Investment Opinion
FOOL PLATE SPECIAL

Penril DataComm Breaks Apart

In what will probably be the most complicated acquisition this week, PENRIL DATACOMM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PNRL)") else Response.Write("(NASDAQ: PNRL)") end if %> announced this morning that it would spin-off its Access Beyond remote-access subsidiary, freeing up its remaining modem business to be acquired by BAY NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %>. Shareholders will end up with one share of Access Beyond and $10.00 per share in Bay Networks stock after all is said and done.

Bay Networks is buying Digital Signal Processing (DSP) modem business. Penril surged $2 7/8 to $12 7/8 in fairly heavy trading.

Penril described its Access Beyond products as a "complete, integrated solution for remote access connectivity, combining advanced modem, ISDN, remote access, internetworking and terminal connectivity within one scalable, modular, cost-effective product family." Products began shipping in February of 1996 and the company anticipates that the full line of products will be available by the fall of 1996. Access Beyond will have "adequate cash to fund growth in the immediate term and no outstanding debt," according to Executive Vice President Ron Howard. Prior to the spin-off of Access Beyond, Penril also had already announced its intention to sell off its Technipower subsidiary and anticipates dumping Electro-Metrics subsidiaries.

According to information released today, Penril DataComm has 11.9 million outstanding shares. Figures from the company's fiscal third quarter, reported on June 14th, show that it has $5.4 million in outstanding long-term debt. With a market capitalization of $156.2 million at $13 1/8, up $3 1/8, Access Beyond is being valued at approximately $37.2 million assuming that Bay Networks assumes all of its debt. According to the third quarter information, Penril as a whole was on track to do about $52 million this fiscal year if it could repeat the quarter to quarter growth. Of this, $4.5 to $5.0 million appears to be from Electrometrics with the discountinued operations of Technipower not listed on the company statement. Penril has working capital in the $22 million range with Bay Networks assuming the roughly $4.0 million of long term debt the company has.

Assuming the new venture can get 20% of the company's current working capital plus the proceeds from the two unrelated asset sales, you have about $4.5 million plus an additional $4.0 million or so if the units can be dumped at 0.3 to 0.5 times sales. Access Beyond, in the same remote access business as Shiva <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SHVA)") else Response.Write("(NASDAQ: SHVA)") end if %>, will have a clean balance sheet and has roughly 25% of its current market capitalization represented by working capital, if you accept my above assumptions. The facts will not be known for another two weeks when the company files an S-3 registration with the SEC to complete the spin-off. When reached on the phone, Howard was upbeat about the deal, stating that he believed even at today's price the potential of Access Beyond was not fully recognized by the market.

UPS

THE SPORTS AUTHORITY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TSA)") else Response.Write("(NYSE: TSA)") end if %> rose $1 1/2 to $33 after the company announced a 3-for-2 stock split.

Well, it appears SYQUEST TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYQT)") else Response.Write("(NASDAQ: SYQT)") end if %> will not be delisted after all. The company rose $7/8 to $10 1/4 after announcing a $20 million convertible bond offering was placed with some venture capital investors.

Sounds like one MF Boring would have loved. BRENCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BREN)") else Response.Write("(NASDAQ: BREN)") end if %>, a maker of railroad car bearings, popped up $3 1/2 to $15 3/4 after announcing it will be acquired by VARLEN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VRLN)") else Response.Write("(NASDAQ: VRLN)") end if %> for $15 1/2 per share in cash. Varlen rose $1 3/4 to $24 3/4.

DURAMED PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DRMD)") else Response.Write("(NASDAQ: DRMD)") end if %> reported today that it expects to receive Food & Drug Administration (FDA) approval to market a generic version of its estrogen replacement drug, Premarin.

COLE TAYLOR FINANCIAL GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CTFG)") else Response.Write("(NASDAQ: CTFG)") end if %> popped up $2 to $28 1/2 after Piper Jaffray upgraded the company to a "strong buy" from a "market performer" after the company announced on Friday it would break itself in two to maximize shareholder value.

IN FOCUS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INFS)") else Response.Write("(NASDAQ: INFS)") end if %> finally caught a break today after Smith Barney analyst Mary Beth Doherty raised the company to "buy" from "outperform" after it dropped by one-third on Friday when Sony announced it was getting in the liquid-crystal-display market.

CENTER FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CFCX)") else Response.Write("(NASDAQ: CFCX)") end if %> was gobbled up this morning by FIRST UNION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTU)") else Response.Write("(NYSE: FTU)") end if %>, rising $1 1/4 to $24 1/8 in the $379 million acquisition. The first bank acquisition in a while, could this re-ignite the financial acquisition fires that burned so brightly last year?

SAKS HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKS)") else Response.Write("(NYSE: SKS)") end if %> rose $1 1/2 to $34 1/2 after Goldman Sachs issued a "strong buy" and set a price target of $40 a share. Goldman helped to underwrite the company's initial public offering a month ago.

DOWNS

Call it "The Case of the Missing Batteries." The FBI is now investigating the management of EXIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EX)") else Response.Write("(NYSE: EX)") end if %> trying to figure out how 200,000 batteries disappeared from a company warehouse a few months back, causing the shares to fall $2 1/2 to $20 1/8.

COMMUNITY BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CMSB)") else Response.Write("(NASDAQ: CMSB)") end if %> shareholders should *not* panic! Although it looks like the shares are down $11 1/16 to $10 7/16, the reality is that the company has finished converting to a stock holding company from a mutual holding company and effectively issued a two-for-one split in a complicated financial resolicitation.

ZYTEC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZTEC)") else Response.Write("(NASDAQ: ZTEC)") end if %> continues to slide, down $1 1/4 to $14 1/4, a little over a week after filing to issue 2.3 million common shares, including about 300,000 from current shareholders.

Goldman Sachs started OPEN MARKET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OMKT)") else Response.Write("(NASDAQ: OMKT)") end if %> as a "moderate outperform" -- pretty weak considering they helped to underwrite it last month. Stock still rose $3 1/2 to $28 on this news.

Semiconductor-related shares are getting pounded today on no news -- ZILOG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZLG)") else Response.Write("(NASDAQ: ZLG)") end if %> slumped $1 1/2 to $27 7/8, CYRIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYRX)") else Response.Write("(NASDAQ: CYRX)") end if %> was down $1 9/16 to $24 and ONTRAK SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ONTK)") else Response.Write("(NASDAQ: ONTK)") end if %> slid $2 1/4 to $20 1/8.

APTARGROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATR)") else Response.Write("(NYSE: ATR)") end if %> fell $3 5/8 to $36 1/8 this morning after revising expectations for its fiscal second quarter down to the range of $0.47 EPS to $0.51 EPS from $0.61 EPS. The manufacturer of perfume and odor dispensing products cited European softness and a strong lira.

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