant investors has proposed that the multi-billion dollar merger would craft a viable rival to CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> that could own the edge of the network. The pessimists focused on 3Com's eroding market share in local-area network (LAN) switching and network adapter cards, citing that the merger was not really compelling even at the current valuation. The more paranoid fringe see this as a move of desperation for both companies, a sign that 3Com lacks any next-generation products and that U.S. Robotics was losing the standards war for 56 kilobit per second modulator-demodulators (modems).

Sorting through the actual facts, Santa Clara-based 3Com is the second largest publicly traded networking equipment concern in the world measured by trailing revenues, bested only by router-crazed Cisco Systems. The company focuses on network systems and network adaptor cards, holding significant market share in both arenas. According to Sage Research, 3Com dominates the low-end of the switching universe. The company has 46% market share in 10 Mbps switches and 38% market share in 10/100 Mbps Ethernet switches, hotly followed in both markets by Cisco. This is particularly promising as, according to Sage, 30% of all U.S businesses currently have 10 Mbps-only Ethernet switches, and 33% currently use 10/100 Mbps Ethernet switches.

Numbers from competing research firm Dell'Oro are less promising, however, showing that 3Com's overall share of the entire modular, switched Ethernet market fell to 14% in 1996 from 34.8% in 1995, getting crunched by Cisco on the high-end. 3Com is also still developing a sales channel for the family of high-end enterprise switches that sprung from its acquisition of ChipCom in 1995. The ONcore intelligent switching system and the CELLplex ATM High-Function switching family grew a healthy 45% from 1995, but Cisco Systems grew its sales a stunning 645% through internal growth and acquisitions. 3Com is trying to catch up, purchasing OnStream Networks in the second quarter to help develop wide-area networks (WAN) products.

3Com says it is number one in the network adapter card market with 40% of the market, followed by INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, which holds 30%. Publicly available documents reveal that for calendar 1996, both companies had 36% market share. This is the arena in which 3Com is currently feeling quite a bit of heat, as the perception is that Intel is going to drive its margins into the ground. It was against the backdrop of a fall in the stock price from $81 5/8 to the current mid-$30s due to the Intel news released in early February that 3Com announced this rather surprising deal, stunning many analysts by making its acquisition using stock that had been cut in half over the past three weeks.

The widespread perception is that 3Com is under seige in both of its core markets with products that are a few generations behind the lead of its formidable competition. Saddled with the perception that it is just a "workgroup supplier," 3Com is missing out on sales of high-end enterprise systems that names like Cisco Systems, CABLETRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CS)") else Response.Write("(NYSE: CS)") end if %>, and Wellfleet-SynOptics successor BAY NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> seem to be closing. The competition has not been without its own problems, however. While 3Com has fallen 20% from where it traded last year, Bay Networks has plunged 47%. Cabletron Systems has had less than sterling performance over the same period as well, although not nearly as horrific as that of Bay Networks or 3Com. With the all the wreckage in the networking arena, investors are now asking whether or not the proposed purchase of U.S. Robotics makes sense or whether it's another Wellfleet-SynOptics merger in the making.

CONFERENCE CALLS

CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>
To Discuss Strategic Alliances
(800) 683-1535
Available from 4 PM EST to 3/12

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

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

ANOTHER FOOLISH THING
Road to the Final Fool!

Road to the Final Fool: It's time for the Fool Dome's annual contest, which follows the men's NCAA tournament, round by round. The first round features 64 questions, one on each team in the tournament. The fun is fast and Foolish, and if you are Foolish enough to be the Final Fool, you will win a free golf vacation in Phoenix, AZ, courtesy of the folks at Preview Travel. You game?

MORE FOOLISHNESS
A Foolish Library

For a change of pace, instead of using this space to plead with you to purchase some of our modest Foolish wares, allow us to shift the spotlight to some books not written by Fools. That's right -- if you're interested in reading some other perspectives on investing, but are just not sure where to begin, or which books might be too far from your Foolish center, head on over to FoolMart (at keyword: FoolMart on AOL or here on our website. There you'll find a host of titles which pass Foolish muster. Many were recommended by our own MF Templar and are found on desks and shelves around Fool HQ. We've read 'em, we like 'em, and we recommend them to you, too. Included are titles by Peter Lynch, Mary Meeker, Michael O'Higgins, David Chilton, William J. O'Neill, and Chuck Carlson. The browsing is free, and the buying is easy!

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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