HEROES

YURIE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YURI)") else Response.Write("(Nasdaq: YURI)") end if %> vaulted $3 1/2 to $27 after the asynchronous transfer mode (ATM) network access concentrator manufacturer signed a three-year OEM deal with LUCENT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>. Yurie's access concentrator takes in all sorts of datastreams, from ethernet to ISDN to next-generation things like xDSL, converts those into ATM packets, sends those packets using the telecom backbone through a T-1, T-3, or SONET link, and then a Yurie concentrator on the other end translates the packets. The usefulness of these products comes through the efficient use of bandwidth by corporations. ATM concentrators don't necessarily make speed the central issue -- price per unit of bandwidth, wide area network planning and integration, and enterprise-wide quality of service are its selling points. [Yurie Systems Message Board]

QUICK & REILLY GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BQR)") else Response.Write("(NYSE: BQR)") end if %> jumped $2 3/8 to $31 11/16 after the Wall Street Journal said the company's management, including Leslie Quick, is talking with investment bankers about a possible sale of the brokerage, clearinghouse, and online brokerage on training wheels. The Journal said the Quicks are sick of watching their stock lag as the rest of the brokerage sector climbs: "The company is particularly irked at the much higher valuation the market has placed on its chief rival, discounter Charles Schwab Corp." Indeed, Quick & Reilly is trading at about half the forward EPS estimate on CHARLES SCHWAB <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCH)") else Response.Write("(NYSE: SCH)") end if %>, but Quick & Reilly has not shown the growth nor the profitability of Charles Schwab, as respectable as those measures of Quick & Reilly's business are. Part of the valuation disparity can also be directly chalked up to name recognition -- Schwab has simply built the better brand. [Quick & Reilly Message Board]

Pharmaceutical and biotech contract research organization APPLIED ANALYTICAL INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAII)") else Response.Write("(Nasdaq: AAII)") end if %> added $3 1/8 to $26 on reporting a 45% increase in Q2 revenues and EPS of $0.04, down from $0.06 last year and $0.04 below estimates. Mitigating the falloff in per-share earnings, the company says it will benefit in coming quarters from increases in R&D in the pharmaceutical industry due, from the FDA approval of its Abbreviated New Drug Application for an ophthalmic drug, and from the expected approval of a client's application for a hormone therapy. If that's not enough to light a fire under the shares, Applied Analytical also said that it is in discussions regarding a "potential business combination transaction."

QUICK TAKES: Education and training software company EDUSOFT LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EDUSF)") else Response.Write("(Nasdaq: EDUSF)") end if %> climbed $2 3/4 to $9 1/8 on reporting Q2 revenues of $3.3 million and EPS of $0.21, up 110% sequentially... MARKET FACTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MFAC)") else Response.Write("(Nasdaq: MFAC)") end if %> gained $2 1/8 to $20 after the market research firm said it has been given the green light by the Chinese government to commence a joint venture in that country... Instrument and pollution control equipment manufacturer MISONIX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSON)") else Response.Write("(Nasdaq: MSON)") end if %> added $2 to $12 1/2 on reporting a 118% increase in Q4 revenues, quarterly EPS of $0.53, and full-year operating EPS of $1.37... LIFECORE BIOMEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCBM)") else Response.Write("(Nasdaq: LCBM)") end if %> gained $1 7/8 to $15 after the medical and surgical device maker reported a 38% increase in fourth quarter revenues and gave favorable guidance for the coming year... Building products company MONROC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MROC)") else Response.Write("(Nasdaq: MROC)") end if %> moved up $1 7/32 to $12 19/32 on announcing that it has engaged an investment banking firm to help it assess strategic alternatives... POLYMEDICA INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: PM)") else Response.Write("(AMEX: PM)") end if %> gained $1 1/8 to $11 1/8 after the medical products company said Medicare budget changes will boost sales of its diabetes products... Wide area network access products maker WESTELL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WSTL)") else Response.Write("(Nasdaq: WSTL)") end if %> rose $1 5/8 to $19 5/8 on announcing that GTE's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTE)") else Response.Write("(NYSE: GTE)") end if %> Government Services unit has selected the company as its exclusive supplier for asymmetric digital subscriber line (ADSL) modems and access multiplexers.

GOATS

After underwriting the company's initial public offering (IPO) in November 1995, it seems that Donaldson, Lufkin & Jenrette (DLJ) is liquidating its inventory of TOTAL RENAL CARE HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRL)") else Response.Write("(NYSE: TRL)") end if %> through a shifting of shares among DLJ's subsidiaries. Total Renal Care announced today that it had filed a registration statement with the SEC for an offering of 2,595,524 shares of common stock, two million of which represent DLJ Merchant Banking Affiliates sole remaining interest in the company. This stake in turn will fall to DLJ Securities Corp., which will be the sole underwriter of the offering. Total Renal Care will not receive a penny from the offering because the shares are already outstanding. However, ignore the insidious overtones, this is quite a common occurrence on "the Street," but unfortunately for Total Renal Care, the perception remains that DLJ no longer cares to hold a long position. The stock fell $2 9/16 to $42 7/16 on the news. [Total Renal Care Message Board]

AMGEN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMGN)") else Response.Write("(Nasdaq: AMGN)") end if %> dropped $6 15/16 to $50 3/16 after First Boston downgraded the company to "buy" from "strong buy." Blood in the water led to a frenzy, as Merrill Lynch reduced Amgen to "intermediate and long-term neutral" from its previous rating of "intermediate and long-term accumulate." The clobbering comes on the heels of unprecedented downward guidance from Amgen in its 10Q released today. The company cited that its Epogen (a drug boosting red blood cell count) sales growth rate would be lower than the 15% reported for the first half of the year. Amgen also wrote that it had "advised analysts that it is no longer comfortable with the current range of their estimates of EPS." Despite the use of the past tense by Amgen, it must have come as a surprise to analysts -- as witnessed by the flurry of downgrades. Trading at 17x forward earnings estimates today, Amgen trades at a large discount to the average forward earnings (23x) of a full-fledged pharmaceutical company. [Amgen Message Board]

QUICK CUTS: With net income for the quarter increasing to a record $26.7 million, or $0.24 per share, DOLLAR GENERAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DG)") else Response.Write("(NYSE: DG)") end if %> of course lost $2 3/4 to $40 due to the fact that it only "met" expectations... PaineWebber analyst John Lazlo cut his fourth quarter earnings and revenue estimates for MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> because of "falling prices for memory chips." Micron shares dropped $4 5/8 to $50 1/2 in response... A net loss of $0.11 per share for the second quarter helped BRILLIANT DIGITAL ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BDE)") else Response.Write("(AMEX: BDE)") end if %> lose some of its burnish as it dropped $1/2 to $8 1/2... HIGHWAYMASTER COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HWYM)") else Response.Write("(Nasdaq: HWYM)") end if %> fell $4 1/16 to $9 9/16 on reporting a net loss of $6.6 million, or $0.27 per share, short of expectations... Outsourcing solutions company ASI SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASIS)") else Response.Write("(Nasdaq: ASIS)") end if %> slipped $3 to $9 3/4 due to an anticipated revenue shortfall as a result of a merger between two of its clients... USA DETERGENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USAD)") else Response.Write("(Nasdaq: USAD)") end if %>, the laundry and household cleaning products people, faded $2 to $11 1/4 after restating its 1996 financial numbers, along with guidance that more may be on the way.

Robert W. Baird & Co. analyst Kim Stulo downgraded the stock of ZEBRA TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZBRA)") else Response.Write("(Nasdaq: ZBRA)") end if %> today after certain senior executive officers registered to sell more than 2 million of the company's shares. Zebra got its stripes shaved $3 9/16 to $27 3/16... Employee "leasing" company EMPLOYEE SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESOL)") else Response.Write("(Nasdaq: ESOL)") end if %> had some of its stock price "let go" today, losing $11/16 to $5 7/16 as investors pondered disappointing earnings... An announcement by CEPHALON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CEPH)") else Response.Write("(NYSE: CEPH)") end if %> that the FDA had extended its review period to Nov. 11 for the company's new drug application for Myotrophin hurt shares $1 5/16 to $10 13/16... APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> gave back $2 1/2 to $22 1/16 as A.G. Edwards lowered its rating on the company to "reduce" from "maintain"... SPARTAN MOTORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPAR)") else Response.Write("(Nasdaq: SPAR)") end if %> hit the brakes, skidding $7/8 to $7 7/8 as the heavy-duty truck chassis maker reported Q2 EPS of $0.05, missing estimates of $0.14.

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

What Goes Down A Little
Can Only Come Back Up A Little

Over the past few years, investors have transformed the quarterly reports of semiconductor equipment behemoth APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> into referendums for the entire industry. Results at Applied Materials are viewed as a leading indicator of future results for other companies in the semiconductor process equipment business. Comments made by management about future conditions are taken as gospel by eager investors looking for any indication of what the future might hold. Should Applied Materials beat earnings estimates or make positive comments about how business is booming, a rally is sure to follow. Should Applied Materials miss estimates or make negative comments about the future -- well, folks, look out below. As the market raced toward today's close anticipating results from Applied, the tension became palpable.

At 16:01 Eastern Daylight Time, the tension cracked. Applied Materials reported quarterly earnings of $0.77per share, nine cents higher than the consensus estimate. The highest estimate was looking for only $0.70 per share. Although the initial wire stories carried news that the company had made $0.98 per share, this number included both a one-time gain for the settlement of the patent litigation with NOVELLUS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> and a one-time loss associated with some bad debt from Submicron Technology plc. In spite of the fact that the $0.77 EPS were down from $0.92 EPS a year ago, Applied Materials shares raced up to $92 in after-hours trading. The initial euphoria need only be confirmed by positive comments from Applied Materials management in the conference call slated for around 5:30 or 6:00 p.m. EDT, and tomorrow it could be off to the races again.

Looking at the results, there are some factors that could warm the hearts of even the most skeptical investors. Revenues for the quarter were only down 5.2% from a year ago, the second-highest revenue level ever achieved by the company. Gross margin was 47.2% during the quarter, only down 0.6% from last year's results, which occurred near the peak of the semiconductor equipment cycle. If Applied revenues and gross margin can approach the levels it last achieved when business was absolutely exploding, the company obviously has an excellent handle on its cost structure and could gain higher gross margins on solid sales. New orders were up 22.2% to $1.24 billion from last quarter with backlog increasing 11.4% sequentially to $1.65 billion over the same period, indicating that the company was operating at close to peak capacity.

Even the company's balance sheet looks excellent. The company's store of cash and short-term investments increased almost $100 million in the quarter, another testament to the company's resiliency during the recent business drop-off. Accounts receivable and inventories are up, but given the fact the company does extensive business overseas where reimbursement time takes longer, the levels are not unreasonable. With new orders up 33.1% from last year, one can only imagine that Applied management will say that business is good. The company received new orders of $100 million from White Oak Semiconductor and $135 million from Taiwan Semiconductor Manufacturing Co. (TSMC) alone, rather large commitments only a year and a half since the semiconductor manufacturing business topped. What could possibly be wrong?

At risk of being incorrect for the third time on Applied Materials, it is difficult to imagine that much of the good news has not already been discounted into the company's current price. Here at $92, the shares are well above the $59 7/8 peak they struck back in August of 1995 when all things looked wonderful. Why is the euphoria so strong only five quarters after the business peaked and two quarters after the company's revenues hit their low? The downturn was not nearly as bad as everyone expected and certainly not as bad as it has been in previous years. In fact, given that Applied remained solidly profitable and orders never slipped below levels seen in early 1995, one might even say this was not a downturn but more like a vacation. Things never got as bad as investors were expecting when Applied traded as low was $21 3/4 in July 1996.

If the downturn was not as bad as expected, however, does it really make sense to model future revenue growth on what has been seen in previous upturns? When Lehman Brothers forecasts peak EPS of $7.50 in 1999 or 2000, this would be equal to the 76.7% annualized profit growth the company reported from 1991 to 1996 coming out of the prolonged downturn in the business in the late '80s. In the past twelve months, Applied has posted $1.87 per share in earnings, meaning that if it hits $7.50 per share by 2000 it will have 48.7% compound annual growth. Had business completely fallen off a cliff, expectations of rapid growth to this level would make perfect sense. However, what is remarkable about Applied over the past few months is that in spite of the downturn, business did not fall off a cliff.

The industry trade group Semiconductor Equipment and Materials International (SEMI) still seems "difficult" times until the year 2000 for the business. The trade group admitted that it could be wrong, however, and pointed out that if it was, the compound rate of growth for the business would actually end up being slower than what most industry analysts are currently looking for. If business returns to levels near the 1996 peak by late 1997, it is hard to say that they will then be set to explode into the year 2000. To have an large up cycle in a partially cyclical business, you need a large down cycle to set it up. Ironically, those who claimed in 1996 that the business had actually stabilized to become a more mature growth business with reasonable year-to-year variations in retrospect were not actually that far off, at least as it relates to revenues.

At $92 and 29.9 times the company's annualized revenues from this quarter, even as estimates for fiscal 1998 are raised tomorrow, it may become increasingly hard to put the 28 times earnings multiple on peak earnings that Lehman Brothers is looking for. If the business grows sales around 15% to 25% overall, it would easily double or triple the growth rate of the best classical capital equipment businesses. Seeing a multiple of 20 to 25 on 1999 earnings of $5.00 per share would give an investor $100 to $125 over the next two years, or about market growth. At some point, Applied has to discount the peak earnings. All that said, investors should probably keep in mind that this is exactly what was written in this space back in November and January when Applied was in the $50 to $60 range. As the share price will tell you, this has has been quite wrong over the past half year. However, considering whether or not Applied will have the huge up cycle anticipated given the lack of a significant down cycle may be worthwhile.

[Applied Materials Message Board]

CONFERENCE CALLS

EMPLOYEE SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESOL)") else Response.Write("(Nasdaq: ESOL)") end if %>
(800) 869-6600 (password: focus) -- replay through 8/13 @ 3:00 pm EDT

HADCO CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HDCO)") else Response.Write("(Nasdaq: HDCO)") end if %>
(800) 633-8284 (reservation #288 3483) -- replay through 8/13 @ 7:00 pm

SARA LEE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLE)") else Response.Write("(NYSE: SLE)") end if %>
(402) 220-3124 -- replay through 8/14

CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>
(800) 633-8284 (code: 2875731) -- replay through 8/15

APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %>
(800) 642-1687 (code: 522530) -- replay from 8:30 pm EDT through 8/14 @ 8:30 pm EDT

DOLLAR GENERAL CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:DG)") else Response.Write("(NYSE:DG)") end if %>
(402) 220-1032 -- replay through 8/15 @ 6:00 pm EDT

FOUNDATION HEALTH SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FHS)") else Response.Write("(NYSE: FHS)") end if %>
(402) 220-0104 -- replay through 8/15

08/13/97 (Wednesday)
AUTOMATIC DATA PROCESSING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AUD)") else Response.Write("(NYSE: AUD)") end if %>
(800) 633-8284 (reservation # 2748489) -- replay from 5:00 pm EDT

08/13/97 (Wednesday)
SEAGRAM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VO)") else Response.Write("(NYSE: VO)") end if %>
(800) 558-5253 (reservation # 601492) -- replay through 8/15

08/13/97 (Wednesday)
ASPEN TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AZPN)") else Response.Write("(Nasdaq: AZPN)") end if %>
(402) 220-0112 -- replay from 8:00 pm EDT through 8/14 @ 8:00 pm EDT

THIS WEEK'S CONFERENCE CALL SYNOPSES

RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> Call
AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> Call
APPLE and MICROSOFT Call

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ANOTHER FOOLISH THING
Take the Fool Quiz

Tired of taking all those quizzes in Redbook magazine? Bored with the Sunday crossword puzzle? Then try taking the Fool Quiz! Penned by the Fool formerly known as MF Swagman, this is one of our most fun primers -- chock full of entertaining questions and situations where you have to make an investment decision. And no, you don't have to order the teacher's guide separately! The detailed answers are included. Learn all about investing from the stories of Wenceslas Widgets and Mercutio's Church Doors. Make sure you know when to buy, when to short, and when to sell. Find out what CANSLIM and the PEG and the PPP really are. A masterful Foolish overview, and as interactive as printed paper can get! The Fool Quiz is available in FoolMart (at keyword: FoolMart or at our website (http://www.fool.com).

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