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HEROES

Mecklermedia Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MECK)") else Response.Write("(Nasdaq: MECK)") end if %>, which operates the popular Internet World trade shows, gained $6 to $26 3/16 after agreeing to be acquired by fellow business media company Penton Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PME)") else Response.Write("(NYSE: PME)") end if %> for $29 per share in cash, or about $274 million. The purchase price represents a 44% premium to Mecklermedia's closing price of $20.19 per share yesterday. Penton's main business is specialized business magazine publishing, which accounted for 74% of its $205 million in fiscal 1997 total revenues. Its growing trade show business accounted for 12% of total revenues on a pro forma basis last year, including the acquisitions of three trade show companies during the year. That end of Penton's business will get a boost from Mecklermedia's trade show operations, which accounted for 70% of the company's $60.8 million in revenues for the 12-month period ended June 30.

Computing products distributor CHS Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HS)") else Response.Write("(NYSE: HS)") end if %> tacked on $1 5/16 to $7 5/16 after pre-announcing fiscal Q3 sales of $2.2 billion, which is in line with the firm's previous expectations and up 18% sequentially. Despite seeing some softness in its Latin American business during the quarter, CHS said the overall demand for its products "remains strong." Chairman and CEO Claudio Osorio suggested that he is a bit confused by the recent slide in the company's share price, which has lost more than half of its value since Sept. 24. "In my opinion our current stock price is inexplicable in light of our recent results and balance sheet position," he said. While investors may be trying to discount the firm's exposure to the ongoing global financial troubles in the market, it appears CHS has a good shot at beating analysts' earnings expectations for an eighth straight time this quarter.

QUICK TAKES: Networking equipment maker Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> bounced back $2 13/16 to $46 11/16 after falling 21% since fears of a slowdown in corporate information technology spending first surfaced on Monday... Women's casual clothing and accessories retailer Chico's FAS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHCS)") else Response.Write("(Nasdaq: CHCS)") end if %> picked up $1 5/16 to $14 3/4 after reporting an eye-opening 30.7% year-over-year increase in September same-store sales, even though the company said 26 of its stores were closed for at least one day during the month due to Hurricane Georges... British information technology consultant and systems integrator ECsoft Group PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ECSGY)") else Response.Write("(Nasdaq: ECSGY)") end if %> advanced $1 1/4 to $12 5/8 after saying it "knows of no reason... based upon the company's business or financial condition" for the 45% decline in the share price of its American depositary shares since Sept. 30.

Network switching and diagnostic systems designer Tekelec <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TKLC)") else Response.Write("(Nasdaq: TKLC)") end if %> climbed $1 1/4 to $11 7/8 after the local telecommunications division of Sprint <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %> agreed to use the company's MGTS 2000 product to test and monitor its local Signaling System 7 network... Online sports media company SportsLine USA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLN)") else Response.Write("(Nasdaq: SPLN)") end if %> rebounded $1 1/4 to $8 15/16 after falling yesterday on news that its fiscal Q3 revenues will be below analysts' expectations... Mapping software products developer MapInfo Corp. (Nasdaq: MAPS) charted a $1 5/16 gain to $11 after saying it will report fiscal Q4 EPS between $0.20 and $0.22, beating the Street's mean estimate of $0.17.

Enterprise storage management software firm Legato Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LGTO)") else Response.Write("(Nasdaq: LGTO)") end if %> was lifted $3 13/16 to $34 1/16 thanks to a Tucker Anthony upgrade to "strong buy" from "outperform"... Thrift holding company Dime Community Bancshares <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DCOM)") else Response.Write("(Nasdaq: DCOM)") end if %> moved up $2 1/8 to $17 1/8 after pre-announcing fiscal Q1 EPS of $0.35, which is $0.05 ahead of the Street's mean estimate... Munitions and satellite propulsion systems maker Primex Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRMX)") else Response.Write("(Nasdaq: PRMX)") end if %> shot $3 1/4 higher to $34 after the U.S. Army awarded the company a $26.3 million contract for 25 mm armor piercing ammunition... Investment technologies and services provider SEI Investments <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEIC)") else Response.Write("(Nasdaq: SEIC)") end if %> climbed $3 1/4 to $57 after saying its fiscal Q3 EPS will come in around $0.60, beating the Street's mean estimate of $0.50.

GOATS

Capital One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %> and its competitors in the credit card lending business got hammered again today on concerns of a recession and worries that given the ugly credit market, it will become harder for the companies to securitize their loans and grow their businesses. For these credit card issuers whose customers are predominantly in the lower- to middle-income brackets, a recessionary environment would mean less revenue and higher charge-offs because lower- and middle-income households are the hardest hit in economically challenged times. But concerns of a credit crunch may be overblown because the market for securities backed by credit card receivables is so liquid, especially with the short duration of so many of these securities. Finally, the Department of Justice's antitrust suit against Visa and MasterCard wouldn't hurt credit card issuers like Capital One. These issuers would actually benefit from being able to issue American Express and Discover cards. Worries about pricing due to antitrust pressure are also overblown. With hundreds of issuers, pricing (including the cost of benefits for cardholders) is very competitive in the credit card industry. Today, Capital One took a hit of $4 15/16 to $62 1/16, Household International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HI)") else Response.Write("(NYSE: HI)") end if %> lost $1 13/16 to $26 3/4, and Providian Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PVN)") else Response.Write("(NYSE: PVN)") end if %> plunged $2 11/16 to $50 1/2.

Internet companies sank today on concern that increasing competition will slow revenue and earnings growth. Yesterday, sports-related website operator SportsLine USA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLN)") else Response.Write("(Nasdaq: SPLN)") end if %> warned that its Q3 revenue will fall short of expectations and chalked it up to intense competition, which cuts into the all-important advertising dollars. Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> was also punished yesterday and today on news that rival Barnes & Noble's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BKS)") else Response.Write("(NYSE: BKS)") end if %> barnesandnoble.com website has a new backer in German media giant Bertelsmann. Amazon dropped another $7 1/4 to $86 3/16 on the day. Internet portal company Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> was pummeled for a $9 9/16 loss to $104 13/16 despite reporting Q3 EPS of $0.15 per share, up from $0.01 a year ago and beating analysts' mean estimate of $0.09. (For more on Yahoo!'s Q3 performance, see today's Breakfast With the Fool.) America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> shed $6 3/4 to $85 1/4, Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> was clipped $4 29/32 to $29 1/32, Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> slid $2 1/8 to $25, Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> tumbled $2 to $18 1/2, and Cnet <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNWK)") else Response.Write("(Nasdaq: CNWK)") end if %> lost $1 3/4 to $27 1/2.

Retail stocks were discounted today despite reporting an average 5.5% increase in same-store sales in September on worries that shoppers may put off purchases and cut spending in the coming months if the economic climate worsens. Sears Roebuck & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> shrank $1 1/16 to $40 9/16, Nordstrom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOBE)") else Response.Write("(Nasdaq: NOBE)") end if %> dropped $1 7/16 to $24 1/16, Wal-Mart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %> slipped $1 15/16 to $56 13/16, Costco Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COST)") else Response.Write("(Nasdaq: COST)") end if %> lost $1 3/16 to $44 7/8 (despite reporting a 22% rise in Q4 EPS to $0.66, a penny ahead of estimates), Home Depot <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %> shed $1 7/8 to $34 1/8, Target Stores parent Dayton Hudson Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DH)") else Response.Write("(NYSE: DH)") end if %> fell $1 3/4 to $33 3/4, Gap Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> folded $2 9/16 to $48 1/8, Abercrombie & Fitch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANF)") else Response.Write("(NYSE: ANF)") end if %> dipped $1 15/16 to $32 3/4, Talbot's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLB)") else Response.Write("(NYSE: TLB)") end if %> slid $1 13/16 to $13 15/16, and Jones Apparel Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNY)") else Response.Write("(NYSE: JNY)") end if %> came down $1 1/4 to $18 5/8.

QUICK CUTS: Diversified manufacturer, NBC parent, and financial services company General Electric <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> fell $3 5/16 to $71 11/16 after reporting Q3 EPS of $0.69, in line with expectations and a 15% improvement over the $0.60 it earned a year ago. EPS were helped by the company's ongoing share buyback program, which aims to repurchase $17 billion in shares over five years... Chrysler <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> skidded $1 7/16 to $37 3/8 on news that the No. 3 U.S. automaker will recall more than 800,000 late-model cars and trucks for safety reasons, though no accidents or injuries have been reported related to these problems. Meanwhile, General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>, which lost $1 1/8 to $50 1/4, is recalling 55,272 1995-1998 Chevrolet C10 and GMC C15 pickups.

Chipmaker Advanced Micro Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> crumbled another $1 3/4 to $14 in the wake of reporting a surprise $0.01 per share profit for fiscal Q3, ahead of the $0.11 per share loss expected by the Street... Document management software company FileNET Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FILE)") else Response.Write("(Nasdaq: FILE)") end if %> plummeted $5 15/16, or 56.6%, to $4 9/16 after warning it expects a Q3 net loss of around $0.18 a share, compared with earnings of $0.06 in the same year-earlier period and analysts' expectations of earnings of $0.14... Information Resources <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IRIC)") else Response.Write("(Nasdaq: IRIC)") end if %>, which compiles data from point-of-sale scanners in the consumer packaged goods business, sank $5 9/16 to $6 15/16 after saying it expects Q3 and Q4 earnings to total below $0.19 a share -- about $0.10 lower than analysts' expectations.

Children's apparel maker and retailer Gymboree Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GYMB)") else Response.Write("(Nasdaq: GYMB)") end if %> tumbled $3 3/8 to $4 1/16 after reporting an 18% decline in same-store sales in September and saying it expects a Q3 loss similar to the previous quarter's loss of $0.03 a share. Analysts had predicted Q3 EPS of $0.23 to $0.31... Computer media and technology company Ziff-Davis Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %> was zapped for a loss of $1 11/16 to $4 1/4 after saying that although it expects Q3 results to be "in line" with expectations, it no longer anticipates seeing a recovery in Q4 -- rather, it foresees a 15% drop in earnings due to lower-than-expected results in its publications business... Greeting card maker Gibson Greetings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GIBG)") else Response.Write("(Nasdaq: GIBG)") end if %> tanked $6 3/8 to $10 7/8 after announcing it expects a Q3 loss of around $0.16 a share (before unusual items) and EPS for the year between $0.95 and $1.05, excluding charges. Analysts had been expecting $0.19 for the quarter and $1.42 for the year.

Computer and software companies continued their decline on worries that companies will cut back on technology spending. Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> was ditched for a loss of $2 1/8 to $48 7/16, Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> slipped $7/8 to $24 1/16, Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> lost $1 15/16 to $41 1/2, and Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> was cut $2 15/16 to $91 3/16... Health insurance company United Healthcare Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %> fell $2 13/16 to $35 3/16 after Donaldson, Lufkin & Jenrette lowered its rating on the company to "market perform" from "buy"... Oil services company Global Industries Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GLBL)") else Response.Write("(Nasdaq: GLBL)") end if %> slid another $1 5/16 to $6 1/2 as it warned that fiscal Q2 EPS will be roughly 40% below the $0.21 it earned a year ago. That would mean EPS of about $0.13 compared with analysts' expectations of $0.21.

Healthcare management firm Magellan Health Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGL)") else Response.Write("(NYSE: MGL)") end if %> dropped $1 1/2 to $8 1/8 after Salomon Smith Barney downgraded its rating on the company to "neutral" from "outperform"... Cigarette paper maker Schweitzer-Mauduit International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWM)") else Response.Write("(NYSE: SWM)") end if %> was crushed for a $7 1/8 loss to $14 15/16 after warning it expects Q3 EPS of $0.41 to $0.46, below the analysts' mean estimate of $0.58, due to a slowdown in international sales... Specialty commercial finance company T&W Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TWFC)") else Response.Write("(Nasdaq: TWFC)") end if %> plunged $1 3/8 to $7 7/8 after announcing it will acquire Vancouver-based Accel Financial for CDN$2.50 per share.

Bassett Furniture Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BSET)") else Response.Write("(Nasdaq: BSET)") end if %> dropped $4 1/4 to $21 1/2 after the furniture maker reported Q3 EPS of $0.29 before charges, down from $0.47 a year earlier and lower than analysts' expectations of $0.40... Collectible figurines maker Enesco Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ENC)") else Response.Write("(NYSE: ENC)") end if %> tumbled $4 11/16 to $20 1/8 after saying it expects Q3 EPS of $0.35 to $0.38, down from $0.47 last year... Automotice and aerospace components maker TRW Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRW)") else Response.Write("(NYSE: TRW)") end if %> slid $2 1/8 to $44 15/16 after Goldman Sachs downgraded its rating on the company to "market perform" from "recommend list."

FOOL ON THE HILL
An Investment Opinion
by Alex Schay

An Inflated Look at Deflationary Recession

Surveying the glum countenance of a Swiss banker en route to Zurich by train, I got the feeling that the reality of global market activity was turning out to be an unwilling partner with prior hopeful projections. A rare conversation ensued, as the normally reserved bank official began to reel off a litany of concerns surrounding global credit quality amidst my characteristically intrusive American questioning.

Having just returned from nearly two weeks overseas, it was definitely "interesting" to get a Western European perspective (albeit anecdotal) on the market turmoil in Asia, Latin America, and Russia. The steady stream of "1929" comparisons made it pretty clear that attitudes within the walls of fortress America were dramatically different than in Europe, where the financial combatants often break camp on an open plain buffeted about by the elements. However, returning to the United States and seeing negative opinion beginning to solidify around a crumbling corporate earnings edifice was dramatic confirmation that incremental information over even the briefest period of time can serve to crystallize suspicions raised in months' past.

As Merrill Lynch reported in its Weekly Economic & Financial Commentary for the end of September, "Action by the Fed would be an acknowledgement of the depth of the global economic and financial crises. A severe deflationary shock is coursing through the world economy, and it will not be easy to cushion that shock no matter what policymakers might do during the next few months. The sizable Fed easing that we think will occur in the months ahead is fully necessary to avoid an abrupt slowdown in U.S. growth." Now, with the Fed's first move already under its belt, it might be instructive to take a look at how economists view a classic deflationary recession. Here are some of the classic calling cards:

A Decrease/Decline in:       An Increase in: 
 Household Income             Unemployment 
 Consumer Spending            Treasury Bond Prices 
 Business Revenues 
 Business Start-Ups 
 Leading Economic Indicators 
 CPI/PPI 
 GNP 
 Investment Yields 
 "Cyclical" Stock Prices 
 *courtesy of Acme Econ Text

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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 Bob Bobala (TMF Bobala), a Fool's Fool Jennifer Silber (TMF Amused), Fool at last