HEROES

Computer telephony company PREMIERE TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTEK)") else Response.Write("(Nasdaq: PTEK)") end if %> gained $3 3/8 to $23 after announcing an agreement to acquire Voice-Tel Enterprises, a similar company that will double Premiere's revenues. One of keys to the deal is Voice-Tel's extensive local infrastructure, which will allow Premiere to save on access charges and reach more potential subscribers for its voice and data services. The deal is structured as a pooling of interests, valued at approximately $185 million, which means the company will avoid incurring charges for amortization of goodwill going forward. Even better, the $185 million price on the acquisition values Voice-Tel at less than half of Premiere's value last night. Shareholders are getting twice the company (if the margins are the same as Premiere's) by issuing less than 50% more shares. Robertson Stephens immediately raised its 1997 earnings estimate by 25%, to $0.70 per share.

Boring Portfolio holding BORDERS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BGP)") else Response.Write("(NYSE: BGP)") end if %>, which operates Borders book superstores and WaldenBooks, gained $1 1/4 to $20 after Merrill Lynch designated the company as its "Focus One" stock of the week. In the recent conference call following its fourth quarter report, the company said that Borders same-store sales were up 11% year-over-year while WaldenBooks, a less differentiated store concept, showed 2.3% growth in same-store sales. Borders must be doing something right for the Merrill Lynch analyst to upgrade the company in one of the slower quarters of the year.

COMPUSERVE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSRV)") else Response.Write("(Nasdaq: CSRV)") end if %> today announced that it is indeed in talks with a possible acquirer, which is widely assumed to be AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>, though there's nothing to say that a company like MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> isn't thinking about it. Much like GE's NBC unit buying out FNN and turning it into CNBC, Microsoft might think about returning CompuServe to its roots as a service more focused on businesses, featuring specialized databases and proprietary information. However, it may well be America Online that is looking at the company. As Alex Schay wrote in the Lunchtime News today, "Still, the allure of removing its second largest rival from the action and consolidating its already enormous lead in the online service arena may be too much for America Online to pass up." CompuServe finished up $1 5/8 at $12 5/8.

QUICK TAKES: BELCO OIL & GAS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOG)") else Response.Write("(Nasdaq: BOG)") end if %> jumped $2 1/4 to $20 7/8 after the company said it believes its Brown #1-H well, in which its has a 30% working interest, is the largest horizontal gas well drilled onshore in the U.S... Computer and PC services superstore COMPUSA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %> gained $1 5/8 to $17 3/8 after announcing third quarter same-store sales growth of $5.6%... CHESAPEAKE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSK)") else Response.Write("(NYSE: CSK)") end if %> moved $2 3/4 higher to $30 after the paper products company said it will sell its West Point, Va., kraft products mill and other assets for a half a billion dollars... Retailer SHOPKO STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKO)") else Response.Write("(NYSE: SKO)") end if %> gained $1 1/4 to $16 1/2 after the company called off its merger with drugstore chain PHAR-MOR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PMOR)") else Response.Write("(Nasdaq: PMOR)") end if %>... SAKS HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKS)") else Response.Write("(NYSE: SKS)") end if %> was marked up $1 7/8 to $32 1/4 after Schroder Wertheim raised its rating on the chichi retailer to "outperform significantly"... Computer projection systems company IN FOCUS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INFS)") else Response.Write("(Nasdaq: INFS)") end if %> gained $4 1/8 to $20 7/8 after it said it will miss Q1 EPS estimates of $0.40, but only by two to four cents, which was excused by investors since the company is trading much closer to the low end of its 52-week range of $12 3/4 and $58 1/4... IPC INFORMATION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPCI)") else Response.Write("(Nasdaq: IPCI)") end if %> rose $2 11/16 to $12 1/8 after the telecom systems company said it is working with investment bankers Deutsche Morgan Grenfell to enhance shareholder value... AMERICAN SUPERCONDUCTOR CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMSC)") else Response.Write("(Nasdaq: AMSC)") end if %> heated up $1 3/8 to $9 5/8 after the company said that Electricite de France, one of the world's largest electric utilities, will invest $10 million in the company to be used in R&D.

GOATS

The endless wave of small and mid-cap blow-ups on earnings pre-announcements continues. Besides those written about in today's Fool on the Hill, some other wrecks include: TRITEAL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TEAL)") else Response.Write("(Nasdaq: TEAL)") end if %> was slammed for a $3 1/4 loss to $6 5/8 after it said it expects to report a loss for the quarter, missing the mean estimate of $0.09 per share. Patient monitoring systems company PROTOCOL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCOL)") else Response.Write("(Nasdaq: PCOL)") end if %> went "code blue," losing $1 1/4 to $7 1/2 after it said revenues will come in lower than expected, and that it will miss quarterly EPS estimates of $0.12 by a "significant" amount.

WANDEL & GOLTERMANN TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WGTI)") else Response.Write("(Nasdaq: WGTI)") end if %> crumpled $10 5/8 to $10 3/4 after the data network test products company pre-announced flat year-over-year Q2 revenues of approximately $15 million. The company reiterated what CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> and others have also said recently -- that capital expenditures for networking products this quarter were lousy. In addition to carriers keeping their wallets firmly ziplocked this quarter, the company said its re seller channels were taking longer than expected in addressing new products. Dollar strength against the Deutschemark also hurt financial results. The company said it expects to report EPS of $0.10 to $0.15, missing the mean estimate of $0.31 per share.

QUICK CUTS: EPITOPE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EPTO)") else Response.Write("(Nasdaq: EPTO)") end if %> lost $1 7/8 to $8 1/4 after the biotech company's Andrew and Williamson subsidiary announced a recall on strawberries tainted with the Hepatitis A virus that it had shipped to six states... ABC RAIL PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABCR)") else Response.Write("(Nasdaq: ABCR)") end if %> lost $3 to $14 3/8 after a company officer said at an investor conference that it expects to miss by a wide margin Q3 EPS estimates of $0.53 because of manufacturing process changes at the company... Networking products company MADGE NETWORKS NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MADGF)") else Response.Write("(Nasdaq: MADGF)") end if %> lost $1 5/16 to $7 after 3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> said it has delivered the industry's first token ring/ATM networking solution, a claim that Madge vigorously denied in a press release... PHYSICIANS RESOURCES GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PRG)") else Response.Write("(NYSE: PRG)") end if %> lost $1 1/8 to $11 7/8 on a downgrade to "neutral" from "buy" at the hands of Alex. Brown... Brokers took more hits today as pundits worry about mutual fund outflows. Among those affected, PAINE WEBBER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PWJ)") else Response.Write("(NYSE: PWJ)") end if %> fell $1 5/8 to $28 1/8 and DEAN WITTER DISCOVER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DWD)") else Response.Write("(NYSE: DWD)") end if %> lost $2 1/4 to $34 1/2... Telecom database software company VERSANT OBJECT TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VSNT)") else Response.Write("(Nasdaq: VSNT)") end if %> lost $2 3/8 to $6 1/4 on warning that Q1 revenues will fall approximately 38% from last quarter and that it expects to report a loss... ALLIN COMMUNICATIONS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALLN)") else Response.Write("(Nasdaq: ALLN)") end if %> fell $2 3/8 to $7 1/8 after the interactive TV services company reported a Q4 loss of $0.94 per share.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Kryptonite

The tumultuous explosions among the networking stocks have deafened many investors to a similar shake-up among software companies. Without question, things have been pretty grim for the networkers. According to Investor's Business Daily (IBD), the networking industry is currently ranked 196 out of 197 industries in terms of price appreciation over the past six months, falling from 77 three months ago. The group as a whole has fallen 35% since January 1st. Viewed as invulnerable as recently as February, investors now cannot distance themselves from these companies. (Yesterday, we explored some of the reasons behind this in a column called "Sifting Through the Networking Ashes".)

What could possibly be as bad as the returns for the networking stocks? Try another one of the favorite groups over the past three years: software. According to IBD computer software ranks 192 out of 197, a mere four notches higher than the beleaguered networkers. The group rated a 48 as recently as three months ago. The shares have fallen a stunning 23.1% since January 1st, merely one quarter ago. (Of course, you are probably wondering what unfortunate industry ranks 197. The exciting world of machinery used for printing trade books and magazines currently holds the bottom spot, probably due in part to the performance of Presstek.)

With the exception of Microsoft, almost every other software company has been getting hammered as earnings momentum slows. Over the past two years, we have seen many small enterprise software companies run into trouble as orders dried up, particularly in document imaging and application development. Over the past few months this stain has spread into the larger names in the industry as weakness in Europe and moderate sales growth in the U.S. has contributed to weaker than expected results. Combine this with the rout that Internet-related companies have experienced and the 192 ranking of computer software is not all that surprising -- even though the attention of the business press has been firmly focused on the poor performance of the networking stocks.

Among the higher profile software disasters today is PROJECT SOFTWARE DEVELOPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PDSI)") else Response.Write("(Nasdaq: PDSI)") end if %>, which tumbled $15 15/16 to $15 5/16. The firm announced this morning that it would not meet expectations for its fiscal second quarter. Revenues will increase to $22 million from $16 million a year ago, but profits will only be $0.15 per share instead of the $0.24 that the company made last year. Although not terrible, these results are a decrease from last quarter's $23.4 million in sales and earnings of $0.35 per share on the lowest profit margins in years. The company blamed the problems on a shortfall in its ADvantage software products and "weakness" in Europe, the same tune companies like Oracle Systems, Sybase, Computer Associates and Informix have been singing over the past few months. Informix actually sang that ditty yesterday after the stock plunged $5 7/32 to $9 29/32 on news that revenue next quarter would be 30% below last year. Other companies like Novell have cited poor sales in Japan as well.

How about the crashes in enterprise software? FILENET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FILE)") else Response.Write("(Nasdaq: FILE)") end if %> crashed $4 7/8 to $11 after the company pre-announced a loss of $0.60 EPS for its fiscal first quarter and promised the second restructuring in a year. Although the loss will actually be an improvement over the $0.79 per share that the company lost in the prior year, the $47 million in revenue it is expecting is down 29.4% from year-ago levels. The imaging and workflow document systems developer called new orders for the quarter "unexpectedly weak." Chief Executive Ted Smith stated, "[S]everal large orders solicited by our European and North American sales organizations did not come through."

FILENet's restructuring charges last year were driven by the acquisition of two firms to broaden its document management product line. The company recently introduced one of the industry's first document management software suites, a product that retails for $495. FILENet's software allows document intensive corporations to put their files onto computer networks, reducing the need for paper copies. The company's share price peaked in the high $60s in early 1996, prior to its ill-fated acquisitions. Problems integrating the sales force of two acquisitions have been behind the terrible revenue performance, but at a recent investment conference the firm stated that it believed this was behind it. Apparently, things were not that simple.

FILENet is a great example of what is happening in competitive software markets where no clear market leader has emerged. The company claims roughly 20% market share after its recent acquisitions with a number of competitors having comparable market shares. It appears that when a particular software industry segment lacks a defined market leader, pricing has become unstable. With sales growth slowing across the board, these companies are increasingly using price cuts and other competitive measures to drum up sales, creating a nasty cycle where revenue growth is actually impeded by the attempts to establish price leadership.

Much like the recent growth slowdown in networking, which has caused many to question the growth potential of the industry going forward, investors are beginning to wonder if software is looking a little sick as well. A note last night from a reader who perused yesterday's column on networking typified the doubts that are beginning to form about the growth potential of both networking and software. "After reporting a string of sequential declines in sales and earnings growth, do you think it is appropriate to accept [Cisco Systems Chief Executive John] Chambers' 30-50% growth rate [estimates for the networking industry]?" By the same token, can one accept predictions by every major information technology services firm that software sales will continue to grow 15% to 25% out to the year 2000? Can anything be certain?

Although it is reasonable to have doubts about the strength of both industries, these doubts should not turn into irrational fears. While the string of sequential increases has slowed, many of the companies in the software and networking industries are generating year-over-year gains of 50% or greater. As both industries mature, the expectation of sequential increase after sequential increase becomes incredibly unrealistic. The simple fact is companies in both industries are reporting year-over-year growth that makes names like Coca-Cola, Disney and Gillette green with envy.

As the momentum players cycle out of these companies into the next wave of sequential increasers, the traditional growth and value crowd seems to have succumbed to the same fears, losing the ability to place these companies within the larger context of all companies and not just against the limited backdrop of how these companies performed last year. Although it might warrant another flurry of letters accusing me of "weak" conclusions, I still believe what is happening to the software and networking shares bears a lot of similarities to what happened with semiconductor-related shares in 1995 and 1996. Trouble appeared, momentum disappeared, investors disappeared, quality companies were tossed out with the junk that had been run up to ridiculous levels, and the best buying opportunity of a two to three year period for the quality companies in the group was unveiled.

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)

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