FOOL PLATE SPECIAL
Downstream Shorts
Since it came public in mid-December at $11 a share, TECHFORCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TFRC)") else Response.Write("(NASDAQ: TFRC)") end if %> has been an unmitigated disaster for its shareholders. The integrated network support solutions provider has been crushed for reasons that one can see clearly outlined in the first section of its prospectus, dated December 14th, 1995 -- "Reliance on Major Customers".
TechForce is in the unhappy position of providing end-user warranty service to Packard Bell customers. In the first six months of 1995, in fact, Federal Express and Packard Bell both accounted for a whopping 46.3% of TechForce's revenues. Packard Bell accounted for almost all of the 26% of revenues dedicated to the personal computer support business.
This would not have been such a bad thing if Packard Bell had not up and decided to go south since the day of TechForce's public offering. Packard Bell came in hard and heavy with a lot of cheap, low-end, x486- and lower-speed Pentium personal computers, when almost all consumers buying PCs were looking for high-end Pentiums. It suddenly got hit by a massive wave of returns on top of this, losing tremendous market share and virtually guaranteeing that TechForce's comparisons to last year, when the low-cost PC maker was doing well, would be terrible.
Alex. Brown & Sons, which helped underwrite the deal fewer than six months ago, finally bailed on the stock today, marking it down to "neutral" from "buy". I would guess that today's merger between the worldwide PC operations of Packard Bell and NEC does not bode well for TechForce's contract with Packard Bell, which expires on November 1, 1997.
Any cagey investors who saw TechForce as an indirect way to short Packard Bell a few months back have reaped significant gains from their prescience. This would have been a "downstream" short -- a company that was set to have problems because one of their major customers was headed for trouble. As for TechForce itself, its other business of servicing multi-vendor enterprise networks still seems like an engine of growth. The only downside here is that a lot of the company's current assets are accounts receivable from Packard Bell that they are currently negotiating over. TechForce was down $1 1/2 to $8 this morning.
SYQUEST TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYQT)") else Response.Write("(NASDAQ: SYQT)") end if %> continued its positive momentum based on the release of the EZFlyer yesterday, running up another $1 1/2 to $16 1/4. And to think some people say if you write a negative story in this space, the stock actually goes down.
Life-insurance provider FIRST COLONY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FCL)") else Response.Write("(NYSE: FCL)") end if %> soared $4 1/4 to $31 1/4 this morning when the company essentially announced it was for sale. GENERAL ELECTRIC'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> GE Capital unit was cited as interested in the deal, having snapped up a number of life insurance providers in the past few months.
US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %> powered ahead $3 1/2 to $94 today based on an "outperform" rating from Morgan Stanley. Regular Fool readers might recall when US Robotics hinted at its April 23rd conference call that it would make more this year than had previously been anticipated based partially on the success of its Total Control Hub.
IMATRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMAT)") else Response.Write("(NASDAQ: IMAT)") end if %> plowed ahead another $1 31/32 to $6 31/32, rising on a positive interview with its chief executive officer on CNBC following yesterday's news that an article in the Journal of the American Heart Association suggested that its Ultrafast scanner was "more powerful than the best available non-invasive test in predicting heart attacks".
TELULAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WRLS)") else Response.Write("(NASDAQ: WRLS)") end if %> continues to climb today, up $5/8 to $8 5/16 after Rick Schottenfeld said that he liked the stock on CNBC yesterday morning. Investors are probably wondering if they can get Schottenfeld to possibly say some nice things about stocks in their portfolio at some point.
Semiconductor equipment manufacturer and recent initial public offering (IPO) ETEC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ETEC)") else Response.Write("(NASDAQ: ETEC)") end if %> continues to defy gravity, rising $3 7/16 to $36 15/16. The perception that equipment from this company is necessary to help companies like INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTC)") else Response.Write("(NASDAQ: INTC)") end if %> make chips for less money is behind the rise.
Electronic credit card authorization is the game of PMT SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PMTS)") else Response.Write("(NASDAQ: PMTS)") end if %>, up $2 to $37 1/4 this morning after it beat consensus estimates of $0.11 EPS by 10% in the quarter it reported this morning.
When Merrill Lynch starts a company with a "near-term neutral", you just don't expect the company to jump $1 3/4 to $25 1/2. That is just what chemical-mechanical planarization (CMP) equipment-maker ONTRAK SYSTEMS (NASDAQ ONTK) did this morning.
UBS Securities announced this morning that it had initiated coverage of GENERAL SURGICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GSII)") else Response.Write("(NASDAQ: GSII)") end if %> with a "buy" rating, setting a 12 to 18 month price target of $30. Shares rose $1 to $20 1/4.
Hambrecht & Quist analyst Jean-Michel Valette raised his rating on vintner ROBERT MONDAVI CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MOND)") else Response.Write("(NASDAQ: MOND)") end if %> from "hold" to "buy" based on the company's new sourcing agreement to import wines from France's Langeudoc region. Valette raised next year's estimate by five cents to $1.80 EPS, and shares jumped $1 3/4 to $32 3/4.
A one week turnaround of fortunes for MATRIX PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MATX)") else Response.Write("(NASDAQ: MATX)") end if %>. Off last week because of failure to get the nod from the Food & Drug Administration (FDA), the company was up $7/8 to $22 1/4 after its AccuSite product was approved for use in the U.K.
Dean Witter analyst Marie Rossi upped healthcare informatics concern MEDAPHIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MEDA)") else Response.Write("(NASDAQ: MEDA)") end if %> from "accumulate" to "buy" this morning, lifting shares $3 1/2 to $43 1/2.
Another "strong sell" out of Asensio & Company -- this time Manuel takes on highflyer DIANA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %>, a food distributor turned networker via the purchase of a number of distribution companies. Diana, down $3 1/4 to $80 3/4, pretty much installs and distributes networking equipment.
ARROW INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ARRO)") else Response.Write("(NASDAQ: ARRO)") end if %>, climbed up to the high dive, hopped three times, and belly-flopped $9 3/4 to $30. The company reported it would actually make less than it did last year when analysts were expecting a 15% profit.
UNIFORCE TEMPORARY SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: UNFR)") else Response.Write("(NASDAQ: UNFR)") end if %> traded down as much as $7 1/2 on the open this morning, recovering to be down only $2 to $15 1/2. There was no news on the wires and no one at the company was available for comment.
BUFFETT'S INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BOCB)") else Response.Write("(NASDAQ: BOCB)") end if %> and HOMETOWN BUFFETT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HTBB)") else Response.Write("(NASDAQ: HTBB)") end if %> announced a definitive merger this morning, causing Hometown Buffett to trade down $1 3/8 to $13 3/4. Hometown holders will get 1.17 shares of Buffett's Inc. -- a wash for them.
Randy Befumo (MF Templar), a
Fool
Selena Maranjian (MF Selena),
another Fool