HEROES
Wide area network access device company ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> gained $4 3/8 to $43 3/4 after finalizing its merger with ATM and frame
relay switch company CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %>. The company
won't be announcing Q2 earnings until mid-July, but one piece of news in
today's press release from Ascend was that the combination of the two companies
will be non-dilutive to Ascend shareholders in the second half of the year.
Before today, it was generally believed that the merger would be slightly
dilutive through 1997 before adding to earnings next year. With today's
announcement showing the confidence of management to project earnings through
the year, investors are also showing a little more confidence in bidding
up the stock that was trading at about 25 times 1997 earnings estimates and
20 times 1998 estimates this morning.
CAL DIVE INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CDIS)") else Response.Write("(Nasdaq: CDIS)") end if %> came public today, popping up
$5 from its IPO price of $15 to close at $20. Cal Dive is an offshore energy
services company with a number of deep-sea vehicles and boats for conducting
maintenance and salvage operations in deepwater environments. According to
the company's prospectus, "Recent Gulf of Mexico lease sales by the [federal
government] attracted record bidding levels both in terms of the number of
leases bid and the amount of capital exposed, including a record level of
interest in Deepwater blocks." Revenues from these operations grew 95% last
year after being stagnant for two years before that. Investors might be
interested in the company's leveraging of its abilities to engage in oil
and gas production, where it purchases mature properties rather than
developmental properties. Oil and gas production revenues grew 156% in 1996
and made up one-quarter of Q1 revenues.
Number one online service provider AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> jumped $3 15/16 to $59 9/16 after announcing a partnership with CBS television, a unit of WESTINGHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WX)") else Response.Write("(NYSE: WX)") end if %>. CBS's popular SportsLine will become the first anchor tenant on AOL's Sports Channel, tying up a second major network that will mention America Online on an ongoing basis as part of regular television coverage (ABC regularly plugs AOL on its network).
QUICK TAKES: FIRST SOUTHEAST FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FSFC)") else Response.Write("(Nasdaq: FSFC)") end if %> gained
$3 7/16 to $13 7/16 after the South Carolina savings and loan holding company
agreed to merge with CAROLINA FIRST CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CAFC)") else Response.Write("(Nasdaq: CAFC)") end if %> in a one-for-one
stock swap.... Minerals exploration company U.S. ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USEG)") else Response.Write("(Nasdaq: USEG)") end if %>
was lit up $1 5/8 to $10 1/4 after the company said it may receive an award
for damages in the range of "hundreds of millions of dollars" from Nukem
Inc. arising from litigation involving a Wyoming uranium partnership owned
by the two companies... FIRST FEDERAL FINANCIAL OF KENTUCKY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FFKY)") else Response.Write("(Nasdaq: FFKY)") end if %> added $3 to $21 1/2 following the death of its CEO... KERR GROUP
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KGM)") else Response.Write("(NYSE: KGM)") end if %> jumped $1 3/8 to $5 1/4 after the plastics manufacturer announced
that it is being acquired by Fremont Partners of San Francisco for $5.40
per share in cash... PEERLESS MANUFACTURING CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PMFG)") else Response.Write("(Nasdaq: PMFG)") end if %> picked
up $1 3/4 to $12 1/2 after the manufacturer of filtration and purification
systems for the energy industry said it has retained an investment banking
firm to undertake a "comprehensive review of strategic alternatives to enhance
shareholder value"... Norwegian diagnostic, imaging, and biotech supply company
NYCOMED ASA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NYD)") else Response.Write("(NYSE: NYD)") end if %> jumped $3 3/8 to $17 3/4 on agreeing to merge
with Great Britain's Amersham International... HEXCEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HXL)") else Response.Write("(NYSE: HXL)") end if %> picked up $1 3/4 to $19 as investors in the engineered materials supplier
to the aerospace industry applauded the decision of the FTC not to stand
in the way of the BOEING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> merger with MCDONNELL DOUGLAS
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MD)") else Response.Write("(NYSE: MD)") end if %>... Packaging products company SONOCO PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SON)") else Response.Write("(NYSE: SON)") end if %> gained $2 15/16 to $33 3/8 after Lehman Brothers included it on its
list of "10 Uncommon Values," a list of its best picks that last year
outperformed the market... CHARTWELL LEISURE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHRT)") else Response.Write("(Nasdaq: CHRT)") end if %> moved
up $1 7/8 to $15 1/4 after the hotel owner and operator said it has retained
Bear Stearns and Chase Securities to look into strategic alternatives...
Customer helpdesk company SCOPUS TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SCOP)") else Response.Write("(Nasdaq: SCOP)") end if %> ran up
$3 1/8 to $25 1/2 after announcing a sales, development, and marketing agreement
with CINCINNATI BELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSN)") else Response.Write("(NYSE: CSN)") end if %>... Contract oil and gas driller
MARINE DRILLING COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDCO)") else Response.Write("(Nasdaq: MDCO)") end if %> moved $2 9/16 higher to $22
1/8 after announcing a deepwater drilling contract worth between $164 million
and $188 million... Flash data storage company SANDISK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNDK)") else Response.Write("(Nasdaq: SNDK)") end if %> gained $1 7/8 to $16 1/2 on announcing a cross-licensing agreement
with Hitachi for flash-memory related products... Drug company WARNER
LAMBERT CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLA)") else Response.Write("(NYSE: WLA)") end if %> rose $7 9/16 to $131 13/16 on analyst sponsorship
from both Smith Barney and Merrill Lynch today... Produce company FRESH
AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRES)") else Response.Write("(Nasdaq: FRES)") end if %> ripened $2 1/8 to $20 3/4 on announcing an agreement
to acquire Tom Lange Co., which would bring yearly revenues above the $600
million mark... Medical products company MEDTRONIC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDT)") else Response.Write("(NYSE: MDT)") end if %>
added $5 9/16 to $87 15/16 after yesterday receiving FDA approval to market
its Wiktor Prime Coronary Stent... Diversified communications company T/SF
COMMUNICATIONS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TCM)") else Response.Write("(AMEX: TCM)") end if %> exploded $8 3/8 higher to $36 after
the company and its executives entered into an agreement to buy up to 2.05
million shares from a holder of those shares for $37 apiece... BADGER
METER <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BMI)") else Response.Write("(AMEX: BMI)") end if %> gained $3 1/8 to $32 3/4 on announcing a 52,000 square
foot expansion at its Brown Deer, Wisconsin facility.
GOATS
CELLULAR TECHNICAL SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTSC)") else Response.Write("(Nasdaq: CTSC)") end if %> lost $3 1/4 to $5 7/8 on
pre-announcing disappointing second quarter revenues and EPS below expectations
of $0.12. The company said it will show a "small loss" because of delays
in deploying new products. Also pre-announcing today was video conferencing
equipment supplier VIDEOSERVER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VSVR)") else Response.Write("(Nasdaq: VSVR)") end if %>, which plunged $2 7/8
to $10 3/8 after saying it wouldn't meet Q2 estimates of $0.20 per share.
The company said that it expects to report revenues of $11 million, down
substantially from last quarter's revenues of $15.3 million. VideoServer
expects to be slightly profitable in the quarter (before charges for its
acquisition of Promptus Communications).
Office superstore company OFFICE DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ODP)") else Response.Write("(NYSE: ODP)") end if %> was smashed for
a $3 13/16 loss to $15 5/8 as it appears that the company will give up its
attempt to merge with STAPLES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %>. Last night, the FTC's
stance opposing the merger was confirmed by a U.S. District Court preliminary
injunction, which said that the FTC had shown a reasonable probability that
the merger would diminish competition. That absolute power corrupts absolutely
may be true, but the combined company would possess something far from absolute
power as far as market share goes, argued Staples. This would have been
especially true if a deal to sell 63 stores at a bargain price to OFFICEMAX
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMX)") else Response.Write("(NYSE: OMX)") end if %> had gone through. Staples gained $1 3/16 to $24 5/16 on the
day while OfficeMax was unchanged. For more on the merger, see "Fool On the
Hill" below.
QUICK CUTS: Echoing RUSSELL CORP.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RML)") else Response.Write("(NYSE: RML)") end if %> recent earnings warning, activewear apparel company PLUMA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PLU)") else Response.Write("(NYSE: PLU)") end if %> lost $2 1/2 to $12 7/8 after pre-announcing flat year-over-year sales growth in its second quarter... Substandard home equity lender CITYSCAPE FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTYS)") else Response.Write("(Nasdaq: CTYS)") end if %> slid $1 9/16 to $18 3/8 as one on-the-ball Fool told us that holders of common shares might be getting out of the way of class "A" preferred shareholders, who might be selling common shares issued as dividends on their preferred shares... Falling $3 7/16 to $25 7/16, EXCEL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECI)") else Response.Write("(NYSE: ECI)") end if %> gave back what it gained yesterday on announcing the appointment of a new CFO... FX ENERGY INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FXEN)") else Response.Write("(Nasdaq: FXEN)") end if %> was shot down $1 3/4 to $6 3/8 after the energy exploration and production company's partner in Poland, German company RWE-DEA, pulled out of the project, according to Dow Jones... Rechargeable battery company VALENCE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VLNC)") else Response.Write("(Nasdaq: VLNC)") end if %> sank $1 7/16 to $7 1/8 after the development-stage company reported Q4 results last night... BROOKTROUT TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRKT)") else Response.Write("(Nasdaq: BRKT)") end if %> warned investors it would not make its second quarter earnings estimates of $0.18 per share, causing shares to plunge $1 3/4 to $10 1/8... Apparel company MARISA CHRISTINA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRSA)") else Response.Write("(Nasdaq: MRSA)") end if %> unraveled for a $1 loss to $8 3/8 after Rodman and Renshaw changed its rating on the company to "hold" from "buy," saying bookings may be softer than expected... Vitamin maker REXALL SUNDOWN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RXSD)") else Response.Write("(Nasdaq: RXSD)") end if %> was taken down $3 5/8 to $35 3/8 after confirming that it has conducted merger talks with TWINLAB <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TWLB)") else Response.Write("(Nasdaq: TWLB)") end if %>.
FOOL ON THE
HILL
An Investment Opinion by Randy
Befumo
FTC's Busy Day
It was a busy day for the Federal Trade
Commission (FTC). Within a 24-hour period, the august government body
won a court order blocking the proposed
multi-billion dollar
merger between office supply stores STAPLES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %> and
OFFICE DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ODP)") else Response.Write("(NYSE: ODP)") end if %> and approved another
multi-billion dollar
merger between aircraft manufacturers BOEING CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> and
MCDONNELL DOUGLAS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MD)") else Response.Write("(NYSE: MD)") end if %>. These two deals raise some questions
over how uniform the standards being applied to potential mergers are and
how relevant the assumptions behind many of the consumer protection laws
the FTC enforces remain in an increasingly global economy.
The authority of the FTC comes from the interstate commerce clauses in U.S.
Constitution, drawn in a manner that is similar to how the Federal Communications
Commission (FCC) gets its authority over broadcasting. The actual agency
was formed at the beginning of the century to enforce the antitrust laws
pioneered under the administration of Teddy Roosevelt, a man who attacked
monopolies with a singular zeal. The FTC's
mission today is to enforce
a variety of antitrust and consumer protection laws, ensuring that the business
environment within the United States remains competitive and free of undue
restrictions.
The September
4, 1996 announcement of a proposed merger between Staples and Office
Depot was formally opposed by the FTC on
March
10, 1997. The merger between the two office superstores was opposed on
the grounds that it would be anti-competitive. The FTC's argument hinged
on the fact that office supply superstores offered such a unique variety
of products that they constitute their own market, separate and distinct
from any other venue through which office supplies are sold. A merger between
the number one and number two company in terms of revenue in a three company
market would create a situation so unbalanced that it would eventually result
in higher prices for consumers as Staples and Office Depot tightened it tentacles
around consumer pocketbooks.
Judge Thomas Hogan concurred with the FTC argument, writing "[n]o one entering
a Wal-Mart would mistake it for an office superstore. No one entering a Staples
or Office Depot would mistakenly think he or she was in Best Buy or CompUSA."
The ruling has broad implications beyond just office superstores, as it
essentially says that any "category killer" retailer cannot acquire a major
competitor if the market is down to only two or three players. Certainly
no one entering Borders would think he or she was in K-Mart's book section,
despite the fact that both locations sell the same product and are just as
accessible to consumers. Simply put, it did not matter to the FTC or Judge
Hogan that the vast majority of office products are sold outside of the office
superstore concept -- the office superstores in it of themselves became a
separate and distinct market.
"Consumers have won today," said William J. Baer, the FTC's Competition Director.
"And competition has been preserved [in the office superstore market]."
Unfortunately, the same can not be said of the merger deal that the FTC approved
today, that between Boeing and McDonnell Douglas. In the
statement supporting
the merger, Chairman Robert Pitofsky and Commissioners Janet D. Steiger,
Roscoe B. Starek III, and Christine A. Varney wrote that because McDonnell
Douglas did not constitute a "meaningful competitive force in the commercial
aircraft market" that there was no way for competition in this market to
be preserved. Additionally, although both companies develop fighter aircraft,
"there are no current or future procurements of fighter aircraft by the
Department of Defense in which the two firms would likely compete." What
sort of time frame the FTC was looking at here was undisclosed.
Although it is difficult to argue with the current state of Douglas Aircraft
and its viability in the market for commercial aircraft, it is worth remembering
that a few decades ago, McDonnell Douglas was number one. Just as Boeing
overcame it with a sustained, superior investment in research and development,
the same road would be open to McDonnell. Certainly, there could be no overnight
change, but to assume that the system is forever closed and will remain the
same as it is today is naive. Although McDonnell did recently get hosed on
the Joint Strike Fighter contract, the copious cash it is generating from
F-18, C-17 and AH-64 Apache helicopters would have easily funded this
development. Saying that McDonnell can never regain prominence is the same
as saying number three OfficeMax can never be number two or number one and
therefore the merger should go through because nothing will ever change.
The similarities between the two deals emerge because of the FTC's decision
to view office superstores as a class unto themselves. This is in spite of
the fact that national companies like Corporate Express and Viking Office
Supplies as well as regional players like those that make up U.S. Office
Products compete with office superstores every day for the bread-and-butter
corporate business. On the consumer side, while no one will ever mistake
a Best Buy for an Office Depot, consumers certainly will be able to figure
out they can buy a computer in both places -- or through the mail from Dell.
How could other office supply stores selling to business or other consumer
outlets that sell office supplies not benefit if Staples unreasonably raised
its prices? Would zombie-like buyers, slave to their habits, be unable to
change their office supply deliveryman from the Staples fellow to the Corporate
Express fellow? Short of forcing suppliers to commit economic suicide and
be exclusive to them, it is difficult to imagine how the market could fail
to adjust if Staples and Office Depot went crazy with the price gun.
CONFERENCE CALLS
FINISH LINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FINL)") else Response.Write("(Nasdaq: FINL)") end if %>
(800) 839-0814
Replay available through 7/2
PAMECO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PCN)") else Response.Write("(NYSE: PCN)") end if %>
(402) 220-1008 -- replay available through 7/2 @ 5:00 p.m. EDT
GENZYME CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %>
(Re: Genzyme Tissue Repair shares and Carticel performa
(402) 220-6028 -- replay available through 7/8 @ 5:00 p.m. EDT
07/02/97 (Wednesday)
VISUAL EDGE SYSTEMS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EDGE)") else Response.Write("(Nasdaq: EDGE)") end if %>
(800) 247-9979 -- replay for 24 hours
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Randy Befumo (TMF Templr), a Fool
Fool Plate Special
Dale Wettlaufer (TMF Ralegh), another
Fool
Ups & Downs
Brian Bauer (TMF Hoops), and yet
another Fool
Editing