Investment Opinion
FOOL PLATE SPECIAL

Madge Mobbed

MADGE N.V. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MADGF)") else Response.Write("(NASDAQ: MADGF)") end if %> got absolutely mashed this morning, down $5 1/8 to $18 3/8, after two previous down days that have taken the stock from the $30-range to today's level. A hastily conceived and vague press release issued last night confirmed the market rumors yesterday that Madge was going to post disappointing profits and revenues in the fiscal second quarter.

Madge last visited the realm of disappointing drops back in early April when revenues for its local area network (LAN) switches came in a little light. Back then, a lot of attention was focused on a product switch by Cisco Systems. Until recently, Cisco systems had been selling one of Madge's token-ring switches as the Catalyst 1600. This changed when Cisco decided to license Madge's technology and come out with the Catalyst 5000 line of switches. Madge's original equipment manufacturing (OEM) business is not a significant part of its revenue mix, however, suggesting there is a lot more going on. Last quarter, Madge blamed the shortfall in a delay in a feature that would tie token-ring networks to FDDI network backbones, putting off Cisco's customers who use FDDI.

The company was in the process of digesting its acquisition of Israel-based Lannett Data Systems and could have run into problems integrating the large company into their operations -- not uncommon when two companies of similar size try to merge. This could go a long way towards explaining why Madge is about to miss its first quarter in a number of years. Madge says that it is on track to complete its "switching to ATM roadmap" by September and is also on track to release its Smart RingSwitch line of "transparent bridging" products. A credible ATM strategy combined with a "transparent bridging" product that will allow mainly token ring systems to connect with Ethernet networks has definite possibilities for the long-term. Short term, though, the company is getting mashed.

It is disappointing that some apparently knew this announcement was coming on Wednesday, given that the stock slipped in late afternoon trading and continued down Thursday morning on slightly higher than normal volume -- before the news was released mid-afternoon. However, this is sunk cost and the reality of the world in which the individual investor lives. The big guys are gonna sometimes know stuff before the little guys -- but is it fair? No. This needs to be measured against the advantages individuals have though, like no set time frame, no one to report to and trading in small lots that do not move the market.

UPS

After VENTRITEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VNTX)") else Response.Write("(NASDAQ: VNTX)") end if %> filed a premarket application to market its Contour implantable defibrillator and UBS Securities upped the company to a "trading buy," shares of the medical device concern rose $2 3/4 to $19 3/8.

COLE TAYLOR FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CTFG)") else Response.Write("(NASDAQ: CTFG)") end if %> increased $1 13/16 to $26 1/16 after it announced it would be selling its banking unit to a private investor group.

Business Week's "Hot Stocks" column is hyping PEOPLE'S BANK OF CONNECTICUT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PBCT)") else Response.Write("(NASDAQ: PBCT)") end if %> this morning, citing comments from "market pros" who see hidden value in the shares because of the company's credit card operations. Shares rose $1 1/2 to $22.

MICRION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MICN)") else Response.Write("(NASDAQ: MICN)") end if %> recovered $1 3/4 to $22 1/2 after a massive two-day slide on concerns about its thin-film business that emerged after competitor QUANTUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QTNM)") else Response.Write("(NASDAQ: QTNM)") end if %> announced problems and READ-RITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RDRT)") else Response.Write("(NASDAQ: RDRT)") end if %> was downgraded because of a slow ramp-up of its thin-film business.

DOWNS

Software concern QUARTERDECK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QDEK)") else Response.Write("(NASDAQ: QDEK)") end if %> announced this morning that it anticipates a "substantial" third quarter operating loss after a rapid decline in its sell-through levels. The company announced a restructuring plan, with shares plummeting $2 7/8 to $10.

REPUBLIC ENVIRONMENTAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RESI)") else Response.Write("(NASDAQ: RESI)") end if %> says that it did not understand why its stock went up so much last week, so it has no idea why the stock has gone down so much this week. The stock was down $4 1/4 to $30 1/2 today.

CALIFORNIA MICROWAVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CMIC)") else Response.Write("(NASDAQ: CMIC)") end if %> saw its shares toasted $1 7/8 to $16 5/8 after it joined in the bad quarter forecasting parade, saying that lower than expected bookings and sales in the fourth quarter will lead to fourth quarter results that looks a heck of a lot like its third quarter results.

TRIMBLE NAVIGATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TRMB)") else Response.Write("(NASDAQ: TRMB)") end if %> fell $3 to $20 today after it announced that it will break-even in its fiscal third-quarter, which was far below consensus expectations.

INFOSEEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SEEK)") else Response.Write("(NASDAQ: SEEK)") end if %> continued to get mashed today, down $3/4 to $10 3/4, suggesting that investors are not willing to bid every single Internet search engine concern to ridiculous levels.

Semiconductor manufacturer EXAR CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EXAR)") else Response.Write("(NASDAQ: EXAR)") end if %> was hit today for $1 1/4 to $14 after saying push-outs and product line cancellations will cause first quarter revenues to be about 15% below last year.

INTEGRATED PROCESS EQUIPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IPEC)") else Response.Write("(NASDAQ: IPEC)") end if %> got whacked for $1 1/2 to $24 today after Oppenheimer cut its rating on the company from "buy" to "market performer".

Despite beating consensus by two cents, MICRON ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MUEI)") else Response.Write("(NASDAQ: MUEI)") end if %> fell $3/4 to $14 3/8 as it reported earnings two cents below last year's results. It did not help that its larger cousin, MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %>, also report disappointing net earnings.

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

Transmitted: 06/05/96