FOOL PLATE SPECIAL

Price Boosts R Us?

Not only does toy retailer Toys R Us <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOY)") else Response.Write("(NYSE: TOY)") end if %> sell the game Monopoly, it might also be playing the game, in its dealings with manufacturers. The Federal Trade Commission's Bureau of Competition announced yesterday that it is bringing an anti-trust case against the company. What is the issue here? Well, several. One is market share. Antitrust regulations are in place to promote competition within industries, and to prevent any one company from establishing a monopoly. However, enforcement of these regulations has varied widely, according to the inclinations of judges and the U.S. Department of Justice. A recent example of this is Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %>, which has been the focus of FTC investigations but which has not had its domination of computer operating systems diminished. In the case of Toys R Us, their market share of 21%-30% of the American toy market is at the low end of what would be considered unfair to competition.

Another issue is whether Toys R Us is in a position to throw its weight around, putting its competitors at a disadvantage. The FTC is alleging that the Paramus, N.J.-based retail chain has restricted manufacturers from selling to discount retailers and that it has manipulated prices by having manufacturers package toys differently for competing chains, thereby increasing the items' price tags at stores other than Toys R Us.

Toys R Us has over 600 stores in America, over 300 international stores, and generates revenues of $19 billion per year domestically and $2.6 billion abroad. Chief Executive Officer (CEO) Michael Goldstein is confident that the company "will prevail", noting that, "Given the combined impact of the practices of the warehouse clubs, our own contribution to the industry, and the intensity of the competition in our marketplace, we reserve our unquestionable right to refuse to carry the same items as warehouse clubs." Shares which traded around $40 thre years ago have remained in the $20-$30 range for the last year, and fell $3/4 to $28 3/8 today.

UPGRADES & DOWNGRADES

Nike <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NKE)") else Response.Write("(NYSE: NKE)") end if %> was downgraded from "strong buy" to "outperform" by Josie Esquivel of Morgan Stanley, who based the downgrade "strictly on price". Shares slumped $2 7/8 to $101 7/8.

HMO company Health Systems International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HQ)") else Response.Write("(NYSE: HQ)") end if %> was upped from "outperform" to "buy" by Smith Barney. Analyst Geoffrey Harris explained that the company is undervalued relative to others in its industry, and shares rose $7/8 to $29 1/4.

ACX Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ACX)") else Response.Write("(NYSE: ACX)") end if %> was cut from "buy" to "near-term hold" by Robinson Humphrey. Shares of the technical ceramic manufacturer dropped $1 1/4 to $20 3/4.

Construction machinery concern Varco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VRC)") else Response.Write("(NYSE: VRC)") end if %> was started by CS First Boston as a "buy", sending shares up $7/8 to $16 3/4.

EARNINGS SURPRISES

Oak Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OAKT)") else Response.Write("(NASDAQ: OAKT)") end if %> revealed today that it expects a loss in its 4th quarter, when analysts were expecting $0.26 in income. Needham & Co. downgraded the company from "buy" to "hold" and shares of the CD-ROM maker plunged $4 1/8 to $12 3/8.

FSI International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FSII)") else Response.Write("(NASDAQ: FSII)") end if %> also warned that it will be disappointing analysts by reporting $0.20 to $0.25 per share, due to customer delays and shipping problems. The semiconductor equipment concern saw its shares drop $3/4 to $13 1/4 on the news.

Sigma Circuits <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SIGA)") else Response.Write("(NASDAQ: SIGA)") end if %> announced that it is consolidating its Northern and Southern California operations, is withdrawing an offering of 2.7 million shares, and will post a loss in its fourth quarter. Shares dropped $1 1/2 to $8 3/8.

After blowing away earnings estimates earlier in the week, Interpoint <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTP)") else Response.Write("(NASDAQ: INTP)") end if %> continued surging ahead, with shares of the microelectronic component and data storage company up $7 7/8 to $30 3/8.

ODDS & ENDS

Fiber optics company Optical Cable <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OCCF)") else Response.Write("(NASDAQ: OCCF)") end if %> has been on an incredible tear. It closed at $37 on Friday, $49 on Monday, $59 on Tuesday, and $79 yesterday. Today? Up $15 to $94. The company offers no explanation for the moves, which are preceding a May 31st 2-for-1 split.

Amresco's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMMB)") else Response.Write("(NASDAQ: AMMB)") end if %> evolution into a commercial mortgage concern was highlighted in Investor's Business Daily, sending shares up $5/8 to $19.

SyQuest <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYQT)") else Response.Write("(NASDAQ: SYQT)") end if %> continued its perplexing run, up $3 to $17 5/8 as some see the financially-troubled storage technology company as another Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %>. The company was around $6 a week ago.

Music distribution company Navarre <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NAVR)") else Response.Write("(NASDAQ: NAVR)") end if %>, announced a 2-for-1 split, sending shares rocketing up $10 3/4 to $36.

Randy Befumo (MF Templar), a Fool
Selena Maranjian (MF Selena), another Fool