The Motley Fool, 04/18/97: The Evening News

HEROES

Healthcare informatics software company HCIA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HCIA)") else Response.Write("(Nasdaq: HCIA)") end if %> gained $3 1/8 to $18 1/4 after the company said it will meet Q1 earnings estimates of $0.21 per share on revenues of $25.7 million. The rebound in operating earnings per share (EPS) comes after a particularly difficult six month period during which the industry transitioned to a longer sales cycle and shook out some competition, similar in many ways to what has happened with helpdesk software companies. In tracking the outcomes of treatments with costs, HCIA's software adds a dimension of precision to clinical decision making that isn't so clearly defined when institutional knowledge is stored in fallible human memories. The cynic will say that such software is only useful for saving HMOs money; however, the products sell because they hit both goals of saving money and improving healthcare.

PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> gained another $2 3/4 to $44 3/8 as the cigarette industry looks to have pulled something of a coup if the rumors are true about a deal to cap the industry's liability at $300 billion. Over a number of years, the companies know what their cash flows will be and can thus budget for potential payments into a legislated compensation fund. Plus, when many of your customers are near-hopeless addicts, price elasticity is pretty springy. Higher prices mean higher revenues, which is something that is quite well known by legislators who decide excise (or sin) taxes. Add to this the expectation that tobacco advertising will be heavily regulated, and the perpetuation of an oligopolistic producer structure is virtually a done deal. Other major tobacco companies were also up today, with RJR NABISCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %> gaining $1 1/4 to $34 and LOEWS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTR)") else Response.Write("(NYSE: LTR)") end if %> up $3 1/2 to $93 3/8.

QUICK TAKES: An appearance in Business Week's "Inside Wall Street" feature drove DONALDSON, LUFKIN & JENRETTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLJ)") else Response.Write("(NYSE: DLJ)") end if %> shares $2 higher to $41 1/4... AURUM SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AURM)") else Response.Write("(Nasdaq: AURM)") end if %> rose $1 7/8 to $12 after the customer relationship software company reported Q1 revenues of $9.3 million and EPS of $0.04, beating estimates by a penny per share... Networker XYLAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XYLN)") else Response.Write("(Nasdaq: XYLN)") end if %> rose $2 to $15 5/8 on reporting a 16% year-over-year revenue increase and EPS of $0.13, up 18% from last year... SIEBEL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEBL)") else Response.Write("(Nasdaq: SEBL)") end if %> jumped $4 1/4 to $17 1/2 after the sales and marketing software company reported Q1 EPS of $0.07, nearly doubling estimated earnings, on revenues of $19.5 million... Medical device manufacturer C.R. BARD INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCR)") else Response.Write("(NYSE: BCR)") end if %> rose $3 3/4 to $32 1/2 after initiating a patent infringement lawsuit against OSTEX INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OSTX)") else Response.Write("(Nasdaq: OSTX)") end if %>... BURR BROWN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BBRC)") else Response.Write("(Nasdaq: BBRC)") end if %> gained $2 15/16 to $23 5/8 after the semiconductor company reported a Q1 sequential revenue gain and EPS of $0.26 (beating estimates), and said it is back on track to grow 15-20% annually... Appliance company PREMARK INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PMI)") else Response.Write("(NYSE: PMI)") end if %>, which makes brands such as Hobart, Wilsonart, and West Bend, gained $2 3/8 to $24 on reporting Q1 EPS of $0.32, beating estimates of $0.27 per share... SYNOPSYS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNPS)") else Response.Write("(Nasdaq: SNPS)") end if %> rose $4 3/4 to $29 1/4 after the semiconductor design software company reported Q2 revenues of $79.5 million and operating EPS of $0.38... Life sciences equipment company PERKIN ELMER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PKN)") else Response.Write("(NYSE: PKN)") end if %> rose $4 7/8 to $67 5/8 on reporting operating earnings of $0.80 per share... BLACK & DECKER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BDK)") else Response.Write("(NYSE: BDK)") end if %> hammered out a $2 1/4 rise to $32 1/8 after the tool company reported Q1 EPS of $0.27 on revenues of $1.01 billion... KEANE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: KEA)") else Response.Write("(AMEX: KEA)") end if %> jumped $2 3/4 to $44 after the computer consulting firm along with VIASOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VIAS)") else Response.Write("(Nasdaq: VIAS)") end if %> announced a comprehensive testing methodology for Year 2000 problems.

GOATS

RIVAL CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RIVL)") else Response.Write("(Nasdaq: RIVL)") end if %> was unplugged for a $6 3/4 loss to $14 5/8 after reporting a horrible quarter that fairly screams out for Al Dunlap. Well, maybe it wasn't that bad, but it certainly wasn't good. The maker of Rival, Pollenex, and Bionair consumer appliances and industrial pumps and fans reported revenue growth of 21% (through acquisitions) to $74.8 million and a quarterly loss of $4.3 million. $3 million of that loss was due to a plant closure in Montreal, Quebec. The company said it has addressed its overcapacity issues by closing down that plant and discontinuing operations at other facilities. Even without the charge, the company still lost $0.09 to $0.13 per share from operations, some of which can be gained back in cost savings from the closings. More serious problems lie in deteriorating product quality and the costs that accompany such problems.

Helpdesk software company REMEDY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMDY)") else Response.Write("(Nasdaq: RMDY)") end if %> recovered somewhat from this morning's plunge, but still ended the day down $3 7/8 to $26 1/2 after reporting Q1 revenues of $23.3 million and EPS of $0.16 per share. While those EPS numbers hammered estimates of $0.13 per share, the 21% sequential decline in revenues was fairly disturbing to everyone who follows the company. The bright spot in the report was an 18% sequential increase in service revenues. That's the sort of recurring revenue stream that the company is looking for. For investors willing to pay large multiples on revenues, though, the value proposition changes somewhat with declines in revenues with 95% gross margins. Take down those sales, and the leveraged nature of the income statement is quite apparent.

Athletic apparel company RUSSELL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RML)") else Response.Write("(NYSE: RML)") end if %> fell $8 1/2 to $27 1/4 after the company reported flat Q1 EPS of $0.30, missing estimates of $0.34, on virtually zero revenue growth. Elsewhere in the athletic apparel and footwear business, REEBOK INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RBK)") else Response.Write("(NYSE: RBK)") end if %> lost $5 5/8 to $40 1/8 after reporting Q1 revenues of $930 million, up 3% from last year's Q1 revenues. EPS of $0.69 made a more respectable advance of 7.8%. Although Reebok beat the consensus estimate of $0.65 per share, EPS growth of such diminutive proportions was bound to disappoint considering the tentative stance investors have taken toward athletic footwear companies. CONVERSE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVE)") else Response.Write("(NYSE: CVE)") end if %> was taken down $3 1/8 to $14 3/4 for the same reason, even after reporting better-than-anticipated Q1 operating EPS of $0.26 on a 105% increase in revenues.

QUICK CUTS: OFFSHORE ENERGY DEVELOPMENT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OEDC)") else Response.Write("(Nasdaq: OEDC)") end if %> slumped $4 1/4 to $3 5/8 after announcing that financial results will be hurt by a number of disappointing drilling results and that it is looking for ways to enhance shareholder value... Internet and intranet information provider DESKTOP DATA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DTOP)") else Response.Write("(Nasdaq: DTOP)") end if %> fell $5 3/4 to $6 after saying that its backlog indicates less revenue visibility in coming quarters.... SDL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SDLI)") else Response.Write("(Nasdaq: SDLI)") end if %> was whacked for a $5 1/4 loss to $10 after the optoelectronic semiconductor company reported Q1 EPS of $0.04, missing estimates of $0.13 per share... News.com company C/NET INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNWK)") else Response.Write("(Nasdaq: CNWK)") end if %> fell $4 5/8 to $18 1/4 on reporting Q1 revenues of $6.3 million and a $5.4 million operating loss as it spends heavily to build its brand-name... IDEXX LABORATORIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IDXX)") else Response.Write("(Nasdaq: IDXX)") end if %> fell $2 1/8 to $9 15/16 after the diagnostic services company said it doesn't expect second quarter EPS to meet Q2 estimates of $0.07 per share... High-performance server company AUSPEX SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASPX)") else Response.Write("(Nasdaq: ASPX)") end if %> slid $1 11/16 to $9 1/8 on a Morgan Stanley downgrade to "neutral" from "outperform"... LUND INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LUND)") else Response.Write("(Nasdaq: LUND)") end if %> was smashed $1 3/4 to $10 1/4 as the light truck and sport utility vehicle accessories company announced it doesn't expect to meet Q3 estimates of $0.15 per share... PC direct marketer CDW COMPUTER CENTERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CDWC)") else Response.Write("(Nasdaq: CDWC)") end if %> fell $5 1/8 to $41 1/2 after it reported Q1 revenues of $298 million and operating EPS of $0.55, but said revenues per customer fell during the quarter, which didn't help COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %>, which lost $3 3/4 to $72... Solid-imaging and modeling systems company 3D SYSTEMS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TDSC)") else Response.Write("(Nasdaq: TDSC)") end if %> lost $1 to $7 3/8 after it introduced its new President and announced that it expects to miss the Q1 estimate of $0.10 per share... ZITEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZITL)") else Response.Write("(Nasdaq: ZITL)") end if %> after the Chair at the company's Year 2000 subsidiary, MatriDigm, said that its "packed binary" solution was not meeting with rapid market acceptance... MOSSIMO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGX)") else Response.Write("(NYSE: MGX)") end if %> lost $2 5/8 to $8 3/8 after the clothing design and marketing firm said it will take another loss in its first quarter... Workstation, supercomputer, and software company SILICON GRAPHICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGI)") else Response.Write("(NYSE: SGI)") end if %> was shellacked for a $4 1/8 loss to $12 7/8 after it reported Q3 operating EPS of $0.09, missing estimates of $0.27 per share... POTOMAC ELECTRIC POWER CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: POM)") else Response.Write("(NYSE: POM)") end if %> dimmed $1 3/4 to $22 1/4 as investors fear the possibility that the Maryland Public Utility Commission may hold back or make less favorable the proposed merger of the company with BALTIMORE GAS & ELECTRIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BGE)") else Response.Write("(NYSE: BGE)") end if %>... Healthcare services company UNITED HEALTHCARE CORP. (NYSE UNH) fell $3 1/4 to $47 1/8 after Salomon Brothers lowered its rating on the company to "hold" from "buy."

FOOL ON THE HILL
An Investment Opinion by MF Templr

The CPU Waltz

CYRIX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYRX)") else Response.Write("(Nasdaq: CYRX)") end if %> enjoyed a resounding return to glory on Thursday, jumping $3 7/8 to $21 5/8 after posting earnings well in excess of analyst expectations. Only handicapped to make $0.09 per share, Cyrix raced in with a $0.33 per share profit -- solidly hitting its profit estimate for next year. With only $1.05 per share forecast for the entire fiscal year and one-third of that already in the bank in the first quarter, analysts will be going back to the drawing boards to revise their Cyrix earnings estimates in the coming days. Estimates in the $1.50 per share range for this fiscal year are not inconceivable, assuming Cyrix can maintain any kind of sales momentum.

Cyrix shares last enjoyed a renaissance on February 20th when the semiconductor manufacturer announced a new, low-end microprocessor it was calling the MediaGX. On the same day, COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> committed to using the MediaGX chip in its Presario 2000 Series, the first line of computers that Houston-based Compaq was going to sell for below $1,000. Cyrix shares went as high as $30 on this news before retreating back to the high teens, mostly on mounting concern that the Richardson, Texas-based company did not have the "right stuff" to compete against industry giant INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>.

Cyrix credited strong sales of both the MediaGX chip and its 6x86 Pentium-class chip with the strong quarterly results. Compaq's reports of strong sales of the sub-$1,000 PCs in its recently completed quarter confirm that the MediaGX product is doing quite well for Cyrix and has potentially opened up an entire new segment of the processor market that Intel has not yet managed to tap effectively. Combined with decent sales of its 6x86 processor, tiny Cyrix managed to juice up its quarter enough to attract the attention of Wall Street.

Cyrix shares soared two days after blowout results of $2.20 EPS from Intel Corp. ended in a fizzle. ADVANCED MICRO DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> manages to return to profitability last week and announces a new processor it has only begun to ship, and investors bid up the shares to the high $30s. Intel announces a new processor set to debut in May and is already shipping product with multimedia extension (MMX) and the stock flatlines. Why are shareholders of Cyrix and Advanced Micro Devices feasting while those who hold Intel are fasting in the current calendar year? Since the beginning of 1997, Intel shares have dropped 0.20% -- a sorry performance compared to gains of 12.3% for Cyrix and 43% for AMD.

Despite some investors' complaints about the untoward effect the "whisper" estimates for Intel had on the Street's perception of the quarter, the real issue was the forward guidance the company gave on sales and margins. Intel expects to post sales that are roughly in line with what they did this quarter when reporting time comes around again in three months, below what some analysts had been expecting. This is due to Intel cutting prices on its CPUs to meet a renewed competitive threat from AMD and Cyrix. Both competitors have CPUs they are currently shipping that they claim have better price/performance ratios than comparable Pentiums, and Intel does not want to risk losing market share.

Additionally, Intel shares have benefited from abnormally high gross margins -- the direct result of the lack of viable competitive products to the Pentium and Pentium Pro class microprocessors for a significant time. With this window beginning to close, Intel told investors to expect gross margins after 1997 in the 50% "plus or minus a few points" range, as much as 10% below the current gross margins. Generating large profit increases when margins are dropping is a challenging but not impossible task. With Cyrix and AMD both rising from the ashes of regular quarterly losses, improving margins over the next few months will be a piece of cake if either company can execute.

As a result, in Wall Street's mind the profit picture for Intel is one of steady but slowing growth over the next two years. Compared with potentially explosive growth from Cyrix and AMD as they turnaround their CPU businesses, it is no surprise that many high-octane investors are chasing those shares instead of those of Intel. Intel currently trades at 16 times next year's earnings estimates, compared to 28 times for AMD and 20 times for Cyrix (14 times if we assume that estimates are going to the $1.50 per share neighborhood for next year). At first glance, AMD and Cyrix appear to be getting premiums over Intel over the next year because they will be showing explosive, sequential growth at a time Intel will be flattening out.

Looking out a little further, the pricing starts to become more rational and the apparent premium AMD and Cyrix enjoy evaporates. If AMD can actually generate the $3.25 EPS that it says it can make in fiscal 1998, it trades at 12 times its fiscal 1998 numbers. If Cyrix gets bumped up to $2.25 EPS from the current $2.00 EPS range for fiscal 1998, it trades at 10 times its fiscal 1998 estimates. Intel, for its part, trades at 13 times its fiscal 1998 estimates. At these forward multiples there is plenty of money to be made in each of these stocks over the next two years if the companies make their numbers, but the biggest potential bang comes from AMD and Cyrix -- hence the reason their shares are being bid up.

The known information about Intel going into 1998 is declining margins and slowing sales growth. The unknown for AMD and Cyrix is whether they can compete, leading to a potentially big payoff if an investor guesses right. Does it make sense then to buy AMD and Cyrix and completely forget about Intel? Actually, that is a patently ridiculous notion. Just because the professionally managed money is chasing number two and three in the market for the big, casino-style hit hardly means that Intel is dead in the water. Intel at a measly 15 times its 1998 estimates would mean a 15% gain from today's levels -- a better return than bonds. In fact, the biggest misconception here is that it is an either/or decision -- while Intel can certainly continue to execute and grow profitably, the market is big enough for tiny Cyrix and medium-sized AMD to make a ton of cash and hardly dent Intel. It will be interesting to watch.

CONFERENCE CALLS

MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
(800) 456-5304 (passcode: 1017) -- replay through 4/21
NetShow Live Call and Replay: http://www.microsoft.com/msft/

IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %>
(800) 633-8284 (reservation # 2593689)
Replay from 6:30 PM ET through 4/23

ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
(800) 475-6701 (code: 336995) -- replay through 4/18 (North
America)
(320) 365-3844 (code: 336995) -- replay through 4/18 (International)

INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>
(402) 280-9021 -- replay through 4/18

360 COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay through 4/22

SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>
(800) 633-8284 (reservation # 2584848) -- replay avail through 4/22

APPLIED DIGITAL ACCESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADAX)") else Response.Write("(Nasdaq: ADAX)") end if %>
(402) 220-6032 -- replay through 4/22

SHIVA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHVA)") else Response.Write("(Nasdaq: SHVA)") end if %>
After 6:00 PM EDT
(800) 458-7879 (code: 69903) -- replay

TRIBUNE CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRB)") else Response.Write("(NYSE: TRB)") end if %>
(800) 633-8284 (reservation # 2649134) -- replay available 4/18 and 4/21

TOMRA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TMRAY)") else Response.Write("(Nasdaq: TMRAY)") end if %>
(800) 633-8638 -- replay available for 24 hours

THIS WEEK'S CONFERENCE CALL SYNOPSES

NIKE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NKE)") else Response.Write("(NYSE: NKE)") end if %> Q3 Conference Call
GREEN TREE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GNT)") else Response.Write("(NYSE: GNT)") end if %> Q1 Conference Call
IOMEGA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> Q1 Conference Call
CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> Q1 Conference Call

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