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HEROES

Several semiconductor equipment makers were up today as Goldman Sachs said the sector may see higher earnings in calendar year 1999 even though the near-term outlook for the industry is "uncertain." Power conversion and control systems developer Advanced Energy Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AEIS)") else Response.Write("(Nasdaq: AEIS)") end if %> rose $15/16 to $14 5/8, PRI Automation <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRIA)") else Response.Write("(Nasdaq: PRIA)") end if %> gained $31/32 to $28 1/4, Novellus Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> advanced $1/2 to $43 7/8, Lam Research <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LRCX)") else Response.Write("(Nasdaq: LRCX)") end if %> added $7/16 to $27 5/16, and KLA-Tencor Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> tacked on $1 7/16 to $38 7/16 after all were assigned "market outperform" ratings. Ion beam etching products manufacturer Veeco Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VECO)") else Response.Write("(Nasdaq: VECO)") end if %> picked up $1 13/32 to $33 13/16 after being started with a "market perform" rating. Applied Materials <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> jumped $1 1/8 to $35 1/4 and Teradyne Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TER)") else Response.Write("(NYSE: TER)") end if %> gained $1 9/16 to $39 9/16 after both stocks were placed on Goldman's "recommended list."

Homebuilder and mortgage finance company Lennar Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEN)") else Response.Write("(NYSE: LEN)") end if %> gained $1 7/8 to $32 7/8 after reporting fiscal Q1 EPS of $0.30, a 50% increase from a year ago and a nickel better than the First Call mean estimate. The company said the higher earnings were due to a 20% rise in homebuilding deliveries and an increase in homebuilding margins. Rising home prices also helped results, as the company said the average selling price of homes it delivered rose 10% to $193,000 during the period. Part of this rise can be attributed to an increased emphasis on the California building market, which has higher average new home prices than other states. Lennar is also profiting from a housing market that just won't quit. Last week, the Commerce Department said new home starts in February climbed 6% from January levels to an annual rate of 1.636 million units -- the highest figure in over a decade. And with 30-year mortgage rates hovering close to 7%, demand for new homes will only increase in the months ahead.

QUICK TAKES: Software giant Microsoft Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> rose $3 7/8 to $88 13/16 after the company said it expects fiscal Q3 EPS of $0.48, $0.04 higher than the First Call mean estimate. The company's CFO expects EPS to trail off in following quarters, although fiscal Q4 earnings are projected to be higher than the current Street estimate of $0.43... Long-distance phone and Internet access provider IDT Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IDTC)") else Response.Write("(Nasdaq: IDTC)") end if %> gained $1 5/16 to $38 1/2 after signing an agreement with Internet search engine Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> to provide IDT's Internet phone service to users of Yahoo's People Search white pages directory... Syntel Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYNT)") else Response.Write("(Nasdaq: SYNT)") end if %> picked up $2 3/16 to $37 7/16 after the information technology consultant and Year 2000 problem-solver announced a 3-for-2 stock split effective April 22.

CPS Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SYS)") else Response.Write("(AMEX: SYS)") end if %> climbed $1 3/8 to $5 3/8 on its first day of trading. The Dallas-based developer of software for appraising and assessing property taxes sold 1.9 million shares in an initial public offering at a price of $4 per share, which was below the expected selling range of $5 to $6 per share... Automated manufacturing systems developer Gerber Scientific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GRB)") else Response.Write("(NYSE: GRB)") end if %> added $1 7/16 to $23 11/16 after the company announced a cash tender offer for British sign-making equipment firm Spandex PLC yesterday... Positron Fiber Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PFSCF)") else Response.Write("(Nasdaq: PFSCF)") end if %>, which develops broadband access network systems for local telecommunications carriers, rose $31/32 to $7 11/32 after broadband communications company Cox Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COX)") else Response.Write("(NYSE: COX)") end if %> agreed to use Positron as its sole supplier of broadband access systems.

CyberShop <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYSP)") else Response.Write("(Nasdaq: CYSP)") end if %> keeps going and going. The online retailer added another $15/16 to $11 1/4 today after selling 2.8 million shares in an initial public offering on Monday at $6.50 per share... Flat panel display manufacturer PixTech Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PIXT)") else Response.Write("(Nasdaq: PIXT)") end if %> moved $9/16 higher to $5 3/8 after naming Dieter Mezger as its new president... Healthcare information management firm MedPlus Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MEDP)") else Response.Write("(Nasdaq: MEDP)") end if %> rose $1 1/8 to $8 3/4 after announcing that it has recently repurchased 24,900 shares under its plan to buyback up to 500,000 shares of its stock "as market conditions warrant"... Disease detection products maker Cholestech Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTEC)") else Response.Write("(Nasdaq: CTEC)") end if %> gained $2 3/8 to $16 after drug store operator Walgreen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAG)") else Response.Write("(NYSE: WAG)") end if %> agreed to use the firm's cholesterol screening product at nearly 600 Walgreen stores.

Intuit Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %>, maker of Quicken financial management software, increased $2 5/32 to $49 after agreeing to form a venture with BankAmerica Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %>, Tele-Communications Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %>, and @Home Network <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> to provide financial planning and management tools over cable TV-based Internet connections. @Home rose $1 1/8 to $34 1/16 on the news... NetSpeak Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSPK)") else Response.Write("(Nasdaq: NSPK)") end if %> gained $15/16 to $31 after semiconductor and wireless phone maker Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> started its previously announced cash tender offer for 3 million of the Internet phone service provider's shares at a price of $30 per share... Lottery and gaming equipment maker Powerhouse Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PWRH)") else Response.Write("(Nasdaq: PWRH)") end if %> rose $1 1/16 to $13 11/16 and footwear retailer Shoe Pavilion <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHOE)") else Response.Write("(Nasdaq: SHOE)") end if %> tacked on $1 7/32 to $9 3/32 after an analyst made positive comments about both firms in an interview with CNBC.

Sterile Recoveries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STRC)") else Response.Write("(Nasdaq: STRC)") end if %> moved $7/8 higher to $16 3/4 after Raymond James upgraded the maker of disposable medical products to "buy" from "accumulate"... Lyondell Petrochemical Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LYO)") else Response.Write("(NYSE: LYO)") end if %> picked up $3 3/16 to $33 1/2 after Goldman Sachs raised its rating on the petrochemical and refining firm to "recommended list" from "trading buy"... Shares of clothing designer Donna Karan International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DK)") else Response.Write("(NYSE: DK)") end if %> traded $1 higher to $13 1/2 after Merrill Lynch raised its near-term rating to "accumulate" from "neutral"... Applied Power <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: APW)") else Response.Write("(NYSE: APW)") end if %> increased $1 9/16 to $37 9/16 after Credit Suisse First Boston started coverage of the provider of tools and equipment with a "buy" rating.

Formula Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORTY)") else Response.Write("(Nasdaq: FORTY)") end if %> moved $1 7/8 higher to $38 1/2 after BancAmerica Robertson Stephens started coverage of the software consulting firm with a "buy" rating... Cotelligent Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CGZ)") else Response.Write("(NYSE: CGZ)") end if %> added $3 1/16 to $27 13/16 as the software services and consulting firm filed a registration statement with the SEC to sell 3 million common shares in a public offering... Laser eye surgery technology company VISX Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VISX)") else Response.Write("(Nasdaq: VISX)") end if %> bounced back $2 3/8 to $24 7/8 after falling yesterday on news that the Federal Trade Commission has charged the company and Summit Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEAM)") else Response.Write("(Nasdaq: BEAM)") end if %> with violating antitrust statutes. VISX's CEO said the allegations are "unfounded" and concern only five of the company's 36 U.S. technology patents.

Genesis Microchip <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GNSSF)") else Response.Write("(Nasdaq: GNSSF)") end if %> rose $11/16 to $16 7/8 after the provider of digital image manipulation integrated circuits solutions reported fiscal Q3 EPS of $0.13 compared with a loss of $0.11 a year ago... Physician Reliance Network <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHYN)") else Response.Write("(Nasdaq: PHYN)") end if %> was lifted $1 1/16 to $14 7/16 after Salomon Smith Barney upgraded the medical practice management company to "buy" from "outperform"... Real estate developer LNR Property Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LNR)") else Response.Write("(NYSE: LNR)") end if %> moved $15/16 higher to $25 9/16 after BT Alex. Brown began coverage of the company with a "buy" rating... Enterprise software developer BroadVision Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BVSN)") else Response.Write("(Nasdaq: BVSN)") end if %> gained $1 7/8 to $18 5/8. The company sold a total of 3,039,000 shares in a public offering yesterday at a price of $16 5/8 per share, raising $47 million in proceeds after fees.

GOATS

Toymakers Hasbro Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HAS)") else Response.Write("(AMEX: HAS)") end if %> and Mattel Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAT)") else Response.Write("(NYSE: MAT)") end if %> were trounced today following separate earnings warnings because of reduced orders from toy retailing giant Toys "R" Us <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOY)") else Response.Write("(NYSE: TOY)") end if %>. Hasbro, which lost $3 5/16 to $35 1/16, announced that its first quarter earnings could be as low as $0.05 per share compared with $0.20 in the year-earlier period and the First Call mean estimate of $0.19. First quarter sales could be about 15% below the $555.8 million reported in Q1 1997. Hasbro anticipates the problem will continue into the second quarter, but the company still expects to achieve double-digit EPS growth for the year. Mattel, which slid $2 9/16 to $40 7/8, expects its Q1 sales to be "relatively flat" but its earnings to increase. Toys "R" Us is reducing inventory to cut warehouse and distribution costs so it can better compete with discount retailers such as Wal-Mart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %> and Kmart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMT)") else Response.Write("(NYSE: KMT)") end if %>. Known for its tight cost controls, Wal-Mart has 15.2% of the toy market, not far behind the 19.1% held by Toys "R" Us, the biggest toy retailer. While Toys "R" Us' main business is toys, Wal-Mart can afford to have lower gross margins (roughly 20% to 22% versus 25% for toy retailers) and use discounted toys as a promotional tool to draw customers who might end up buying other goods.

3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> dropped $1 3/4 to $35 1/2 after the maker of modems, network interface cards, and networking products reported third quarter earnings late yesterday of $0.02 per share before a merger-related credit of $0.02 per share associated with the company's acquisition of U.S. Robotics last June. (The First Call mean estimate was for $0.14). The company stated it has confidence that operating performance will now improve and overall costs will be cut dramatically now that it has reached its channel inventory goals (in terms of the number of weeks of inventory each business segment carries in the channel). The company has been plagued by cutthroat price competition in its systems business, a reluctance among consumers to purchase 56K modems before the February modem standard came in (in favor of the lower margin vl34), and a stock price that may look fairly valued at 20 times estimated 1999 EPS of $1.75.

QUICK CUTS: Pharmaceutical company Eli Lilly & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LLY)") else Response.Write("(NYSE: LLY)") end if %> shed $1 1/4 to $61 1/4 after Salomon Smith Barney downgraded its rating on the maker of Prozac to "outperform" from "buy." Analyst Christina Heuer said the launch of the company's osteoporosis drug Evista has been disappointing, and she lowered her 1998 sales estimate for the drug to $180 million from $375 million, according to Reuters... Computer data storage products manufacturer Iomega Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> slipped $3/8 to $7 on announcing the resignation of CEO Kim Edwards, just a week after the company pre-announced flat year-over-year revenue growth in the first quarter as well as a loss due to an increase in marketing expenditures... Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> dipped $27/32 to $27 5/32 after yesterday's climb as image technology developer Imatec Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMEC)") else Response.Write("(Nasdaq: IMEC)") end if %> announced it had filed suit against the computer maker alleging infringement of three patents and seeking $1.1 billion in damages.

Cell Therapeutics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTIC)") else Response.Write("(Nasdaq: CTIC)") end if %> was hammered for $5 5/16 to $4 7/16 after the small molecule drug developer announced disappointing preliminary results for its first Phase III clinical trial of lisofylline in patients with hematological malignancies undergoing bone marrow transplants from HLA-identical sibling donors... Point-of-sale payment processing solutions supplier Hypercom Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HYC)") else Response.Write("(NYSE: HYC)") end if %> plunged $5 3/16 to $12 3/16 after announcing that it anticipates third and fourth quarter earnings to be level with the prior year at $0.08 per share for each quarter due to continued weakness in sales of enterprise networking products in Asia... Adept Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADTK)") else Response.Write("(Nasdaq: ADTK)") end if %> dropped $3 1/4 to $10 5/8 after the maker of intelligent automation software and hardware products announced that it expects third quarter earnings to be about the same as the $0.10 per share reported for the prior-year period and less than the First Call mean estimate of $0.15 because of slowing demand in the electronics industry.

Apria Healthcare Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHG)") else Response.Write("(NYSE: AHG)") end if %> lost $2 5/16 to $8 7/8 after announcing that it is suing Joseph Littlejohn & Levy for allegedly failing to invest $172 million in the home healthcare company as agreed. Apria also is scuttling its 17.3 million share buyback program announced on Feb. 4 as part of the financing agreement... National Steel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NS)") else Response.Write("(NYSE: NS)") end if %> was cut $3 1/16 to $18 11/16 after the steelmaker announced that it expects break-even first quarter results due to equipment problems and a production slowdown as a result of a severe winter storm in the Midwest. The First Call mean EPS estimate was $0.39... Transportation and logistics services provider Motor Cargo Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CRGO)") else Response.Write("(Nasdaq: CRGO)") end if %> skidded for $1 1/2 to $11 3/8 after announcing that its first quarter earnings will be about $0.10 to $0.12 a share, below the $0.18 mean estimate listed in First Call, due to severe weather conditions in the Pacific Northwest and California.

Witco Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WIT)") else Response.Write("(NYSE: WIT)") end if %> fell $1 7/8 to $38 5/8 as the specialty chemicals and petroleum products manufacturer announced that first quarter earnings could fall 25% short of analysts' estimates and be roughly the same as the $0.35 per share it reported in the year-ago quarter because of its restructuring plan and the weakened Asian currencies... Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> dipped $2 to $85 as it confirmed that the U.S. Securities and Exchange Commission plans to file civil charges against the investment bank and brokerage house over the role it played in the months leading up to Orange County's 1994 bankruptcy, according to Reuters... Telecommunications services provider Tel-Save Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TALK)") else Response.Write("(Nasdaq: TALK)") end if %> finished down $2 31/32 to $24 after announcing that "there is a strong probability the company will remain independent" rather than being acquired by another company.

Bandwidth management technologies provider Adaptec Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADPT)") else Response.Write("(Nasdaq: ADPT)") end if %> lost $1 1/8 to $21 1/4 after announcing late yesterday that it will buy read channel ASIC technology from integrated circuits maker Analog Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADI)") else Response.Write("(NYSE: ADI)") end if %> for up to $60 million depending on sales... Plumbing and electrical products marketer Barnett Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BNTT)") else Response.Write("(Nasdaq: BNTT)") end if %> fell $1 3/16 to $21 9/16 after announcing it expects third quarter earnings to be about 10% below expectations. The I/B/E/S mean estimate was $0.23 per share... QAD Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QADI)") else Response.Write("(Nasdaq: QADI)") end if %> slid $2 11/16 to $14 1/4 after the software developer reported fourth quarter earnings of $0.21 a share versus $0.33 in the prior-year period... Electronic Data Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EDS)") else Response.Write("(NYSE: EDS)") end if %> slipped $1 3/4 to $46 5/8 after Donaldson, Lufkin & Jenrette lowered its rating on the computer systems and technology services company to "market perform" from "buy"... Salomon Smith Barney lowered its rating on Centocor Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNTO)") else Response.Write("(Nasdaq: CNTO)") end if %> to "neutral" from "outperform," sending the biopharmaceutical company down $2 to $41 1/4.

[Correction: In last night's "Quick Cuts," we incorrectly said that Creative Computers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MALL)") else Response.Write("(Nasdaq: MALL)") end if %> would report a fiscal Q1 loss of over $160 million. What we meant to say is that the company expects to report a Q1 loss based on sales of over $160 million.]

FOOL ON THE HILL
An Investment Opinion
by Louis Corrigan

Dangers of the OTC BB

So you missed the fantastic run in those brand-name Internet stocks. While online bookseller Amazon.Com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> was bringing shareholders a flood of new wealth, you remained high on a bluff scared to get your feet wet. While search-engine outfit Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> was making itself into a content provider, you re-read Gulliver's Travels looking for tips in market timing. Tired of seeing your conservative investments reappraised as risky while nearly profitless ventures were proclaimed no-brainers, you searched for an undervalued Internet play and settled on... Shopping.com (OTC Bulletin Board: IBUY). Too bad for you.

Based in Corona Del Mar, California, Shopping.com is an online retailer that offers over a million brand name products, including computers, books, office supplies, and CDs. Unlike an Amazon, the firm maintains no inventories, so it's basically just a virtual storefront with jazzy transaction software that tells vendors to ship products directly to the customer. That means it has no warehouses and no risk that a PC bought today will be a liability two months from now.

Shopping.com opened its website on July 11. By November, the company was selling 1.3 million shares apparently to the public at $9 share in a deal underwritten by Waldron & Co., a brokerage firm based in Irvine, California. Of course, when Shopping.com finally announced its October quarter results in early February, the numbers weren't so impressive. Net sales for the quarter were $0.32 million, good for a loss of $1.3 million, or about $0.19 per share.

Yet the company followed the established pattern among Internet merchants by using its IPO money to acquire eyeballs. In early January, it leased valuable online real estate, signing an 18-month deal with @Home Network <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %>, itself a highflying outfit that offers high-speed Internet service via cable infrastructure. As bandwidth expands and people have an easier time moving about the Web, online merchants should benefit. The Net-savvy folks cruising @Home's high-speed network are presumably already more willing and able to participate in online shopping, offering Shopping.com a potentially solid customer base right now.

The market seemed to agree. By the time the @Home deal was announced, the stock was in the low teens. Within days of the February 3 earnings announcement, the stock had topped $20 a share. Then on March 12, amidst frenzied buying in other Internet-related issues, Waldron issued a "buy" report on the firm, a common practice of stock underwriters. Waldron projected revenues would rise to $15.4 million for the January '99 fiscal year and argued that Shopping.com was undervalued relative to other online merchants. The brokerage firm suggested a twelve-month target price of $43.

The stock soared to an intraday high of $32 7/8, up $3 1/2. That gave Shopping.com a market cap of $179 million, assuming full dilution. But the party was about to end. With the stock back at $22 1/4 yesterday, the Securities and Exchange Commission (SEC) temporarily suspended trading in Shopping.com in order to protect investors. The SEC said that the recent activity in the shares "may have been the result of manipulative conduct."

Indeed, the true story of why Shopping.com shares jumped 365% in four months appears to be quite sordid. As MSNBC columnist Chris Byron reported in a March 12 article, the recent series of rallies owe a lot to short squeezes. The Fiero Bros., well-known short-sellers based in New York, apparently suffered a series of forced buy-ins, sending Shopping.com ever higher. Short-sellers bet a stock will fall by selling borrowed shares with hopes of buying them back later at a cheaper price. Forced buy-ins are one hazard of the trade.

What made this case different was that Waldron, which holds 122,000 warrants to purchase Shopping.com stock at $14.40 per share, apparently controlled virtually the entire public float. If that proves true, then the underwriter could have orchestrated the short squeezes to generate public attention and thus outside buyers for the stock. That would have allowed Waldron to sell its shares at a profit. The same day Waldron was allegedly squeezing Fiero for the last time, it made the unusual move of sending its entire analyst report out on the Business Wire with the self-serving headline "Shopping.com Stock up on Waldron & Co. 'Buy' Recommendation."

According to Byron, the real story was quite different. Several former Waldron stockbrokers have written letters to the NASD regulators or the Fiero Bros. alleging that Waldron's officials, including the firm's leader Cery B. Perle, forced them to buy Shopping.com shares for their clients and then prevented the clients from selling the shares. As Byron reported, former Waldron broker Bahram Mirhashemi quit the firm because a Waldron branch manager "verbally threatened to fire me if I did not purchase shares in Shopping.com."

Former Waldron broker Tamar Youssef also quit rather than work for a firm that, Youssef said, "breaks the law and implements unfair and unethical business practices." Youssef told the NASD, "I had numerous clients who were not permitted to liquidate their positions in 'IBUY' when they placed orders to be executed."

Byron suggests that these shenanigans at Waldron were triggered when, shortly before the IPO, the Nasdaq decided it would not list Shopping.com. Under California law, this meant that Waldron could only sell the shares to high net worth investors. Waldron officials became desperate.

Nasdaq's problem was that Shopping.com CEO Robert J. McNulty had run afoul of the securities laws back in 1989 when four companies for which he served as Chairman engaged in stock-propping transactions that weren't immediately disclosed to shareholders. According to the firm's public prospectus, McNulty signed a decree in U.S. District Court on October 10, 1995 that enjoined him from violating the securities laws in the future. Though he neither admitted nor denied the allegations, people don't usually agree to such deals unless the SEC has some sort of case against them. So a reasonable investor might wonder whether Shopping.com's CEO had committed securities fraud. And today, a reasonable investor might worry that the company's underwriters also may have committed fraud over the last four months. Waldron has denied any wrongdoing.

The bottom line is that the OTC Bulletin Board is simply the Wild West of investing where crappy companies and investment scams may roam free. That's why the Motley Fool steers investors away from these stocks and why Nasdaq wants to clean up this mess. However this ultimately shakes out, Shopping.com suggests some red flags to watch for, including: a top executive that's had run-ins with the SEC, a no-name underwriter who stands to make a killing on warrants, and overly promotional press releases from the company or the underwriters.

For its part, Shopping.com issued a statement today in which McNulty said the firm is "cooperating fully" with the SEC and that its public filings are accurate. He expressed confidence that the stock will begin trading again after its 10 day suspension. "What is going on with Wall Street isn't happening on Main Street," he said.

Will Shopping.com re-open and return to its highflying ways? I doubt it, but stranger things have happened. Yet whatever Shopping.com's fate, no investor should give much thought to OTC Bulletin Board stocks. If you lie down with dogs, you wake up with fleas. Who needs that?

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