Investment Opinion
FOOL PLATE SPECIAL
A Soft Technophrenia Reprise
Fears about second quarter results continue to mount as a slew of companies preannounced bad quarters this morning. Although the details varied from company to company, the core story was the same -- "we ain't doing the business we thought that we would". The high-profile belly-flops of a number of so-called "technology" stocks should weigh on the minds of Wise portfolio managers as they assiduously reduce their exposure to this mythological sector because of the perceived "business risk".
Fools continue to wonder why some companies are considered "technology" companies and why some are not and what makes the difference. If you are a small company developing a drug or a medical device you are biotechnology. If you are a large company with a consumer brand name like Johnson and Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> you are a blue-chip, defensive stock. If you produce software, you are a "technology" company -- unless you do software for the healthcare industry, the oilfield services and equipment industry or computer-aided design for various engineering professions. Basically, you are software if you are in enterprise or consumer space -- a bizarre juxtaposition not repeated anywhere else in investment thinking. (Gee, Alcoa and Coca-Cola are in the same sector, right? They are big industrial or consumer companies.)
And look at the names of those who expect to miss their quarters -- these are not the star performers of the last decade. Losers today include BORLAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BORL)") else Response.Write("(NASDAQ: BORL)") end if %>, DIGITAL EQUIPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEC)") else Response.Write("(NYSE: DEC)") end if %>, SYBASE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYBS)") else Response.Write("(NASDAQ: SYBS)") end if %> and CREE RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CREE)") else Response.Write("(NASDAQ: CREE)") end if %>. What do they all have in common? They all cried uncle *last* quarter. In fact, at least one of them cried uncle two quarters before that. Can we say *company-specific* problems? The rest of the names warning about next quarter? A bunch of small-fries.
FLAMEL TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FLMLY)") else Response.Write("(NASDAQ: FLMLY)") end if %> popped up $1 3/8 to $10 1/4 this morning after Oppenheimer initiated the French-developer of controlled release drug-products with a "buy" rating. Oppenheimer was one of the lead underwriters for the initial public offering (IPO) last month.
INTERPOINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTP)") else Response.Write("(NASDAQ: INTP)") end if %> announced late yesterday that it planned to spin off its Advanced Digital Information Corp. unit, causing shares of the beleaguered software concern to rally $1 3/4 to $16 3/4.
AMERICAN MOBILE SATELLITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SKYC)") else Response.Write("(NASDAQ: SKYC)") end if %> was buoyed by $1 to $16 1/2 when it announced a $225 million financing package that will reportedly meet its capital requirements going forward.
Hambrecht & Quist upgraded GT INTERACTIVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GTIS)") else Response.Write("(NASDAQ: GTIS)") end if %> from "buy" to "strong buy" today based on the company's recent acquisitions, a strong product line, and a strengthening publishing business. Shares were up $13/16 to $19 13/16.
REPUBLIC ENVIRONMENTAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IASI)") else Response.Write("(NASDAQ: IASI)") end if %>, recently spun-off from REPUBLIC INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RWIN)") else Response.Write("(NASDAQ: RWIN)") end if %> rose $3/4 to $15 1/4 the day after it changed its ticker symbol. The environmental services concern has recently entered into a complicated merger which will dramatically expand its core business.
Well, not everyone is warning about bad second quarters. ORBITAL SCIENCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ORBI)") else Response.Write("(NASDAQ: ORBI)") end if %> happily announced this morning that it has received $300 million in orders in the second quarter, calling $230 million "firm" and the remaining $75 million "options". Apparently this exceeded the Street's expectations, as the stock was up $7/8 to $17 1/2.
Nonline coverage affects stock prices! Electro-optical measuring device maker ZYGO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZIGO)") else Response.Write("(NASDAQ: ZIGO)") end if %> fell $7/8 to $41 1/8 while GREENWICH AIR SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GASIB)") else Response.Write("(NASDAQ: GASIB)") end if %> fell $1 to $16 1/2 after Louis Navieller's MPT Review faxed out "sell" recommendations yesterday morning.
SEGUE SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SEGU)") else Response.Write("(NASDAQ: SEGU)") end if %> was greased for $11 3/4 to $12 3/4 today after announcing that its second quarter will bring a $0.01 EPS to $0.02 EPS loss on $3.5 to $3.6 million in revenues.
VITALCOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VCOM)") else Response.Write("(NASDAQ: VCOM)") end if %> was another firm that pre-announced a bad second quarter, reporting that the slippage of a large order will cause it to miss revenue targets. The stock slipped $3 7/16 to $13 3/8.
IMMUNOMEDICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMMU)") else Response.Write("(NASDAQ: IMMU)") end if %> gave back some of yesterday's gains after the Food & Drug Administration (FDA) approved a cancer diagnostic test, falling $1 7/8 to $11.
SUNGLASS HUTT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RAYS)") else Response.Write("(NASDAQ: RAYS)") end if %> was mauled for another $1 1/4 to $18 3/4 today after being dropped from Smith Barney's "mid-cap recommended list." At least it was not purged from the much bally-hooed "stocks for left-handed philatelists" list.
Not even toys are immune. MATTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: MAT)") else Response.Write("(AMEX: MAT)") end if %> was shot for $1 7/8 to $27 1/4 this morning after forecasting that earnings for the year will be up only 15% from last year's results.
Apparently the granting of a new trial in a patent dispute was not enough for some CELLPRO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CPRO)") else Response.Write("(NASDAQ: CPRO)") end if %> shareholders. The stock fell $1 1/8 to $15 5/8 as investors who were hoping for the judge to set the case aside completely bailed.
AMERICAN RADIO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMRD)") else Response.Write("(NASDAQ: AMRD)") end if %> was downgraded from a "strong buy" to a "neutral" over at busy brokerage Smith Barney, knocking shares of the nascent radio king down $3 1/2 to $38 1/2.
CALIBER SYSTEM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBB)") else Response.Write("(NYSE: CBB)") end if %> posted a second quarter net of $0.01 EPS this morning, a complete belly-flop when compared to estimates in excess of $0.20 EPS. The Dow Transportation component was crushed for $3 3/8 to $29 5/8 in heavy trading.
Aye, caramba. DIGITAL EQUIPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEC)") else Response.Write("(NYSE: DEC)") end if %> made it two quarters in a row today when it forecast lower-than-expected earnings on revenues that will be below the same period one year ago. Down $4 to $41 7/8 this morning, investors are now realizing that they are far past the so-called "sweet spot" of the turnaround. The head of the Computer Systems Division has resigned and the company is laying off 7,000 employees.
Even as ORACLE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ORCL)") else Response.Write("(NASDAQ: ORCL)") end if %> has soared and INFORMIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INFX)") else Response.Write("(NASDAQ: INFX)") end if %> has muddled along, SYBASE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYBS)") else Response.Write("(NASDAQ: SYBS)") end if %> continues to keep on messing up. Shares of the database concern dropped $1 19/32 to $18 13/32 this morning after the company forecast a second quarter loss of $20 million, far below the revised estimates that came out last week. "Demand for [our] products has been slower than expected", the company said.
PRISM SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRZM)") else Response.Write("(NASDAQ: PRZM)") end if %> warned of second quarter revenues of $7.4 to $7.6 million, with a net loss to boot. The stock fell $5 1/4 to $13 1/2 as Hambrecht & Quist downgraded the firm.
SILICON STORAGE TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SSTI)") else Response.Write("(NASDAQ: SSTI)") end if %> was crunched for $3 1/2 to $10 1/4 after the company told the Street to expect revenues of $23 million and net income of only $0.14 EPS to $0.15 EPS in the second quarter. Analysts were looking for about $0.18 EPS per share.
ROOSEVELT FEDERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RFED)") else Response.Write("(NASDAQ: RFED)") end if %> slipped $13/16 to $18 1/16 this morning after pre-announcing weak second quarter results of only $0.48 EPS versus expectations of $0.50 EPS.
Higher-than-expected costs for its proprietary blue light-emitting diodes (LEDs) will push CREE RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CREE)") else Response.Write("(NASDAQ: CREE)") end if %> to a fourth quarter loss of $0.02 EPS to $0.05 EPS a share, in contrast to expectations of a $0.03 EPS profit. The stock is down $2 3/4 to $13.
WONDERWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WNDR)") else Response.Write("(NASDAQ: WNDR)") end if %> waited until after the market closed last night to announce that second quarter revenues would be below expectations due to lackluster new product revenues, causing shares of the factory automation software concern to give up $4 to $15 1/8 this morning. Alex Brown trimmed the stock from "strong buy" to "buy" today.
AMERICA SERVICE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASGR)") else Response.Write("(NASDAQ: ASGR)") end if %> forecast a second quarter loss of $0.60 EPS to $0.65 EPS compared to estimates of $0.13 EPS due to start-up issues in Georgia, and saw its stock fall $4 1/4 to $13 1/4. The company provides healthcare in prison systems in the United States.
Down-and-out software developer BORLAND INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BORL)") else Response.Write("(NASDAQ: BORL)") end if %> continues to slide, losing $1 1/4 to $8 today. The company is looking at a $0.53 EPS to $0.56 EPS loss on first quarter revenues of $34 to $35 million, far below expectations. The president and chief executive officer (CEO) has resigned after this second disappointment in as many quarters. OPEN ENVIRONMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OPEN)") else Response.Write("(NASDAQ: OPEN)") end if %>, in a stock-for-stock merger with Borland, slipped $3/4 to $4 5/8.
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