HEROES

Not to be one-upped by WACHOVIA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WB)") else Response.Write("(NYSE: WB)") end if %>, FIRST UNION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTU)") else Response.Write("(NYSE: FTU)") end if %> will gain the lead in the Virginia market (in terms of deposits) by acquiring SIGNET BANKING CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBK)") else Response.Write("(NYSE: SBK)") end if %> in a $3.25 billion stock swap. Signet shareholders will receive 0.55 shares of First Union stock for each Signet share, valuing Signet at 3.5 times book value, 28% of assets, and approximately 25 times trailing operating earnings. Signet jumped $13 1/2 to $50 3/16 while First Union fell back $3 to $94 7/16. Signet's cross-town rival, CRESTAR FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CF)") else Response.Write("(NYSE: CF)") end if %> gained $2 5/8 to $45 7/8 on the acquisition news. Washington, D.C.-based RIGGS NATIONAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RIGS)") else Response.Write("(Nasdaq: RIGS)") end if %> also picked up $7/8 to $21 3/8.

RAMBUS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMBS)") else Response.Write("(Nasdaq: RMBS)") end if %> surged $7 1/4 to $52 after TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> agreed to license the company's chip-to-chip interface technology for TI memory devices and digital signal processors (DSPs). The agreement is significant not only because of TI's endorsement of the CPU-DRAM interface, but also because TI is the world's largest manufacturer of DSPs. This is the first license of Rambus technology for DSPs and communications application specific integrated circuits. In 1996, revenues at Rambus were $11.27 million and sales of Rambus-enabled chips were $447 million. If 25% of TI's chips are Rambus-enabled by 1999 (with TI's chip revenues growing 10% per year) and the revenue-to-licensing ratio holds up, this deal alone could result in incremental Rambus revenues of $62 million.

Reflecting the strength at medium and heavy duty engine makers such as CUMMINS ENGINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CUM)") else Response.Write("(NYSE: CUM)") end if %>, trailer manufacturers such as CARLISLE COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSL)") else Response.Write("(NYSE: CSL)") end if %>, and the trucking sector, WABASH NATIONAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WNC)") else Response.Write("(NYSE: WNC)") end if %> rose $2 15/16 to $27 1/6 after the trailer manufacturer reported a 40% rise in Q2 revenues and EPS of $0.13, beating estimates of $0.11. Elsewhere in the transportation components manufacturing sector, DANA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DCN)") else Response.Write("(NYSE: DCN)") end if %>, a manufacturer of axles, driveshafts, frames, and other components, rose $2 to $39 1/4 after reporting Q2 EPS of $0.90, beating estimates of $0.81. Dana also announced an 8% increase in its quarterly dividend.

QUICK TAKES: Optoelectronic semiconductor company SDL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SDLI)") else Response.Write("(Nasdaq: SDLI)") end if %> rose $1 1/2 to $18 1/4 on signing a multi-year supply agreement with CORNING INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLW)") else Response.Write("(NYSE: GLW)") end if %> before reporting estimate-beating Q2 EPS of $0.07 after the bell today... Specialty semiconductor manufacturer ZILOG INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZLG)") else Response.Write("(NYSE: ZLG)") end if %> popped $1 13/16 to $24 3/16 after agreeing to be acquired by private investment group Texas Pacific for $25 per share in cash... RPC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RES)") else Response.Write("(NYSE: RES)") end if %> gained $1 1/4 to $16 7/8 after the oil services company and maker of Chaparral recreational boats reported a 28% increase in Q2 revenues of $67 million and EPS of $0.41, up 86% over last year... Computer printer manufacturer LEXMARK INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LXK)") else Response.Write("(NYSE: LXK)") end if %> gained $2 1/8 to $29 1/4 on reporting a 12.5% increase in Q2 EPS on flat revenue growth.

GOATS

3-D PC chip company 3DFX INTERACTIVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TDFX)") else Response.Write("(Nasdaq: TDFX)") end if %> took a big hit this morning, dropping $4 1/8 to $12 after the rumor mill started churning about the company's contract with Sega. According to Reuters, the Microprocessor Report said Sega will go with a 3-D chip made by NEC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NIPNY)") else Response.Write("(Nasdaq: NIPNY)") end if %>. Currently, 3Dfx is developing a chipset for Sega's next-generation game console, but 3Dfx said today that Sega has made no decision on which chip solution it will choose. More than 15% of the company's most recent quarterly revenues were comprised of development contract revenues from Sega. Shorter-term, this might not hurt 3Dfx and its popular Voodoo chipset, according to Fool Tasuki Hirata. Longer-term, the company has a cheap Microsoft-Lockheed Martin chipset to contend with.

HUTCHINSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HTCH)") else Response.Write("(Nasdaq: HTCH)") end if %> lost $2 3/8 to $29 1/8 after the Silicon tundra manufacturer of head suspension assemblies for the disk drive industry reported strong Q3 EPS of $0.68 on a 33% increase in revenues. In its conference call, the company advised that it sees a 5% sequential decrease in unit production and a fall-off in gross margins to support the ramp up of Trace Suspension Assemblies. Hutchinson's stock is no stranger to volatility at earnings time, but one thing that has alleviated some of the volatility was the company's 3-for-1 stock split, which has increased the float. For those not familiar with the company from before the stock split, quarterly EPS of $2.04 (mentally reversing that split) are absolutely huge.

KIMBERLY CLARK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMB)") else Response.Write("(NYSE: KMB)") end if %> slumped $4 5/16 to $47 5/16 after the consumer paper products company reported Q2 operating EPS of $0.60, below estimates of $0.62. The company said the quarter was affected by near-term issues of pricing in its European away-from-home tissue business, structural changes in combining Kimberly Clark's and Scott Paper's away-from-home tissue business, and advertising expenses for its feminine products businesses. Kimberly Clark also advised that second half operating earnings will be about level with the first half, putting full year operating earnings around $2.50 per share, about 6% below the current mean earnings estimate. The company did say, however, that it is targeting year 2000 EPS of at least $3.86, or 3-year EPS growth of 15.6% annually between now and then.

QUICK CUTS: MOTOROLA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> fell $3 1/8 to $78 7/8 on brokerage downgrades after the company said in a meeting with analysts and the press last Thursday that a major customer in Japan further slowed down or stopped investment in TDC infrastructure as part of a move into a large investment in CDMA infrastructure... Internet service provider and UUNet wannabe EARTHLINK NETWORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELNK)") else Response.Write("(Nasdaq: ELNK)") end if %> lost $2 5/8 to $10 1/4 after posting Q2 revenues of $17.5 million and a loss of $0.80 per share... Lawn and garden tools manufacturer ACORN PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACRN)") else Response.Write("(Nasdaq: ACRN)") end if %> was cut down $2 1/4 to $11 3/4 even as A.G. Edwards started coverage with a "buy" rating... SODAK GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SODK)") else Response.Write("(Nasdaq: SODK)") end if %> fell $2 to $10 5/8 after Raymond James cut its rating on the company to "accumulate" from "buy"... Helpdesk software company SCOPUS TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SCOP)") else Response.Write("(Nasdaq: SCOP)") end if %> fell $4 3/8 to $24 before releasing earnings after the market close... IONA TECHNOLOGIES PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IONAY)") else Response.Write("(Nasdaq: IONAY)") end if %> fell $3 1/8 to $22 1/2 after the software development tools company reported Q2 revenues of $6.98 million and EPS of $0.09, 12% better than estimates... NEXSTAR PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NXTR)") else Response.Write("(Nasdaq: NXTR)") end if %> lost $1 1/2 to $13 5/8 after reporting an 8% increase in Q2 revenues and a loss of $0.31 per share... Central California bank holding company CAPITAL CORP. OF THE WEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCOW)") else Response.Write("(Nasdaq: CCOW)") end if %> slid $1 to $10 3/4 after reporting a quarterly loss of nearly $1 million because of a real estate development loan write-off... Latin American utility holding company ENERSIS SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ENI)") else Response.Write("(NYSE: ENI)") end if %> was powered down $3 1/16 to $32 3/4 in rocky South American trading... Title insurance company FIDELITY NATIONAL FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNF)") else Response.Write("(NYSE: FNF)") end if %> fell $1 5/16 to $17 3/16 after agreeing to purchase one million shares and 2.5 million warrants in GB FOODS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GBFC)") else Response.Write("(Nasdaq: GBFC)") end if %>, the CEO of which resigned today over the deal... National Discount Brokers THE SHERWOOD GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHD)") else Response.Write("(NYSE: SHD)") end if %> traded $1 1/4 lower to $16 1/2 after reporting a 22% decrease in Q4 revenues... WISCONSIN CENTRAL TRANSPORTATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCLX)") else Response.Write("(Nasdaq: WCLX)") end if %> fell $2 5/8 to $31 after the railroad company's locomotive engineers and conductors voted to unionize... INLAND STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IAD)") else Response.Write("(NYSE: IAD)") end if %> fell $1 7/16 to $22 1/4 after an accident at an Illinois steel making facility killed two workers on Friday... Spanish stocks were down 2.43% at the close, having recovered from their lows during the session. Spanish banks took a hit, including CORPORACION BANCARIA DE ESPANA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGR)") else Response.Write("(NYSE: AGR)") end if %> which lost $1 9/16 to $28 and BANCO SANTANDER SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STD)") else Response.Write("(NYSE: STD)") end if %>, which fell $1 3/8 to $28 1/8... BOEING CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> descended $1 11/16 to $54 3/8 after reporting Q2 revenues of $9.3 billion and EPS of $0.55, below estimates of $0.59. The company said operating expenses were higher due to increased R&D spending, training costs, joint venture development expenditures, and a higher effective income tax rate.

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

National TechTeam, Trounced

NATIONAL TECHTEAM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TEAM)") else Response.Write("(Nasdaq: TEAM)") end if %> was sacked today for $5 7/8 to $10 by Rhonda Brammer, a linebacker for Barron's. In a story called "Media Star," Ms. Brammer shot some rather large holes in the legitimacy of National TechTeam's accounting. Shares opened down $2 1/8 to $13 3/4 this morning and did not look back, tumbling all the way to $11 7/8 before they were halted for news pending. With its quarterback under pressure from the open, TechTeam compounded the problem by fumbling the ball by issuing a rather underwhelming press release indicating that the company would not make current consensus earnings estimates for the fiscal second quarter. Shares fell even further to close at $10, off 37% on the day on more than 17 times normal volume.

TechTeam's bad day began with the rather insightful Barron's article. After a quick summation of the company's basic "call center" business, it questioned the company's concentration in a few customers and then detailed a rather dubious transaction between TechTeam and Capricorn Capital, a privately held equipment leasing company based in Farmington Hills, Michigan. Like so many call center companies, TechTeam has developed proprietary software that enables a staff of operators to answer calls for large corporations looking to outsource their teleservices business. Capricorn Capital decided to license this software for their call center equipment, a transaction that netted TechTeam $3.6 million of its $21.2 million in revenues in the fiscal first quarter. As it was just a software licensing deal and TechTeam did not have to staff a call center with live bodies as part of the transaction, the margins were pretty good, making it appear to be a real coup for the company.

Unfortunately for TechTeam, the enterprising Ms. Brammer discovered that although TechTeam had booked the $3.6 million in revenues, it had actually only collected $840,000 as of April 17th. How does this work? Under generally accepted accounting principles (GAAP), a company can book revenues for sales that it has not collected money for by simply putting the sales on the accounts receivable portion of the balance sheet. A very common accounting procedure, almost every company in America books sales on its accounts receivable for items or services it has sold on credit to a customer that it believes will come up with the dough when the time comes. This is one of the reasons why many urge investors to pay attention to cash flow as well as to operating earnings, as this would have been a deduction from operating cash flow even though it added to operating earnings.

So if every company does this, what's wrong at TechTeam? Besides the fact that this is not the most conservative way to recognize a sale, not all that much -- except for the fact that this sale might not actually be a sale. Brammer dug deeper and found that TechTeam had signed a separate agreement listed in the 10-Q with an unnamed "major distributor" to buy $28 million worth of call center equipment. TechTeam was going to pay "cost plus 15%," or $4.2 million over three years. The $4.2 million figure becomes suspect when you realize that the $3.6 million that TechTeam recognized from Capricorn was actually $4.2 million that had been discounted into net present value. When a company recognizes revenues that it will not collect for a while, it has to recognize them at their "net present value," not at the face value, as a $1 in a year is not worth as much to a company as a $1 today. If you substitute the name "Capricorn Capital" for "major distributor" in the 10-Q, you realize that the $4.2 million that TechTeam booked is gonna go right out the back door to Capricorn to pay for the equipment TechTeam bought.

Given that the transaction will end up being neutral to TechTeam's operation, Brammer concludes that the $3.6 million in highly profitable licensing revenue may have had a disproportionate effect on TechTeam's operating profit of roughly $3 million in the first quarter. Put another way, TechTeam would not have been profitable if it had not been for this very interesting transaction, one that actually will end up being neutral for the company as it owes Capricorn just as much as it is getting. Paying $15 7/8 per share for the stock of a company that on a cash-accounting basis was breakeven in the first quarter was something that TechTeam investors suddenly did not feel comfortable with, and the stock began to tumble immediately on the open.

Like throwing gasoline on an already raging fire, TechTeam decided that today was the day to announce that, lo and behold, it would have breakeven earnings in the fiscal second quarter. Blaming the shortfall on slower-than-expected project growth and significant start-up costs for a number of new projects, TechTeam said that it would make absolutely no money. Without the Barron's piece, this might have been chalked up as another quarterly disappointment from a teleservices firm in a industry fraught with peril. In the context of the Barron's article that legitimately questions whether or not TechTeam actually made money last quarter, things take a slightly more insidious turn. Are the shares a bargain at $10, marked down almost 60% in the past two weeks? Unless the company can come up with operating earnings that do not involve swap meet accounting, probably not.

CONFERENCE CALLS

AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>
(800) 475-6701 -- replay

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

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

07/22/97 (Tuesday)
SAFEGUARD SCIENTIFICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFE)") else Response.Write("(NYSE: SFE)") end if %>
(800) 360-6890
(800) 642-1687 (ID# 504652) -- replay through 7/23

THIS WEEK'S CONFERENCE CALL SYNOPSES

CAPITAL ONE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %> Call
GREEN TREE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GNT)") else Response.Write("(NYSE: GNT)") end if %> Call
CARLISLE COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSL)") else Response.Write("(NYSE: CSL)") end if %> Call
IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> Call
APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> Call
INNOVEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVX)") else Response.Write("(Nasdaq: INVX)") end if %> Call

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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