CONFERENCE CALLS
07/24/96 (Wednesday)
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INVESTMENT OPINION
Data Points
The massive correction in semiconductor pricing driven by inventory adjustments, component obselence, and the relentless drive toward smaller, more sophisticated packages has already happened. Shocked semiconductor manufacturers have already begun to trim their capital spending budgets over the next two to six quarters, creating despair among the semiconductor capital equipment manufacturers who sell the semiconductor manufacturers expensive gadgets with which to make chips. Company after company in both industries talk about uncertainty, bring down expectations, and in general throw a wet blanket on what had been a pretty nice party.
Unfortunately for investors, the true import of the above still has not been priced into many of the stocks, as one can witness from seeing company after company in either industry cut in half or worse over the last few months. People realize things at different speeds, and the late risers to the difficulties in the sector are still driving the selling. "My electronic component company is somehow different," many have said, unaware that even if the market did not perceive that difference in the near-term, their baby would still be thrown out with the bathwater.
This is a market that demands a long-term horizon from the investor who is not plugged into the ebbs and flows of capital among the large manufacturers of various component goods. People who have lost money in many of these stocks may take years to make it back -- or may never make it back, in the case of one commodity DRAM manufacturer I like to rag on all the time in this column. Competition here is ruthless -- you need to constantly pour money into research and development to be newer-better-bigger or you risk being tossed onto the junkheap of history. The general sell-off in all of these companies will not end until there is some kind of factual information that a bottom has been hit, not opinions from some selected CEOs while the rest of the executive crowd talks about how they do not know what will happen next week. Investors either need to be very patient or admit fundamental error. The middle ground of hanging tough for a few weeks or months to break-even is becoming more and more impossible.
US SURGICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USS)") else Response.Write("(NYSE: USS)") end if %> surged $1 5/8 to $30 3/8 today after posting an 8% revenue increase last night. The controversial chief executive officer (CEO) also announced his retirement last night. Cowen & Co. upgraded the stock to "buy" while Oppenheimer and Prudential were content just to raise their estimates.
A long way off of its highs, CADENCE DESIGN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDN)") else Response.Write("(NYSE: CDN)") end if %> still managed to climb $2 1/8 to $25 1/8 this morning after reporting earnings that were a penny ahead of consensus expectations of $0.30 EPS.
RATIONAL SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RATL)") else Response.Write("(NASDAQ: RATL)") end if %> posted earnings of $0.23 EPS, leaps and bounds above the $0.15 EPS that analysts were looking for. The company rose $4 1/4 to $44 and said it intended to split the stock two-for-one.
Better-than-expected results from COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> caused the shares to perk up $2 1/2 to $47 1/2 today. The company reported earnings that were slightly higher than expected because the company had gross margins of 23% compared to the 22% it guided analysts to expect. Its chief executive officer (CEO) apparently also made positive comments in the conference call this morning.
PEOPLESOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PSFT)") else Response.Write("(NASDAQ: PSFT)") end if %> drove ahead $5 1/4 to $63 after beating consensus estimates by more than 15% and getting an upgrade and estimate increase from Morgan Stanley.
Solid earnings from NATIONAL INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NATI)") else Response.Write("(NASDAQ: NATI)") end if %> helped to boost the shares $2 1/2 to $24 1/2 this morning. The company earned $0.28 EPS before a one-time charge this morning.
XYLAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: XYLN)") else Response.Write("(NASDAQ: XYLN)") end if %> responded well this morning when Robertson Stephens announced that it had upgraded estimates for the company after the agreement to work with IBM on certain projects was announced, moving up $2 to $38 1/4.
FEI CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FEIC)") else Response.Write("(NASDAQ: FEIC)") end if %> reported extremely disappointing results today, stating that it made only $0.09 EPS in the second quarter compared to old expectations of $0.19 EPS -- which it said it would not meet two weeks ago. The stock is off $5/8 to $8 3/8.
Whoosh. FRITZ COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FRTZ)") else Response.Write("(NASDAQ: FRTZ)") end if %> is taking all sorts of charges, knocking the stock down $15 3/4 to $11 3/4 today. The firm will lose $3.4 million in the fiscal fourth quarter because of merger-related charges and will also restate previously announced third quarter earnings because of $11 million in additional charges it has decided to take.
ADVANCED TECHNOLOGY LABS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATLI)") else Response.Write("(NASDAQ: ATLI)") end if %> was munched for $2 1/2 to $29 3/8 today despite smashing estimates by more than 25% as net income tripled. There was no clear reason for the sell-off in shares of the ultrasound device manufacturer.
Unfortunately for PENDERM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DERM)") else Response.Write("(NASDAQ: DERM)") end if %>, executives at JOHNSON & JOHNSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> were in a feisty mood when they woke up. Shares of Penterm dropped $1 3/4 to $6 1/4 this morning after Johnson & Johnson filed a patent infringement suit against the company's Avita gel product.
ALLIED HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AHPI)") else Response.Write("(NASDAQ: AHPI)") end if %> will lose $2 million in the first quarter due to some problems in swallowing recent acquisitions. Shares dropped $1 3/4 to $7 1/4 as the company talked about suspending its quarterly dividend.
Big moves in little stocks. Shares of ZYTEC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZTEC)") else Response.Write("(NASDAQ: ZTEC)") end if %> plunged $1 3/4 to $11 5/8 this morning after the firm forecast a soft second half of the year in spite of the 50% revenue growth and 400%-plus EPS increase they reported last evening.
MATTSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MTSN)") else Response.Write("(NASDAQ: MTSN)") end if %> dropped $1 5/8 to $7 3/4 this morning after reporting lower-than-expected earnings of $0.23 EPS, two cents lighter than expectations. Gunnar Miller at PaineWebber slashed his numbers for the company. PRI AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRIA)") else Response.Write("(NASDAQ: PRIA)") end if %> also slipped $1/2 to $23 3/4 after it missed its quarter by a few pennies.
Shares of FILENET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FILE)") else Response.Write("(NASDAQ: FILE)") end if %> tumbled $1 to $20 1/2 after the company reported earnings of $0.15 EPS, in line with lowered estimates of $0.15 EPS that the company put out at the beginning of July. Management still intends to buy back about 1% of its shares outstanding.
GLENARYE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GEMS)") else Response.Write("(NASDAQ: GEMS)") end if %> only made its quarterly numbers, and got racked for $5 to $40 as a penalty for not exceeding estimates.
The semiconductor chip inventory correction continues to take casualty after casualty. ACTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACTL)") else Response.Write("(NASDAQ: ACTL)") end if %> dropped $1 1/4 to $13 5/8 after its quarterly conference call, reporting earnings in-line with expectations but forecasting an uncertain second half.
AMC ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AEN)") else Response.Write("(NYSE: AEN)") end if %> dropped $2 1/4 to $20 5/8 after it forecast a $0.10 EPS loss in its fiscal first quarter, blaming a lack of decent films and start-up costs at new theaters for its difficulties.
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