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HEROES

3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %>, the number-two data networking firm, connected for a $4 3/8 gain to $31 1/2 after announcing slightly better-than-expected earnings for its fiscal fourth quarter and a ten million share stock buyback. The company produced $1.375 billion in sales in the quarter, up only slightly from the year-ago period but 10% higher sequentially. Excluding one-time items, 3Com earned $65.9 million, or $0.18 a share, beating the consensus estimate by a penny. After trading as high as $81 a share in December 1996, 3Com shares plunged following its spring '97 acquisition of modem, network interface card, and access concentrator systems company U.S. Robotics. The market's immediate reaction was, dare we say it, correct in discounting 3Com as the economics of U.S. Robotics have turned out to be significantly worse than 3Com's core business, as evidenced by the serious inventory problems that have dogged the company in the last year. However, Chair/CEO Eric Benhamou said yesterday that the company "turned the corner" in the fourth quarter and is now enjoying operating efficiencies. If not, don't worry. Benhamou will contact the analysts for closed-door updates -- individual investors will eventually get the news.

Luxury retailer Saks Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKS)") else Response.Write("(NYSE: SKS)") end if %> jumped $2 11/16 to $27 1/2 after saying it hired Goldman Sachs and Merrill Lynch to explore "strategic alternatives," including a possible sale of the company. The firm is currently controlled by an investment group led by Bahrain-based Investcorp International, which bought Saks from Britain's B.A.T. Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTI)") else Response.Write("(NYSE: BTI)") end if %> in 1990 for $1.6 billion. The group then sold 26% of the department store chain in an initial public offering in May 1996, leaving Investcorp and its affiliates, including Saudi Prince Alwaleed bin Talal, with the controlling stake. Rumors that the group was ready to bail out of its investment have been swirling as far back as February 1997 but didn't pan out until today. Besides its 41 flagship Saks Fifth Avenue department stores, Saks operates 43 OFF 5TH discount outlets and a catalog business called Folio.

QUICK TAKES: Internet services and community company America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> gained $4 1/8 to $108 1/16 after Brown Brothers Harriman started coverage with a "short-term buy" rating... Merger rumors (again) lifted Mellon Bank Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEL)") else Response.Write("(NYSE: MEL)") end if %> $4 to $74 3/4, as some speculated Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %> will buy the company after it was disclosed Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEL)") else Response.Write("(NYSE: MEL)") end if %> blew off a Chase advance in April... Stent and angioplasty balloon maker Arterial Vascular Engineering <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVEI)") else Response.Write("(Nasdaq: AVEI)") end if %> moved up $1 1/4 to $32 3/4 after signing an agreement to provide coronary stent systems to hospital operator Columbia/HCA Healthcare <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %>... Chauffeured vehicle services roll-up firm Carey International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CARY)") else Response.Write("(Nasdaq: CARY)") end if %> rolled $3 higher to $26 1/4 after reporting Q2 EPS of $0.22 versus $0.17 last year. The company also said it is in acquisition talks with 63 companies representing $420 million in revenues.

American Airlines parent AMR Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> advanced $1 5/8 to $82 3/8 as it appears European regulators are close to approving its alliance with British Airways <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAB)") else Response.Write("(NYSE: BAB)") end if %> as long as the carriers give competitors access to some trans-Atlantic flights between the U.S. and London's Heathrow airport... ITT Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IIN)") else Response.Write("(NYSE: IIN)") end if %> rose $1 1/8 to $35 3/16 after the electronics and defense products maker agreed to sell its automotive electrical systems business to France's Valeo for $1.7 billion in cash... Satellite systems company Loral Space & Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOR)") else Response.Write("(NYSE: LOR)") end if %> picked up $11/16 to $27 9/16 after selling 20 million common shares in a public offering at a price of $27 per share.

Educational software company The Learning Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLC)") else Response.Write("(NYSE: TLC)") end if %> gained $1 11/16 to $26 7/8 after BT Alex. Brown raised its rating to "strong buy" from "buy." The brokerage firm also upgraded TLC merger partner Broderbund Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BROD)") else Response.Write("(Nasdaq: BROD)") end if %>, which rose $1 1/4 to $20 11/16... PVC resin and compounds marketer Geon Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GON)") else Response.Write("(NYSE: GON)") end if %> advanced $3 1/8 to $22 13/16 after forming a PVC joint venture with oil and specialty chemicals firm Occidental Petroleum Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OXY)") else Response.Write("(NYSE: OXY)") end if %>. The deal is expected to yield $80 million in annual cost savings... Metal building and framing systems maker NCI Building Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLDG)") else Response.Write("(Nasdaq: BLDG)") end if %> added $2 5/8 to $57 5/8 after setting a two-for-one stock split, payable July 22... Industrial fluid handling devices manufacturer Robbins & Myers <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RBN)") else Response.Write("(NYSE: RBN)") end if %> picked up $1 5/8 to $27 after announcing it will buy back up to 5% of its more than 11 million outstanding shares over the next 12 months.

Bandwidth switching systems developer Xylan Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XYLN)") else Response.Write("(Nasdaq: XYLN)") end if %> tacked on $1 1/4 to $27 5/8 after French telecom equipment maker Alcatel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALA)") else Response.Write("(NYSE: ALA)") end if %> agreed to sell Xylan's OmniStack line of products worldwide under the Alcatel brand name. Alcatel rose $1 1/4 to $40 3/8... Chemicals and plastics company Union Carbide Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %> moved up $4 1/4 to $52 1/4 after Credit Suisse First Boston raised its rating to "buy" from "hold"... Bear Stearns upgraded Radio Shack parent Tandy Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TAN)") else Response.Write("(NYSE: TAN)") end if %> to "attractive" from "neutral," sending the firm's shares up $2 5/8 to $53 13/16.

Internet service provider MindSpring Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSPG)") else Response.Write("(Nasdaq: MSPG)") end if %> picked up $14 5/16 to $94 7/8 after setting a three-for-one stock split, payable July 24... Bandwidth management tools and PC adapter cards developer Adaptec <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADPT)") else Response.Write("(Nasdaq: ADPT)") end if %> tacked on $1 1/16 to $16 11/16 after calling off an agreement with Hyundai Electronics America to buy the company's Symbios server adapter products unit for $775 million. The company said it was concerned that the Federal Trade Commission would not approve the deal.

GOATS

As its chairman, Bill Gates, made numerous appearances to drum up sales for Windows 98, Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> fell $3 3/8 to $101 9/16 in heavy trading on mixed and scattered sales reports. There is some concern that the new Windows 98 operating system, which went on sale today, won't be flying off the shelves as its predecessor did. The CompUSA store on Broadway in Manhattan had about 350 to 400 people in line to get Windows 98 at a minute past midnight as CompUSA stores across the country opened for 98 minutes to sell the software. U.K. computer products retailer PC World said the product had been "very well received." Still, many industry observers believe that Windows 98 won't be the roaring success Windows 95 was three years ago. To be sure, Microsoft is reportedly spending roughly $10 million promoting its latest product -- that pales in comparison to the $200 million it spent marketing Windows 95.

Money-losing consumer appliances maker Sunbeam Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOC)") else Response.Write("(NYSE: SOC)") end if %> plunged $1 9/16 to $10 7/16 after announcing that it is delaying its SEC filing for its previously issued Zero Coupon Convertible Senior Subordinated Debentures due 2018 in order to continue its review of its 1997 financial statements. The company said its auditor, Arthur Andersen, has refused to allow inclusion of its previously unqualified opinion of Sunbeam's 1997 financial statements until the review is completed. The company also confirmed news reports that the SEC is conducting an "informal inquiry" into its accounting practices, and that it is in talks with Morgan Stanley Dean Witter, First Union, and BankAmerica to obtain waivers to avoid defaulting on $1.7 billion in loans. The flood of bad news comes a week and a half after Sunbeam's board of directors fired then chairman and CEO Al Dunlap and warned that it doesn't expect to meet earnings expectations for the second quarter. Sunbeam has plummeted 83% to a low of $8 7/8 on Monday from a high of $52 in March before it issued an earnings warning for the first quarter.

QUICK CUTS: Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> fell $1 3/4 to $75 5/8 after a strong three-day rally on concern over its new Xeon processor. The Pentium chip maker said it has found a flaw in its upcoming chip for workstations and servers... AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> was cut $1 5/8 to $58 3/8. It has been the most active stock on the New York Stock Exchange with more than 18 million shares traded per day since it announced that it will acquire cable TV operator Tele-Communications Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %>... Pharmaceutical company Amgen <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMGN)") else Response.Write("(Nasdaq: AMGN)") end if %> gave back $2 1/4 to $64 1/2 as analysts talked down rumors that the company may be acquired by Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %>. Amgen gained yesterday on takeover rumors and an analyst upgrade to "strong buy."

Home furnishings retailer Bed Bath & Beyond <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BBBY)") else Response.Write("(Nasdaq: BBBY)") end if %> sank $6 3/8 to $49 7/8 after reporting fiscal Q1 EPS of $0.18 compared with $0.14 for the prior-year period and in line with analysts' estimates. The company also announced a 2-for-1 stock split... SBC Warburg Dillon Read sent several oilfield services companies downward with downgrades and cuts in earnings estimates. Ensco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESV)") else Response.Write("(NYSE: ESV)") end if %>, which lost $1 5/16 to $17 9/16, and Global Marine <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLM)") else Response.Write("(NYSE: GLM)") end if %>, which fell $7/8 to $18 7/16, were downgraded to "neutral" from "outperform." Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %> also slid $1 3/16 to $67 9/16... Diversified energy holding company MCN Energy Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCN)") else Response.Write("(NYSE: MCN)") end if %> plummeted $5 13/16 to $25 5/16 after warning that it expects an after-tax Q2 charge of up to $225 million and 1998 EPS that will be 10%-15% below last year's $1.91. It anticipates that 1999 EPS will recover to a range of at least $2 to $2.10.

Property and casualty insurance holding company W.R. Berkley Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BKLY)") else Response.Write("(Nasdaq: BKLY)") end if %> tanked for a $4 5/8 loss to $40 3/4 after warning that it expects Q2 earnings will be about 10% lower than those of the year-earlier period due to storms and intense ongoing price competition... Diversified industrial machinery and specialty components manufacturer Dover Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DOV)") else Response.Write("(NYSE: DOV)") end if %> lost $1 5/16 to $35 after announcing that it expects Q2 EPS will be about flat with last year's $0.44 a share and that its earlier hope of another year of double-digit EPS growth "now looks a bit aggressive"... Meat processor Thorn Apple Valley <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TAVI)") else Response.Write("(Nasdaq: TAVI)") end if %> was chopped up, losing $1 1/4 to $10 7/8 after announcing plans to exit the fresh pork business and focus on its processed meats business. The company will take a fiscal Q4 charge of $35-$50 million.

Performance Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTIX)") else Response.Write("(Nasdaq: PTIX)") end if %>, which makes communications, networking and data storage interface systems products, dropped $13/16 to $10 11/16 after announcing that it anticipates lower-than-expected Q2 earnings on revenues that will be 15% to 20% less than Q1 revenue of $7.4 million... Outsourcing and consulting firm CDI Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDI)") else Response.Write("(NYSE: CDI)") end if %> lost $2 3/8 to $27 1/4 after announcing that it anticipates Q2 EPS will be between $0.45 and $0.46, including an $0.08 restructuring charge, down from $0.60 for the year-earlier period... Vinyl floor covering company Armstrong World Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ACK)") else Response.Write("(NYSE: ACK)") end if %> was floored for $4 15/16 to $70 7/16 after warning it expects Q2 EPS of $1.35 to $1.40, below last year's $1.56 and the $1.59 predicted by analysts, due to economic conditions in Asia and a drop in sales.

Automotive- and computer-parts maker Autocam Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACAM)") else Response.Write("(Nasdaq: ACAM)") end if %> slid $1 1/8 to $17 7/8 as it announced it will buy an unidentified European manufacturer for $68-$70 million to expand its precision-machined components business... Internet service provider At Home Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> dropped $3 7/16 to $47 3/4 after yesterday's run-up as it was downgraded by two analysts who said investors overreacted to the AT&T-TCI merger. TCI owns 39% of At Home... Integrated circuit controls maker Frequency Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: FEI)") else Response.Write("(AMEX: FEI)") end if %> shed $1 1/8 to $13 1/2 after reporting a Q4 loss of $0.71 a basic share compared with a profit of $0.20 last year... Animation studio Pixar Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PIXR)") else Response.Write("(Nasdaq: PIXR)") end if %> shed $2 3/4 to $55 1/4 after Merrill Lynch downgraded its near-term rating on the company to "neutral" from "accumulate," while keeping a long-term "accumulate" rating.

FOOL ON THE HILL
An Investment Opinion
by Alex Schay

The Dynamic Duo: Software and the Net

In a recent interview, Netscape <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> chief executive officer James Barksdale used the following example to illustrate how Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> might be able to use its clout in the market to bias consumer choice:

Imagine turning on a new Compaq PC. "On the
Windows 98 screen it says, 'Do you want to
[shop for] your travel services?' And you say,
'Yes, I think I will.' Well, what does it pull down?
It pulls down a Microsoft travel service. If you
want to gather information about automobiles,
you pull down Microsoft's automobile shopping
service... And the list goes on and on."

CONFERENCE CALLS

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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool Editing Brian Bauer (TMF Hoops), another Fool Jennifer Silber (TMF Amused), Fool at last