DJIA: 8675.75 +32.63 (+0.38%) S&P 500: 1068.47 +4.22 (+0.40%) Nasdaq: 1756.85 +8.34 (+0.48%) Value Line ndx 954.17 +3.77 (+0.40%) 30-Year Bond 102 19/32 +9/32 5.94% Yield
Weyerhaeuser Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WY)") else Response.Write("(NYSE: WY)") end if %> rose $3 3/8 to $55 3/4, moving higher
with other paper companies following Monday's announced merger between newsprint
maker Bowater Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BOW)") else Response.Write("(NYSE: BOW)") end if %> and Canada's Avenor Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANR)") else Response.Write("(NYSE: ANR)") end if %>. Contributing to the overall rise was renewed positive sentiment about
the industry in the wake of a recent American Forest & Paper Association
conference. Mead Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEA)") else Response.Write("(NYSE: MEA)") end if %> gained $1 1/4 to $37;
Georgia-Pacific Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GP)") else Response.Write("(NYSE: GP)") end if %> rose $2 9/16 to $68 1/16; Champion
International Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHA)") else Response.Write("(NYSE: CHA)") end if %> climbed $1 3/4 to $54 13/16; and
International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %> moved $1 7/16 higher to $51 7/8. Paper
demand remains strong while the overall supply has stabilized, permitting
the companies to shrug off the recent slowdown in sales to Asia. Also, falling
pulp prices are helping to keep costs in line. But one major pulp producer,
Stone Container Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STO)") else Response.Write("(NYSE: STO)") end if %>, feels that prices for the input
have hit rock-bottom and is raising its price for certain pulps earmarked
for Japan by 67%. That news pushed Stone Container $1 higher to $13 1/4.
PC maker Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> added $2 1/16 to $26 1/8 after
striking yet another deal with the Dark Side, software juggernaut Microsoft
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>. This time around the two companies agreed to combine
their Macintosh Java technologies. Microsoft, in addition to making Java
a more powerful tool for writing Windows applications, will work with Apple
to make the language more powerful for writing native Macintosh applications.
This will allow Apple to take advantage of the growing pool of Java developers
and potentially beef-up applications written for Apple's operating system.
This move follows Microsoft's
recent
commitment to launch its Office 98 software on the Mac using technologies
not available in the Windows version and its decision to make its Internet
Explorer browser available to Mac users. Since the beginning of the year,
Apple's stock has led all of the PC makers, rising roughly 50%. Also helping
Apple shares today was an announcement by computer retailer CompUSA Inc.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %> that it will launch Apple "store within a store" environments
in all of its 149 Superstores this weekend.
Advanced Fibre Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AFCI)") else Response.Write("(Nasdaq: AFCI)") end if %> gained $4 1/2 to $34
3/4 after the local loop telecom switching products manufacturer was reiterated
a "strong buy" at Hambrecht & Quist yesterday. Analyst Joe Noel said
the company is not experiencing seasonality in the quarter, which contrasts
with other telecom equipment companies that have gotten crushed by lumpy
telecom carrier ordering patterns. Noel expects the company to generate $82.2
million in revenues and EPS of $0.14 in the first quarter, and he thinks
that there may be upside to Q2 and Q3 per-share earnings. Further, international
sales are shaping up better than expected, which lends further leverage to
the company's earnings.
It was payday for benefit and payroll outsourcing firm Administaff Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASF)") else Response.Write("(NYSE: ASF)") end if %> as its stock rose $2 1/2 to $42 1/4. The company said it has completed its previously announced alliance with financial services giant American Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %> to provide personnel management services to Amex's small business customer base. As part of the agreement, Amex bought 693,126 Administaff shares and warrants for an additional 2 million shares for $17.7 million. Amex also received the right to plop one of its executives on the Administaff board. The deal is a coup for Administaff, which provides comprehensive personnel management services for more than 1,900 small- and medium-sized business clients. Given Amex's well-established corporate credit card, travel, and tax services for small businesses, the deal will allow Administaff to cross-promote its own products to a whole new set of customers.
QUICK TAKES: Computer Sciences Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSC)") else Response.Write("(NYSE: CSC)") end if %> jumped $4
11/16 to $101 5/8 after the computer services firm said it had received an
$11 million order to provide software to the U.S. Marine Corps... Internet
software developer Verity Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VRTY)") else Response.Write("(Nasdaq: VRTY)") end if %> rose $1 11/16 to $6
7/8 after the company sued IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> unit Lotus Development
Corp. for allegedly misappropriating trade secrets under a 1992 software
licensing agreement... Document management software developer FileNET
Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FILE)") else Response.Write("(Nasdaq: FILE)") end if %> leapt $3 23/32 to $38 1/8 on announcing a new series
of global marketing, development, and support programs with Microsoft
Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>... Power line filter and telecommunications connector
maker Corecom Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CORC)") else Response.Write("(Nasdaq: CORC)") end if %> picked up $2 5/8 to $12 3/8 after
agreeing to be acquired by privately owned Communications Instruments Inc.
for $51.2 million in cash, or $13 per share.
Fisher Scientific International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FSH)") else Response.Write("(NYSE: FSH)") end if %> gained $5 7/16 to $60
3/16 after the laboratory products company declared a five-for-one stock
split yesterday... Dental insurance plan operator United Dental Care
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UDCI)") else Response.Write("(Nasdaq: UDCI)") end if %> rose $1 to $17 15/16 after agreeing to be acquired by
insurer Protective Life Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PL)") else Response.Write("(NYSE: PL)") end if %> in a deal valued at $175
million... Investment advisor White River Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WHRC)") else Response.Write("(Nasdaq: WHRC)") end if %> added
$4 5/8 to $84 7/8 after financial services holding company Fund American
Enterprises Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FFC)") else Response.Write("(NYSE: FFC)") end if %> offered to buy the 79.2% stake in the
company that it does not already own at a price of $85 per share in cash...
New Holland N.V. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NH)") else Response.Write("(NYSE: NH)") end if %> drove $2 1/8 higher to $27 7/8 after the
manufacturer of construction and agricultural equipment was upgraded to "buy"
from "market perform" by Donaldson, Lufkin & Jenrette.
Physician practice management form Medical Manager Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MMGR)") else Response.Write("(Nasdaq: MMGR)") end if %> rose $2 5/16 to $27 15/16 after BT Alex. Brown started coverage of
the company with a "strong buy" rating... AstroPower Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APWR)") else Response.Write("(Nasdaq: APWR)") end if %> lifted off for a $7/8 gain to $9 1/8 after the maker of photovoltaic
solar cells was rated a "strong buy" in initial coverage by First Albany...
Fiberoptic communications equipment firm Ciena Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %>
tacked on $2 1/4 to $43 1/4 after J.P. Morgan started coverage of the company
with a "buy" rating... Silicon carbide-based semiconductor devices maker
Cree Research <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREE)") else Response.Write("(Nasdaq: CREE)") end if %> moved up $2 3/4 to $18. Former Fidelity
Magellan fund manager Jeffrey Vinik said in a federal filing today that his
investment group sold 233,900 of the company shares, cutting its stake to
3.8% from 5.6%.
The American depositary shares of Spanish telecom Telefonica de Espana
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TEF)") else Response.Write("(NYSE: TEF)") end if %> traded $5 15/16 higher to $116 7/16 after announcing yesterday
a global alliance with WorldCom Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> and MCI
Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %>... Busline Greyhound Lines <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BUS)") else Response.Write("(AMEX: BUS)") end if %> motored ahead $3/8 to $5 3/8 after announcing that ticket sales in February
increased 9% over the same period a year ago... Thin client/server system
software developer Citrix Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTXS)") else Response.Write("(Nasdaq: CTXS)") end if %> gained $4 1/8 to
$44 3/4 after signing licensing agreements with six hardware and software
manufacturers, including Philips Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHG)") else Response.Write("(NYSE: PHG)") end if %> and a unit
of Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>... Mortgage finance company BNC
Mortgage <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BNCM)") else Response.Write("(Nasdaq: BNCM)") end if %> jumped $2 1/8 to $11 5/8 after selling 3.2
million shares in an initial public offering at $9.50 per share.
Jefferson Smurfit Corp.<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JJSC)") else Response.Write("(Nasdaq: JJSC)") end if %> advanced $1 7/16 to $17 3/4
after Standard & Poor's rated the firm's $1.3 billion credit facility
"double-B" and said the paperboard and packaging company's outlook is "stable"...
Equipment leasing company Newcourt Credit Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCT)") else Response.Write("(NYSE: NCT)") end if %> jumped
$3 1/2 to $52 1/8 after inking a five-year deal to finance the equipment
sales of Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>... Retailer Claire's Stores
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CLE)") else Response.Write("(NYSE: CLE)") end if %> rang up $1 1/16 to $22 after announcing that it will acquire
specialty teen apparel chain Lux Corp. for about $43 million in stock...
Healthcare products company Q-Med Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QEKG)") else Response.Write("(Nasdaq: QEKG)") end if %> shot up $1 1/8
to $6 7/8 after the company agreed to terminate its strategic alliance with
SmithKline Beecham <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBH)") else Response.Write("(NYSE: SBH)") end if %>. Q-Med will retain all future revenue
from managed care contracts produced by the alliance.
Cereal bar and fruit snack maker Grist Mill Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GRST)") else Response.Write("(Nasdaq: GRST)") end if %> ground
out a $2 1/32 gain to $14 9/32 after agreeing to be acquired by
International Home Foods <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IHF)") else Response.Write("(NYSE: IHF)") end if %> for about $105 million in cash,
or $14.50 per share... Genzyme Tissue Repair <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZL)") else Response.Write("(Nasdaq: GENZL)") end if %>, a separately
traded division of biological products company Genzyme Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %>, gained $11/16 to $8 7/8 after announcing that a group of orthopedic
surgeons said 86% of patients treated with the firm's product to repair damaged
knee cartilage showed improvement two years after treatment... Hearing
improvement technologies company Symphonix Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMPX)") else Response.Write("(Nasdaq: SMPX)") end if %>
was lifted $7/8 to $15 3/4 after its Vibrant semi-implantable hearing device
was approved for sale in the 15 European Union member countries.
Specialty imaging products maker Nashua Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NSH)") else Response.Write("(NYSE: NSH)") end if %> gained $1
1/4 to $14 1/4 on reporting a Q4 operating loss of $0.19 per share compared
to earnings of $0.08 per share a year ago. The company also said it will
sell most of its photofinishing business to an unspecified privately owned
U.S. firm for $52.5 million... Terex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TEX)") else Response.Write("(NYSE: TEX)") end if %> increased $1
5/8 to $24 1/4 after Standard & Poor's raised the credit rating of the
maker of earth movers and telescopic mobile cranes to "single B plus" from
"single B minus" and took the company off of CreditWatch... Price
Communications Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: PR)") else Response.Write("(AMEX: PR)") end if %> rose $1 to $12 after the communications
company announced a five-for-four stock split yesterday... Arts and crafts
retailer Michaels Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MIKE)") else Response.Write("(Nasdaq: MIKE)") end if %> advanced $2 3/4 to $39 1/2
after reporting Q4 EPS of $0.79, which topped the First Call mean estimate
of $0.73.
Yesterday it was cigar maker Consolidated Cigar Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CIG)") else Response.Write("(NYSE: CIG)") end if %>
that put a damper on Swisher International Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWR)") else Response.Write("(NYSE: SWR)") end if %>. Today
Swisher returned the favor, sliding an additional $1 5/8 to $13 1/8 on announcing
after the bell yesterday that it expects first quarter sales and earnings
to fall below expectations. The maker of cigars and smokeless tobacco products
blamed the shortfall on excess wholesale cigar inventories and a moderation
in retail sales growth. This follows Consolidated's warning yesterday that
its Q1 earnings will also show little or no growth compared with a year earlier.
The bad news led Morgan Stanley Dean Witter to downgrade both Swisher and
Consolidated to "neutral" from "strong buy." Consolidated was stubbed out
$2 to $19 today, and General Cigar Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MPP)") else Response.Write("(NYSE: MPP)") end if %> was smoked
for a $2 1/16 loss to $15 1/4.
BetzDearborn Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTL)") else Response.Write("(NYSE: BTL)") end if %> dropped $3 5/16 to $56 7/16 after the
water and chemicals treatment company announced plans to issue $400 million
of securities that may include debt securities, common stock, preferred stock,
and warrants. The company also announced that January and February sales
were softer than expected due to weather conditions, including an ice storm
in Quebec and extremely mild winter conditions in the U.S., as well as the
economic turmoil in Asia. Blame it on El Nino and the "Asian Contagion."
Meanwhile, Standard & Poor's assigned the company a corporate credit
rating of triple-'B' with a positive outlook, and J.P. Morgan cut its rating
on the company to "long-term buy" from "buy."
QUICK CUTS: THQ Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THQI)") else Response.Write("(Nasdaq: THQI)") end if %> plunged $7 15/16 to $24
1/2 after announcing late yesterday that its licensing agreement with WCW
World Championship Wrestling will not be renewed... Apparel and footwear
retailer Phillips-Van Heusen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PVH)") else Response.Write("(NYSE: PVH)") end if %>, whose brands include Bass
and Izod, lost $9/16 to $11 13/16 after reporting fourth quarter earnings
of $0.20 (before charges) versus $0.29 in the year-earlier period. During
the quarter, the company experienced a substantial drop in sales in its footwear
business and had higher advertising expenses.
Wireless communication systems equipment supplier Andrew Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANDW)") else Response.Write("(Nasdaq: ANDW)") end if %> sank $2 1/2 to $22 1/4 after
announcing
after the bell yesterday that it anticipates second quarter earnings to fall
short of analysts' expectations... International telecommunications concern
Telegroup Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TGRP)") else Response.Write("(Nasdaq: TGRP)") end if %> was disconnected for $2 9/16 to $15
after announcing late yesterday a fourth quarter loss of $0.35 per share
before charges compared with a loss of $0.08 in Q4 1996... PSW
Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSWT)") else Response.Write("(Nasdaq: PSWT)") end if %>, which provides software services to the
R&D organizations of technology companies, was knocked down $1 1/8 to
$6 7/8 after announcing late yesterday that its first quarter revenue and
earnings will fall below expectations due to an anticipated $645,000 project
milestone payment that the company will not receive.
Mexican industrial conglomerate Desc SA de CV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DES)") else Response.Write("(NYSE: DES)") end if %> slid $1
1/2 to $28 3/4 after announcing it expects first quarter operating income
to fall below the year-earlier period. Slower-than-anticipated sales growth
in its auto parts division, price cuts for petrochemical products, and
lower-than-expected sales in its food and consumer products division all
have contributed to slower earnings growth... Benton Oil & Gas
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BNO)") else Response.Write("(NYSE: BNO)") end if %> sank $15/16 to $10 3/4 after it was cut to a "hold" from "buy"
by CIBC Oppenheimer. The oil and gas producer today announced that its proved
oil reserves as of December 31 were an estimated 120.8 million barrels of
oil equivalent (BOE), 10% higher than the 109.6 million BOE reported at the
end of 1996.
Rock-Tenn Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RKT)") else Response.Write("(NYSE: RKT)") end if %> tanked $2 3/4 to $16 15/16 after announcing
late yesterday that it expects its sales and earnings will be negatively
impacted through the end of 1998. The paperboard manufacturer blamed the
projected shortfall on reduced demand for the company's recycled paperboard,
as well as lower volume and certain operating inefficiencies within the Waldorf
folding carton operations acquired in January 1997... Kyoto, Japan-based
Kyocera Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KYO)") else Response.Write("(NYSE: KYO)") end if %> tumbled $4 to $100 on concern that its
struggling mobile phone business, which makes up a fourth of the company's
sales, could depress earnings. The company's main business of making ceramic
semiconductor packaging has suffered since Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> opted
to switch to resin packaging for many of its computer chips.
Let's Talk Cellular & Wireless <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LTCW)") else Response.Write("(Nasdaq: LTCW)") end if %> fell $7/8 to $12
1/2 after the specialty retailer of cellular and wireless products and services
reported second quarter earnings of $0.12 a share before charges versus $0.14
for the same period last year... Internet companies ended their rally today
after The Wall Street Journal's "Heard on the Street" column reported
that "lots" of hedge fund managers are shorting Internet stocks, "betting
on a decline in their price because of the stratospheric valuations they
have taken on lately." Search engines Excite Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> fell
$4 7/8 and $51; Infoseek Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> sank $2 3/16 to $18
9/16; Yahoo! Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> fell $3 1/4 to $84 1/4; and Lycos
Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> lost $3 1/16 to $42 1/4. Online bookstore
Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> dropped $3 15/32 to $79 5/8; Cyber-auctioneer
Onsale Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONSL)") else Response.Write("(Nasdaq: ONSL)") end if %> sold off for $1 1/2 to $33 1/2; and online
travel agency Preview Travel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTVL)") else Response.Write("(Nasdaq: PTVL)") end if %> slid $1 1/8 to $26 1/8.
Call-center software and services provider Davox Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DAVX)") else Response.Write("(Nasdaq: DAVX)") end if %> fell $2 25/32 to $30 27/32 after announcing that it will acquire closely held AnswerSoft Inc. for about $85.4 million in stock.
Speech recognition software company Lernout & Hauspie Speech
Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LHSPF)") else Response.Write("(Nasdaq: LHSPF)") end if %> fell $10 3/4 to $81 3/4 after Paribas Capital
Markets yesterday released a research note saying "we've seen a lot of product
announcements and we haven't seen so many products yet," according to Bloomberg
News.
RATINGS MOVERS: Nikko Research Center Ltd. downgraded Toyota Motor
Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TOYOY)") else Response.Write("(Nasdaq: TOYOY)") end if %> to a "2-'' rating from its previous "1,'' or basically
to "underperform by 10% or less" from "outperform," driving the Japanese
auto maker down $1 15/16 to $52... Samsonite Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SAMC)") else Response.Write("(Nasdaq: SAMC)") end if %>
slipped $1 3/4 to $35 1/4 after Salomon Smith Barney lowered its rating on
the luggage maker to "outperform" from "buy"... Information technology staffing
services supplier Syntel Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYNT)") else Response.Write("(Nasdaq: SYNT)") end if %> dropped $2 3/8 to $36
3/8 after Prudential Securities cut its rating on the company to "hold" from
"buy"... Mortgage insurance provider MGIC Investment Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MTG)") else Response.Write("(NYSE: MTG)") end if %> lost $3 9/16 to $67 5/8 after Morgan Stanley Dean Witter lowered its
rating on the company to "neutral" from "outperform."
FOOL
ON THE HILL
An Investment Opinion
by Louis Corrigan
Computer Learning De-Centered
With corporations desperate for skilled information technology workers,
Computer Learning Centers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLCX)") else Response.Write("(Nasdaq: CLCX)") end if %> has been doing gangbuster
business. Based in Fairfax, Virginia, the company now operates 25 centers
in the U.S. plus the newly acquired Delta College in Montreal, where it offers
courses on client/server systems and applications programming, networking
administration, help desk operations, and tech support. Students pay about
$13,000 a year in tuition to attain the skills they hope will connect them
to a solid career path. The company's growth has reflected this strong demand,
with revenues for the first nine months of the year up 50% to $68.7 million
and earnings per share keeping pace, up 52% to $0.41.
Investors have loved the story, sending Computer Learning's stock from a
split-adjusted $3 a share two years ago to Tuesday's all-time high of $39
3/8. Short-sellers also liked the story. At its high, the company was valued
at 74 times its trailing twelve-month earnings and 66 times its third quarter
earnings run-rate. Even adding revenues from recent acquisitions, Computer
Learning has trailing sales of just $100 million. At its peak, then, it sported
a price-to-sales ratio over seven. Even for a company with attractive 10%
profit margins, that was pricey.
So short-sellers piled on to the tune of 4 million shares, a hefty amount
considering that company insiders own around 30% of the stock, leaving just
11 million shares in the float. As the stock kept rising, the shorts went
on the attack.
Computer Learning's business depends on two things: providing students with
the skills to land good jobs and making sure its students' loan default rate
remains below 25% so its centers remain eligible for federal aid programs.
In theory, if the company does the former, it should have no problem with
the latter. The shorts have questioned the company's performance in both
areas, and as is common, have worked to get the media to run with their arguments
and to get government bodies to take corrective actions. Washington Post
reporter Jerry Knight presented the shorts' story in a Monday
feature
article.
Knight interviewed a dozen unhappy students at the firm's campus in Alexandria,
Virginia. They said they had been forced to use dated equipment ("We've never
seen a Pentium machine or Windows 95," said one student) and endure unqualified
instructors. The Post also indicated that Fahnestock & Co. senior
VP Michelle McDonough, who is short the stock, sent undercover agents to
take admissions tests at eight schools in six states. McDonough claims that
even those who badly failed the tests were granted admission and were encouraged
to take out loans. The shorts have also argued that Computer Learning has
only avoided running afoul of the default rules by encouraging students to
apply for deferments. Short-sellers have reportedly lobbied the Department
of Education and congressional staffers to investigate this practice.
This last issue is a touchy one for Computer Learning because in September
1996 its Chicago center temporarily lost its access to federal loan programs
because the Education Dept. found that the center's students were defaulting
on them in high numbers. The Chicago center was reinstated last year. Still,
new trouble on that front could be a major obstacle to the company's growth
given that 72% of students rely on these programs.
CEO Reid Bechtle has said that given that Computer Learning's centers have
over 11,000 students, it's not hard to find some unhappy ones. He told the
Post that the company's teachers are all fully accredited; the equipment
students work on is the stuff that companies need help fixing; and default
rates have fallen from 21% in 1993 to 16% in 1995, the last year for which
there's available data. The shorts, he has said, are just trying to stir
up trouble.
"Every dollar the stock goes up is $4 million the shorts take out of their
bank accounts," Bechtle reportedly told the Post. "We've already gone
through Hiroshima and its time for Nagasaki," he said, apparently hoping
to crush critics through some sort of short squeeze.
Monday's story took a major turn
yesterday.
The Illinois Attorney General charged the company with fraud for the way
its Schaumburg, Illinois center allegedly enticed students to attend by
misrepresenting the ease with which credits could be transferred to other
colleges and the likelihood of landing top jobs with lofty starting salaries.
The state also charged that the company understated class sizes and failed
to provide adequate computers, books, and classroom equipment. Illinois is
seeking restitution, a $50,000 civil penalty, and $50,000 in damages for
each of the eight allegations. "We intend to vigorously defend ourselves
against these allegations," Bechtle responded yesterday in a press release.
Yet after hitting its all-time high yesterday before this news surfaced,
the stock fell $7 1/4 to $29 5/8 before its trading was halted. Today, Computer
Learning stock fell another $9 23/32 to close at $19 23/32.
Analyst estimates have risen steadily throughout the past year, and the whispers
suggest the company can easily beat the fourth quarter's $0.14 per share
estimate on the way to at least $0.73 next year. That puts the stock at 27
times forward estimates, near its projected 30% long-term growth rate. While
these new troubles and the ongoing difficulty of finding qualified instructors
may pose problems for the company, others argue that Computer Learning should
trade at a premium to its growth rate due to the federally regulated moat
around its business. All schools of higher education depend on federal loan
money, but Uncle Sam requires a school to be in business for at least two
years before its students can qualify for loans. That makes it tough for
competitors to enter the field. Plus, the Chicago facility accounts for just
an eighth of the company's revenues, so the stock's two-day haircut looks
awfully severe.
Still, shareholders would do well to operate under the
where-there's-smoke-there-may-be-fire premise when their company comes under
the gun of short-sellers. Wall Street analysts have become a harried lot,
often more interested in selling their customers on a stock or cozying up
to a firm for investment banking business than in doing the necessary work
to produce strong research. This provides an opportunity for short-sellers,
who are often relentless in how deeply they'll dig to find out how a company
is really doing. Plus, it's almost always a red flag when shorts begin to
register in a CEO's public comments to the media or, even worse, in a company's
press releases. Executives who protest too much may know their company's
performance alone can't silence the critics.
Whether the recent action in Computer Learning shares offers a buying opportunity
or a wake-up call, it at least reinforces an important lesson. When a stock
trades at high multiples relative to current and future earnings and provokes
massive short interest, investors need to do diligent research. After all,
short squeezes can often turn into long squeezes.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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