Investment Opinion
FOOL PLATE SPECIAL
Modem Mania
Some readers may remember that I got to attend the Bear Stearns Growth Conference on June 19th and 20th, courtesy of some very kind readers. In the Evening News on June 21st, I listed some highlights from the conference and had the following to say about US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %>:
"US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %> gave a pretty upbeat presentation... Their market share in the 28.8 modem market with the Sportster has been expanding rapidly, aided by the fact they have streamlined manufacturing to get product out into the sales channel -- bad news for competitors like Boca Research and Zoom Telephonics."
As confirmation of this prediction, ZOOM TELEPHONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZOOM)") else Response.Write("(NASDAQ: ZOOM)") end if %> was crushed today, down $4 to $12 in heavy trading. The modem maker estimated sales for the second quarter of 1996 would be below expectations due to "the intensified competitive environment". Apparently, pumping the channel full of nice, new Sportsers was just what the doctor ordered for US Robotics. BOCA RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BOCI)") else Response.Write("(NASDAQ: BOCI)") end if %> was down $1 1/2 to $16 in sympathy. Ironically, US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %> lost $4 to $86 on the perception that Zoom's news meant bad news for the industry in general -- a pretty dim view.
The dynamics of this industry have been skewed over the past two years because of intensified demand. US Robotics has barely been able to keep more than two weeks of inventory in the channel -- meaning that many times, the shelf has been bare when consumers have come to look for the US Robotics brand. It was this lack of branded products that allowed names like Zoom and Boca to generate higher sales -- because in technology-space, particularly for complicated peripherals, consumers go for brands that they can trust because they lack the technological sophistication to discern which is the truly superior product.
Now that US Robotics is managing its channel inventory better, the company will continue to gain 28.8 market share at the retail level. They are currently working on the next generation of dial-up modems that will go at speeds above 34.0 and announced the acquisition of some proprietary technology for their ATM switches yesterday when they acquired Scorpio Communications for $50 million in stock. Finally, the US Robotics contract with AT&T to supply the phone giant with Total Control intelligent hubs for their WorldNet dial-up network should allow them to take market share in this market as well.
GREENWICH AIR SERVICES CLASS A <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GASIA)") else Response.Write("(NASDAQ: GASIA)") end if %> rebounded $2 1/2 to $24 1/4 and CLASS B <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GASIB)") else Response.Write("(NASDAQ: GASIB)") end if %> recovered $1/2 to $17 1/2 this morning after getting clobbered all week when a newsletter recommended that investors take profits. Alex. Brown upgraded the Class B shares to "strong buy" from "buy" today based on valuation.
Been a while since we saw a New America stock jump. CELERITEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLTK)") else Response.Write("(NASDAQ: CLTK)") end if %> rose $1 1/4 to $11 3/4 after being profiled in Investor Business Daily's famous puff-piece page that glowingly reports on up-and-coming companies.
SEATTLE FILMWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FOTO)") else Response.Write("(NASDAQ: FOTO)") end if %> flashed up $1 7/16 to $18 11/16 after Smith Barney initiated coverage with a "buy" rating.
Merrill Lynch initiated coverage of software distributor GT INTERACTIVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GTIS)") else Response.Write("(NASDAQ: GTIS)") end if %> with a "buy" this morning, pushing shares up $3/4 to $21.
Some initial public offerings (IPOs) were well-received by investors this morning -- TREXMED <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TMD)") else Response.Write("(AMEX: TMD)") end if %> in particular rose $1/2 to $23 1/4 at the open. The stock climbed from an offering price of $14, although individual investors would have seen little of that gain. Our own MF Prem is adding short descriptions of these companies to the Fool's IPOzone -- check 'em out.
ANNTAYLOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %> just cannot catch a break. The stock got mashed for $1 3/4 to $18 1/2 this morning -- a beating attributed to sickly June same-store sales numbers. Rumor is that with inventories down 25% to 30%, it will be virtually impossible for AnnTaylor to show positive same store sales.
AMWAY ASIA-PACIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAP)") else Response.Write("(NYSE: AAP)") end if %> dropped $1 1/2 to $28 1/2 this morning after reporting third quarter earnings that were two cents below consensus expectations of $0.33 EPS. Amway made $0.41 EPS a year ago, so it was ugly all the way around.
PRISM SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRZM)") else Response.Write("(NASDAQ: PRZM)") end if %> continued to collapse, down $1/4 to $14 1/2 today after it guided expectations for the second quarter down yesterday. The one piece of good news for Prizm shareholders, an upgrade from Cowen, was canceled out by a downgrade by Hambrecht & Quist.
C/NET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CNWK)") else Response.Write("(NASDAQ: CNWK)") end if %> gave back $2 to $17 this morning after yesterday's successful initial public offering left it with a market capitalization in excess of $200 million -- pretty good for a company with all of $3 million and change in trailing revenues.
Finally, the last of the warnings about next quarter's earnings. ASTEA INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATEA)") else Response.Write("(NASDAQ: ATEA)") end if %> got hurt the worst, down $15 to $8 after it announced it would lose $0.24 EPS to $0.29 EPS -- not counting a $1.00 EPS charge relating to an acquisition. Several orders did not close when expected.
INTEGRATED PROCESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IPEC)") else Response.Write("(NASDAQ: IPEC)") end if %> was greased for $3 3/4 to $16 1/2 this morning after reporting that sales for its fiscal fourth quarter would be only $48 million, meaning profits would be around $0.17 EPS. The stock enjoyed a brief rally in May when an executive of APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMAT)") else Response.Write("(NASDAQ: AMAT)") end if %> signed on to run the chemical-mechanical polishing equipment manufacturer.
Only days after DANAHER'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DHR)") else Response.Write("(NYSE: DHR)") end if %> revelation that it was accumulating shares in TYLAN GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TYGN)") else Response.Write("(NASDAQ: TYGN)") end if %> pushed the stock up significantly, those speculators got a slap in the face as the stock slipped $3/4 to $11 5/8. Tylan said the third quarter would fall below last year's results and that it was adopting a shareholder's rights plan to stave off any acquisition.
Food-distributor SYSCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYY)") else Response.Write("(NASDAQ: SYY)") end if %> lost $2 3/8 to $31 7/8 after Donaldson, Lufkin and Jenrette downgraded the stock to "market performer" from "buy".
Wasn't all that long ago that Integrated Services Digital Network (ISDN) provider GANDALF TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GANDF)") else Response.Write("(NASDAQ: GANDF)") end if %> was hot. Down $1 13/16 to $6 today, well off of its high of $20 1/4, it is definitely not. The company expects second quarter revenues of $18 to $19 million and a loss of $0.12 to $0.15 EPS.
Healthcare informatics concern QUALITY SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QSII)") else Response.Write("(NASDAQ: QSII)") end if %> was whacked for $5 to $12 1/4 today when it reported that it would not make estimates for the fiscal first quarter. Apparently, there was a delay in the delivery of some orders.
DRAVO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DRV)") else Response.Write("(NYSE: DRV)") end if %> lost $3/4 to $13 5/8 this morning when it reported that it would not make its second quarter numbers. Extended outages at a customer's power plant reduced shipments of lime during the quarter.
DIGI INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DGII)") else Response.Write("(NASDAQ: DGII)") end if %> reported this morning that it will miss estimates for the next quarter -- for the third time in a row. The communications hardware and software provider lost $7 3/4 to $18 1/4 on the news.
FILENET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FILE)") else Response.Write("(NASDAQ: FILE)") end if %> mentioned after the stock market closed yesterday that it would not make its second quarter numbers, and plunged $9 to $24 as a result.
CENTER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CERN)") else Response.Write("(NASDAQ: CERN)") end if %> will only make $0.02 EPS to $0.05 EPS when it reports second quarter earnings, compared to the $0.21 EPS it earned last year. The stock lost $4 3/8 to $15 1/2.
PARCPLACE-DIGITALK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PARQ)") else Response.Write("(NASDAQ: PARQ)") end if %> dropped $3 17/64 to $5 31/64 this morning after the company forecast a first quarter loss of $0.22 EPS to $0.28 EPS on revenue of $11.5 to $12 million.
SPACETEC IMC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SIMC)") else Response.Write("(NASDAQ: SIMC)") end if %> dropped $2 3/4 to $11 7/8 this morning after it stated that revenues for the first quarter failed to meet the company's expectations and were flat when compared with last year's revenues.
APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AAPL)") else Response.Write("(NASDAQ: AAPL)") end if %> slumped $1 1/4 to $19 3/4 on reports in the Wall Street Journal that sales of the Macintosh line of computers might be down as much as 30% to 50% -- much lower than the 20% number analysts gave last quarter.
SMITH MICRO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SMSI)") else Response.Write("(NASDAQ: SMSI)") end if %> dropped $1 3/4 to $10 1/4 after Oppenheimer trimmed its estimates for the computer retailer.
BOYD GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BYD)") else Response.Write("(NYSE: BYD)") end if %> sees fourth quarter earnings well below the current $0.22 EPS estimates, causing the gambling concern to plunge $3 1/4 to $12 today.
SST TELECOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SSET)") else Response.Write("(NASDAQ: SSET)") end if %> plopped own $1 1/4 to $9 3/8 after the company forecast $0.04 EPS to $0.08 EPS for next quarter on decreased revenues and a lower than expected gross margin.
***FOOLISH CLARIFICATION: Some irate investors in INTERPOINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTP)") else Response.Write("(NASDAQ: INTP)") end if %> got upset when I characterized the company as a "beleagured software" concern. My apologies. I was thinking of INTERLEAF <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LEAF)") else Response.Write("(NASDAQ: LEAF)") end if %> when I wrote that squib and regret the error. MF Templar**
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