HEROES

LANDRY'S SEAFOOD RESTAURANTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LDRY)") else Response.Write("(Nasdaq: LDRY)") end if %> gained $1 7/8 to $23 7/8 on reporting 36% revenue growth in the second quarter. Morgan Stanley responded with a rating upgrade to "outperform" from "neutral." Last month, Landry's said it plans to expand its restaurants to 106 or 108 units by the end of the year from 76 at the end of January. With unit growth of 41% and a consistent operating model, a company officer said on CNBC this morning that Landry's thinks it can keep up the earnings growth of 30% over the next few years.

TELCOM SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLCM)") else Response.Write("(Nasdaq: TLCM)") end if %> jumped $3 7/8 to $12 3/8 after the maker of linear and mixed signal integrated circuits reported a 24% sequential increase in revenue and EPS of $0.10, doubling the mean estimate of $0.05. Last quarter, TelCom wrote off part of its investment in a wafer foundry and went outside the organization for a guaranteed five-year wafer capacity. That strategic decision spelled the difference in the company's profit margin from last quarter. Quarter-over-quarter, operating expenses (before the impairment charge) increased by less than $500,000 while revenues increased by $2.6 million. Even pouring more money into R&D and sales, general, and administrative expenses, the company grew operating earnings 99%, thus the climb back from the cellar on the share price.

Earnings heroes today include computer telephony components maker DIALOGIC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLGC)") else Response.Write("(Nasdaq: DLGC)") end if %>, which added $5 to $32 1/2 after reporting a 26% increase in Q2 revenues and EPS of $0.29, topping the mean estimate of $0.27. DIGITAL MICROWAVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DMIC)") else Response.Write("(Nasdaq: DMIC)") end if %> popped up $3 7/8 to $37 3/4 after the wireless telecom equipment company turned in 54% first quarter revenue growth and EPS of $0.30, beating estimates of $0.27. Security cameras and semiconductor test handling equipment maker COHU INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COHU)") else Response.Write("(Nasdaq: COHU)") end if %> rose $7 to $43 on reporting Q2 revenues of $44.6 million and EPS of $0.70, beating estimates of $0.50.

QUICK TAKES: Dental practice company MONARCH DENTAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDDS)") else Response.Write("(Nasdaq: MDDS)") end if %> came public today, picking up $3 3/4 from its $13 IPO price to close at $16 3/4... Fox & Hound and Bailey's Sports Grille restaurant operator TOTAL ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TENT)") else Response.Write("(Nasdaq: TENT)") end if %> also came public today at $9 and promptly climbed $2 to $11... DIGITAL LIGHTWAVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIGL)") else Response.Write("(Nasdaq: DIGL)") end if %> moved up $1 7/8 to $11 5/8 after the optoelectronics manufacturer reported a 254% increase in Q2 revenues and EPS of $0.05, beating the break-even estimate... MOTHERS WORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWRK)") else Response.Write("(Nasdaq: MWRK)") end if %> moved up $1 1/4 to $9 1/2 after the maternity clothing retailer reported sales growth of 24.5% and EPS of $0.18, smashing estimates of $0.13... Semiconductor test equipment manufacturer AETRIUM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATRM)") else Response.Write("(Nasdaq: ATRM)") end if %> climbed $2 3/4 to $22 courtesy of competitor Cohu's good results today... DIGITAL MICROWAVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DMIC)") else Response.Write("(Nasdaq: DMIC)") end if %> popped up $3 7/8 to $37 3/4 after the wireless telecom equipment company turned in 54% first quarter revenue growth and EPS of $0.30, beating estimates of $0.27... FANSTEEL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNL)") else Response.Write("(NYSE: FNL)") end if %> shot up $1 11/16 to $9 after shareholders of the specialty metals company learned of the death of holder of 47% of the company's shares... Semiconductor and electronics components company INTERNATIONAL RECTIFIER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IRF)") else Response.Write("(NYSE: IRF)") end if %> moved $1 9/16 higher to $19 9/16 on reporting better-than-expected Q4 operating EPS of $0.10... Timeshare properties operator and marketer FAIRFIELD COMMUNITIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FFD)") else Response.Write("(NYSE: FFD)") end if %> rose $1 1/2 to $26 1/4 on reporting Q2 EPS of $0.42 on a post-split basis... Digital subscriber line equipment manufacturer ADTRAN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADTN)") else Response.Write("(Nasdaq: ADTN)") end if %> gained $1 15/16 to $27 after Goldman Sachs rated the shares a "trading buy."

GOATS

SYNOPSYS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNPS)") else Response.Write("(Nasdaq: SNPS)") end if %> was smashed for a $5 1/8 loss to $33 1/8 after the semiconductor design automation software company reported Q3 revenue growth of 22% and EPS of $0.38, in line with estimates. Analysts covering the company must have come away from the conference call with a bad taste in their mouths, as Goldman Sachs and Hambrecht & Quist downgraded the shares this morning. Robertson Stephens also cut its rating on the company, as analyst Jennifer Smith told Reuters this afternoon that she is concerned with slowing growth for the company's Synthesis product. Smith said new products, such as the company's PrimeTime timing product, will not offset the slowdown in the Synthesis product. Robbie Stephens now estimates 1998 EPS of $1.93.

BTG INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BTGI)") else Response.Write("(Nasdaq: BTGI)") end if %> lost $2 to $11 3/8 after the computer systems integrator and consultancy reported a 75% decline in first quarter EPS of $0.03, underperforming estimates by a dime per share. Prudential Securities lowered its rating on the company to "hold" from "buy." Two problems in the quarter were the company's continuing push into the commercial sector (it is primarily a government contractor) and its investment in providing Internet service through cable networks, although the one can't tell looking at the financials whether that's just a balance sheet concern or whether it's flowing through the consolidated income statement. Whatever it is, BTG's deteriorating asset management can explain the poor results without looking at increased goodwill amortization or leverage issues. Last year, the company turned assets 3 times, this quarter it was 2.6 times, or down 13%. Problem? Annualized inventory turns fell to 16.8 times from 24.6 times last year.

QUICK CUTS: MOTOROLA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> slid $7 to $82 after Robertson Stephens lowered its rating on the company while Gruntal & Co. reiterated its "strong buy" rating... Specialty pharmaceutical company ROBERTS PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: RPC)") else Response.Write("(AMEX: RPC)") end if %> declined $1 5/16 to $10 1/4 after reporting Q3 EPS of $0.04 yesterday... LSI LOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LSI)") else Response.Write("(NYSE: LSI)") end if %> dropped $2 5/16 to $32 7/16 on reporting flattish year-over-year revenue growth and EPS of $0.32, in line with estimates... Consumer and industrial containers and rubber products company RUBBERMAID INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RBD)") else Response.Write("(NYSE: RBD)") end if %> dropped $1 3/4 to $25 1/4 after yesterday reporting disappointing second quarter earnings... AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> lost $3 3/4 to $64 after Goldman Sachs removed the company from its priority list, most likely on a price basis... Analog mixed signal semiconductor company MICRO LINEAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MLIN)") else Response.Write("(Nasdaq: MLIN)") end if %> plunged $5 1/16 to $8 1/2 after Q2 EPS of $0.19 missed estimates of $0.23. The company said orders in the quarter dropped off by 29% from last year... Banking software company CFI PROSERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PROI)") else Response.Write("(Nasdaq: PROI)") end if %> slid $3 1/4 to $14 3/4 on reporting Q2 EPS of $0.28, beating estimates of $0.27... Neural network software company HNC SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HNCS)") else Response.Write("(Nasdaq: HNCS)") end if %> fell $6 1/16 to $36 5/8 after Q2 EPS of $0.12 met estimates with a 67% increase in quarterly revenues... Telecom equipment maker SPECTRIAN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPCT)") else Response.Write("(Nasdaq: SPCT)") end if %> skidded $5 13/16 to $45 1/2 even though Q1 operating EPS of $0.57 smoked the mean estimate of $0.42... Information technology services staffing company CORESTAFF INC. (Nasdaq CSTF) lost $3 1/4 to $27 after announcing last night that it and selected shareholders are filing to sell $180 million in debt and common stock... SPLASH TECHNOLOGY HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLH)") else Response.Write("(Nasdaq: SPLH)") end if %> fell $4 to $39 7/8 after reporting earnings earlier this week.

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

BISYS Bomb

Taking advantage of the tremendous growth in the mutual fund industry has been surprisingly difficult for individual investors over the past five years. Major mutual fund powerhouses like Fidelity Management & Research (FMR) and Scudder are privately held. The mutual fund units of large financial services companies like Dean Witter or Morgan Stanley represent only a small piece of the overall companies' financial pie. After you consider T. ROWE PRICE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TROW)") else Response.Write("(Nasdaq: TROW)") end if %> and FRANKLIN RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEN)") else Response.Write("(NYSE: BEN)") end if %>, the number of "pure plays" becomes surprisingly small. However, some opportunities do exist beyond the actual money management firms.

The painfully tedious task of keeping records is just as important to the overall function of a mutual fund as actually picking stocks. From keeping track of when individuals buy and sell shares in the fund to apportioning capital gains distributions, the "back office" functions are vital to the success of the entire operation. Companies that can use technology to help the process along add real value to growing mutual fund operations increasingly weighed down by the need to invest in systems and people to keep the back office running. Rather than the fund company doing it all by itself, passing on the back office duties to another company actually ends up saving money and providing better service to the customer.

Possibly the biggest name in this business is STATE STREET BOSTON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STT)") else Response.Write("(NYSE: STT)") end if %>. The largest U.S. custodian of mutual funds, the company provides banking, trust, investment management, and securities processing worldwide. The company does all of the back-end processing for a number of worldwide mutual funds and securities companies. The company's stock has gone virtually parabolic since December of 1994, when it closed the month at $14 7/8 and proceeded to run up 244% over the next 31 months (not counting the company's dividend yield), a 61.4% annualized return. State Street has recently seen a significant upward move based on speculation that American Depository Receipt (ADR) king BANK OF NEW YORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BK)") else Response.Write("(NYSE: BK)") end if %> wants to acquire the company. With State Street growing at 12% per year and trading at 25 times trailing earnings, some investors might argue the majority of the potential benefit is reflected in the current share price.

Another company in the same business as State Street, but growing at a much faster pace, is THE BISYS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BSYS)") else Response.Write("(Nasdaq: BSYS)") end if %>, a company that until today had also enjoyed an admirable share price performance record. BISYS does a number of data processing jobs for banks, including administering their mutual funds. While State Street is the largest U.S. custodian of mutual funds, BISYS is the largest mutual fund administrator in the U.S. Despite this happy market position, shares of BISYS did a belly flop today, tumbling $6 1/2 to $32 5/8 after one of its largest customers decided to call it quits. Bank of America elected to terminate its distribution and administration agreement with BISYS subsidiary Concord Financial for the Pacific Horizon Funds effective September 1997.

The reason for the sharp and negative reaction to this news is that this "change" will trim 1998 earnings for BISYS by roughly $0.15 per share after one-time charges. With current EPS estimates at $1.87, this means that BISYS will now probably earn around $1.60 per share next year compared to estimates of $1.56 per share for the current fiscal year. Revenues related to these agreements representing only $15 million of the $319 million BISYS is forecast to bag in fiscal 1997. The loss of 5% of the company's revenues will drop profitability by 8%, not unreasonable considering that the Concord Financial mutual fund processing operation is only a part of BISYS and not the whole thing. As Concord probably lost a large chunk of its overall revenues, the subsidiary will be much less profitable for BISYS as a whole. However, if the move by Bank of America does not reflect the quality of BISYS but rather Bank of America's intention to go it on its own, this might present an interesting opportunity.

With Section 20 of Glass-Steagall Act amended, banks can now generate 25% of their revenues in the securities business, specifically mutual funds. Banks are consolidating into regional powerhouses that offer brokerage services, and adding their own proprietary mutual funds to the mix is an easy way to squeeze some extra money out of the customer. This change could possibly fuel the growth of the industry, which augurs well for BISYS' Concord Financial unit. Add to this that BISYS offers a number of complementary outsourcing solutions for banks looking to get a handle on their data processing needs, and the forecast growth rate of 20% may prove to be on the low side over the next three to five years. Significant structural changes like the shift in Section 20 often take months to have a measurable effect and last for years.

Before a charge in the fourth quarter of 1996 for an acquisition, BISYS has $1.50 in trailing EPS and $304.1 million in trailing revenues. The company closed at $32 5/8 today, giving it a trailing P/E of 21.8 and a trailing price/sales ratio of 2.7. The most recent major acquisition in the transaction processing universe was FISERV'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FISV)") else Response.Write("(Nasdaq: FISV)") end if %> purchase of BHC FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BHCF)") else Response.Write("(Nasdaq: BHCF)") end if %> in March of 1997. BHC was purchased at distressed prices of 2.1 times sales, putting a valuation floor on BISYS, which has a more significant collection of assets. With a high degree of repeat business (excluding the occasional Bank of America), a P/E that is a premium to the underlying growth rate would make sense. Twenty-five times next year's $1.62 EPS estimates (the current estimates minus $0.15 EPS) puts the company at $40 1/2, 26% up from here. Given that the company outperformed estimates by 7.5% last quarter, the forward numbers may prove to be low. If the company uses its $57.6 million cash hoard to repurchase some shares, this could be where the upside in the estimates comes from. BISYS is definitely a company to watch for investors looking for a way to participate in the stunning growth of the mutual fund industry.

CONFERENCE CALLS

MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
(800) 456-5304 (code: 1017) -- replay through 7/21
(402) 344-6835 (code: 1017) -- replay for international callers

IOMEGA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %>
(800) 633-8284 (code: 2854533) -- replay through 7/21

ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
(800) 475-6701 (code: 348047) -- replay through 7/25

SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>
(800) 633-8284 (reservation # 2689889) -- replay through 7/20
(303) 248-1201 (reservation # 2689889) -- replay for international callers

360 COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay through 7/23

HARLEY-DAVIDSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HDI)") else Response.Write("(NYSE: HDI)") end if %>
(402) 222-9905 -- replay

INTERNATIONAL RECTIFIER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IRF)") else Response.Write("(NYSE: IRF)") end if %>
(800) 633-8284 code 292-5369
Replay available through July 24

APPLIED DIGITAL ACCESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADAX)") else Response.Write("(Nasdaq: ADAX)") end if %>
(402) 220-6028 -- replay available through 7/25

TRIBUNE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRB)") else Response.Write("(NYSE: TRB)") end if %>
1-800-633-8284 (code: 2941595) -- replay through 7/25

THIS WEEK'S CONFERENCE CALL SYNOPSES

IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> Call
INNOVEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVX)") else Response.Write("(Nasdaq: INVX)") end if %> Call
APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> Call
SHAW GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGR)") else Response.Write("(NYSE: SGR)") end if %> Call
ASCEND <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> Call
INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> Call
SEAGATE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> Call

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