HEROES

Investment bank SALOMON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SB)") else Response.Write("(NYSE: SB)") end if %> jumped $4 to $53 7/8 after Securities Data Co. reported strong results for securities underwriting in the first quarter. Overall securities underwriting rose more than 11% year over year. Not only does Salomon participate in the higher-profile initial public offering (IPO) deals (which actually slumped this quarter for the industry), but it participates in a lot of debt underwriting when credit card companies, banks, and other corporations securitize and sell debt packages or want to borrow money. Combined with a record quarter for mergers, shareholder value enhancement initiatives, continual buybacks, and other activities on which Salomon advises, investors applauded the company.

Bar code data systems integrator PEAK TECHNOLOGIES GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PEAK)") else Response.Write("(Nasdaq: PEAK)") end if %> gained $1 1/8 to $11 5/8 after the company reported that it has received a buyout offer "from a company substantially larger than Peak at a premium to the current market price." This is a good thing, since the company just reported a substantial operating loss of $1.29 for its first quarter, missing by far estimates of $0.03 per share. Gross profits fell 51% from last year on only a 4.5% decline in quarterly sales, suggesting that the company took an inventory writedown. The company also initiated a shareholders' rights plan, in an announcement it said was separate from the merger discussions.

QUICK TAKES: RATIONAL SOFTWARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RATL)") else Response.Write("(Nasdaq: RATL)") end if %> gained $1 7/8 to $22 1/2 after the software tools company said it will buy for $31 million in cash Performance Awareness Corp., another firm making test products for software developers... STEEL OF WEST VIRGINIA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SWVA)") else Response.Write("(Nasdaq: SWVA)") end if %> jumped $1 1/2 to $8 after the company announced strong order growth. Separately, the company received a hostile takeover offer for $9 per share... Energy company ZEIGLER COAL HOLDING CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZEI)") else Response.Write("(NYSE: ZEI)") end if %> burned up $1 1/4 to $25 after naming a new Chief Financial Officer (CFO)... SELECT SOFTWARE TOOLS PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SLCTY)") else Response.Write("(Nasdaq: SLCTY)") end if %> gained $1 5/8 to $11 5/8 after enterprise management software company PEOPLESOFT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSFT)") else Response.Write("(Nasdaq: PSFT)") end if %> signed a product and development deal with Select... Telecom equipment company BROADBAND TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BBTK)") else Response.Write("(Nasdaq: BBTK)") end if %> rose $1 3/8 to $10 1/2 after its board authorized a share buyback of up to 1.3 million shares.

MORE QUICK TAKES: Banking company and credit card processor SYNOVUS FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNV)") else Response.Write("(NYSE: SNV)") end if %> regained $3 5/8 to $33 1/8 after yesterday's plunge on no fundamental news... CONSECO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CNC)") else Response.Write("(NYSE: CNC)") end if %> jumped $3 3/8 to $39 after it announced that it will buy back up to five million of its more than 160 million shares outstanding... Hospital manager HEALTH MANGEMENT ASSOCIATES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMA)") else Response.Write("(NYSE: HMA)") end if %> gained $2 to $25 3/4 after Raymond James upped its rating on the company to "buy" from "accumulate"... Industrial equipment manufacturer GENCOR INDUSTRIES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GX)") else Response.Write("(AMEX: GX)") end if %> picked up $1 5/8 to $16 3/4 after announcing that it expects to surpass "significantly" last year's EPS of $1.55.

GOATS

PATRIOT AMERICAN HOSPITALITY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAH)") else Response.Write("(NYSE: PAH)") end if %> declined $1 7/8 to $22 3/8 today, after Dow Jones heaped some more speculation upon the hotel real estate investment trust (REIT). Yesterday, it was rumored that the company would be buying WYNDHAM HOTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WYN)") else Response.Write("(NYSE: WYN)") end if %>. The buzz today is that Patriot is doing a different deal. Last month, Realty Stock Review Online (a Dow Jones unit) speculated that PaineWebber would buy Bellemead, a commercial real estate unit of CHUBB <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CB)") else Response.Write("(NYSE: CB)") end if %>, and sell it to Patriot's chairman, who would then bring it public. Today, Dow Jones says Patriot might just buy the Bellemead assets directly, without the extra step of the Chairman's personal involvement. No word on whether the company is burning the candle on both ends and thinking about taking out Wyndham.

CATALINA MARKETING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: POS)") else Response.Write("(NYSE: POS)") end if %> was clipped for a $9 1/4 to $29 3/4 loss after the in-store marketing company, which specializes in bar-code gathering and coupons, said it expects EPS of $0.30 to $0.31 to miss the fourth quarter estimate of $0.36 due to weakness in "non-core" businesses. The company said it will be difficult to repeat strong growth next year because 1997 was so strong, which sets a difficult basis for comparison. In core operations, the company is expecting 13% revenue growth and 20-30% growth for the whole company. It says its marketing methods are four times more competitive than free-standing inserts, which are marketed by companies such as HERITAGE MEDIA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HTG)") else Response.Write("(NYSE: HTG)") end if %>. NEWS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %> is buying that company with the expressed intent of dumping its broadcast properties and keeping the free-standing insert marketing unit.

The ugly underside of the "Vinik effect" smeared QUICKTURN DESIGN SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QKTN)") else Response.Write("(Nasdaq: QKTN)") end if %> today, pushing the stock down $7 3/4 to $8 1/4, as investors raced for the exits after the semiconductor design firm issued an earnings warning. The company said revenues will fall up to 50% sequentially and about 16% from last year's first quarter. In addition, earnings will not come in at $0.20 per share as expected, but will come in on the ugly side of zero at a loss of $0.10 to $0.13 per share. Hambrecht & Quist lowered its rating on the company to "hold" from "strong buy" and lowered its 1997 EPS estimate to $0.19 from $0.95. The company's statements, however, suggested something more transitory than the dour outlook from H&Q.

QUICK CUTS: Database software company INFORMIX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IFMX)") else Response.Write("(Nasdaq: IFMX)") end if %> was destroyed for a $5 7/32 to $9 29/32 loss after it said Q1 revenues will decline up to 36% from last year and that it expects to report a "substantial operating loss" for the quarter. (Read more about this in today's Lunchtime News).. APPLIX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APLX)") else Response.Write("(Nasdaq: APLX)") end if %> lost $2 1/16 to $4 5/16 after announcing it expects sales to decline by 27% sequentially, causing a loss for its first quarter... U.S. DIAGNOSTIC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USDL)") else Response.Write("(Nasdaq: USDL)") end if %> lost $2 to $6 1/8 after the medical imaging labs company said it will restate 1996 results to reflect a $20.6 million non-cash charge arising from acquisitions.... HEARTSTREAM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HTST)") else Response.Write("(Nasdaq: HTST)") end if %> lost $2 1/2 to $8 1/8 after Cowen & Co. cut its rating on the heart defibrillator company to "buy" from "strong buy" following its Q1 earnings report... Generic drug company MYLAN LABS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MYL)") else Response.Write("(NYSE: MYL)") end if %> lost $2 1/8 to $12 5/8 after institutional brokerage Oppenheimer & Co. lowered its earnings estimate on the company... PARAMETRIC TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PMTC)") else Response.Write("(Nasdaq: PMTC)") end if %> fell $3 5/8 to $41 1/2 on a rating downgrade of the computer aided design and manufacturing (CAD/CAM) software company from Goldman Sachs.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Sifting Through The Networking Ashes

[CORRECTION: In yesterday's column on S&P Index funds, for some strange reason I stated that if Microsoft made up 10% of the Index, then anyone who purchased an S&P Index Fund would get 0.1 shares of Microsoft. This was obviously not correct, as the number of shares of stock one would get would be contingent upon the current price of the stock and the number of shares outstanding. Instead, if Microsoft made up 10% of the Index, shares of the Index fund were priced at about $60 apiece and Microsoft were priced at $90 per share, it would work much differently. Investors would get $6 of Microsoft stock per share of the Index fund, 10% of the Index fund share price. With Microsoft at $90 a share in our example, this would mean the investor got 0.066 shares.]

Networking shares came unglued again today as investors scrambled to figure out what was happening to the industry. Slowing sales in the fiscal first quarter, a series of complicated mergers among the major players and the perennial march of networking technology have raised significant questions about which companies will be the market leaders in two years. This morning's earnings warning from FORE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FORE)") else Response.Write("(NYSE: FORE)") end if %> and Sunday evening's surprise decision by ASCEND COMMUNICATIONS (Nadsaq: ASND) to merge with CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> have further muddied an already complex picture.

The latest confirmation that sales of networking equipment have slowed in the first quarter comes from FORE Systems. The manufacturer of asynchronous transfer mode (ATM) and local area network (LAN) switches stated that it would book only $100 million to $103 million in revenues for the quarter, a meager 35% increase over last year. Earnings per share will only be $0.09 to $0.10, down from last year's $0.11. These revenues are a drop from last quarter's $112.6 million in sales and $0.16 per share in profit, a very disappointing performance for a stock that has been among the favorites of momentum investors for more than two years.

The slowdown in FORE is just the latest sign of a slowdown in first quarter sales for all networking companies, with names like 3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> and CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> either making full-blown profit warnings or public statements emphasizing that business was weak in certain geographical regions and among certain types of buyers. A big picture of growing weakness across the board has now developed, raising questions about how much networking companies will grow going forward. While the implosion of MADGE NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MADGF)") else Response.Write("(Nasdaq: MADGF)") end if %> and BAY NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> due to a problematic merger and bad product transitions respectively were once viewed as company-specific, the more pessimistic are alleging that there is a larger pattern. Bay's turmoil has been extended beyond just last year's chaos -- the company has warned that comparisons will be terrible for the next few quarters as it attempts to rebuild its business -- so terrible that insiders dumped more than 2.2 million shares on the open market in January and February.

If the signs of sales slowing weren't enough, the merger of a number of high-profile companies have complicated the competitive picture. The Ascend-Cascade deal is only the latest in a slew of networking mergers that have been engineered to make the companies bigger and more competitive. The combination of Ascend's wide-area network (WAN) and remote access gear combined with Cascade's carrier-class ATM switches allows the company to provide end-to-end WAN solutions -- a distinction previously held by CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> after its purchase of Stratacom. Unfortunately, the market was not sanguine about the Ascend merger, pasting the stock for $11 1/4 to $40 3/4 yesterday. Accompanying the news of the merger was Cascade's profit warning. The company stated it would only book $90 million in revenues compared to $110 million last quarter, confirming fears raised when the company last reported earnings that sales momentum was slowing.

A few weeks back, 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 %> decided to tie the knot in a merger that has analysts and investors split on whether or not it was a strategically sound move. At the very least, it exacerbates the confusion and tension over the ongoing progression of networking technology. Although Cisco has historically been able to acquire seven or so small companies a year without blinking, the record for networking mergers otherwise is quite mixed. Bay Networks, the product of a merger between Wellfleet and Synoptics, had executives focusing on putting two companies together when they probably should have been pushing their research and development teams to work harder. With 3Com and Ascend now both engaged in fairly substantial mergers, many investors are worried that management focusing on making the mergers work may lose sight of the road ahead -- particularly when 3Com and Cascade have both preannounced terrible earnings before entering into pretty huge deals.

Although Cisco has not announced a bad quarter and is not involved in a huge merger, the leader in networking technology has actually been dogged by questions about technology. Cisco's mainstay routers are being challenged by a new technology called IP switching, pioneered by upstart Ipsilon. Although Cisco is releasing what it calls the Big Fast Router (BFR) to compete with the promise of IP switching using a new technology called tag switching, some investors are worried. Add to this Ascend's entry into the router market with the GRF router that uses technology it grabbed with its Netstar acquisition and you can see why some might be worried about Cisco's health, even if they are paradoxically fretting about the health of Cisco's competitors. For its part, Cisco expects the industry to maintain its 30% to 50% annual growth pace, and the company's goal is to grow at or above that pace, according to Chief Executive John Chambers. Chambers also confirmed that demand for corporate networking gear is down in an offhand way, stating "Customers insist upon receiving products quicker so Cisco has reduced its manufacturing lead times to one to three weeks from eight to 12."

Widespread weakness in corporate demand for networking gear, confusing mergers, and the ongoing march of networking technology to new standards are all haunting networking shares at the moment. The once-invincible stocks are now showing that they have vulnerable underbellies after all. Investors are scared and are reacting as such. Momentum players are clearing out of the stocks, leaving broken husks behind. Companies are doing stock deals with shares down 33% to 50% from their highs, causing some to question whether or not management really believed the stock was ever worth that much to begin with. Growth is obviously slowing, but it is going from low triple digits to middling double digits -- hardly disastrous.

Investors are cautioned to remember that the real measure for risk is the valuation at which you purchase a stock, not how volatile it is. Purchasing quality networking shares when all seems darkest and waiting a few years should provide the same kind of returns for investors that buying quality semiconductor and semiconductor equipment shares in mid-1996 provided. Keep in mind that those buying semiconductor-related stocks in mid-1996 had a few more months of terror to work through before the soundness of their capital allocation was revealed. Investors have been complaining for years that these stocks were too overvalued to purchase, even though they wanted to buy. Now that the valuations are falling, they are scampering the other way. Individual investors need to decide whether they are running with the herd or whether they want to stalk their preferred prey on their own schedule, not one supplied by others.

CONFERENCE CALLS

CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %>
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
To discuss merger announcement
(800) 475-6701 (code: 336788)

ASTORIA FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASFC)") else Response.Write("(Nasdaq: ASFC)") end if %> and
THE GREATER NEW YORK SAVINGS BANK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GRTR)") else Response.Write("(Nasdaq: GRTR)") end if %>
call regarding Astoria's acquisition
(800) 839-3308 -- replay available through 4/2

US DIAGNOSTIC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USDL)") else Response.Write("(Nasdaq: USDL)") end if %>
Replay available after 3:00 PM EST through 4/8
(303) 267-1074

THIS WEEK'S CONFERENCE CALL SYNOPSES

SHIVA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHVA)") else Response.Write("(Nasdaq: SHVA)") end if %> Q1 Pre-Announcement
PAYCHEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAYX)") else Response.Write("(Nasdaq: PAYX)") end if %> Q3 Conference Call

ANOTHER FOOLISH THING
Rogue In-Depth Insights

Looking for some meaty and insightful analysis of a timely business, investing or technology issue? Check out our Rogue missives -- where you can read Foolish musings on the best and worst of 1996, Warren Buffet, Teamsters, EDGAR, AOL, Alan Greenspan, Al Dunlap, Teletek, liquor advertising, disclosure laws, United Auto Workers, shareholder activism, Alta Vista, pension funds, Web-vertising, the Arms Index, CNBC, shorting, the SEC, cyber-cafes, Elaine Garzarelli, Jack Kemp, margin accounts, capital gains, George Soros, and much, much more. You can access Rogue via the Lunchtime/Evening News window's listbox.

MORE FOOLISHNESS
Better than a Secret Handshake

It's finally here! A way for you to slyly convey to the cognoscenti that you, too, are a member of Club Fool. For lapels, hats, scarves, ties, and coats, it's our new sterling silver Jester Pin! Specially-crafted for the Fool, it can perk up almost any Wise outfit, from navy blue suit lapels to a well-worn sweater. The Jester Pin measures approximately 1" x 1" and is available both on our website, and on AOL at keyword: FoolMart. It comes in two fun styles -- sterling silver or a combination of sterling silver and copper. It makes a terrific gift for that special Fool in your life!

Randy Befumo (MF Templar), a Fool
Fool Plate Special

Dale Wettlaufer (MF Raleigh), another Fool
Ups & Downs

Brian Bauer (MF Hoops), and yet another Fool
Editing