THE MOTLEY FOOL LUNCHTIME NEWS: Monday, August 26, 1996

CONFERENCE CALLS

None

FOOL PLATE SPECIAL

Long distance reseller WORLDCOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WCOM)") else Response.Write("(NASDAQ: WCOM)") end if %> vaulted itself into star status this morning when it announced the purchase of local telephone service provider MFS COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MFST)") else Response.Write("(NASDAQ: MFST)") end if %> for $14.4 billion in the fifth-largest merger in U.S. history. Worldcom is forking over 2.1 shares of its stock for each 1.0 shares of MFS Communications common, a move that nets MFS Communication shareholders about $47 a share for a total price tag of about $11.8 billion plus the value of a little over 15 million shares of MFS Communications's preferred stock. MFS only recently finished an acquisition itself, gobbling up Internet service provider UUNet Technologies for a cool $2 billion. The combined company will now be able to offer business customers an end-to-end package of long distance, local and internet access service.

MFS Worldcom will have annual revenues of $5.4 billion with more than $700 million of those dollars being generated internationally. The resulting company will have a market capitalization of more than $20 billion, rivaling many Baby Bells and making it bigger than MCI COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MCIC)") else Response.Write("(NASDAQ: MCIC)") end if %> and SPRINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %>, the only two other non-Bell concerns that offer end-to-end telecommunications services. This deal comes at a price, however. Despite the fact that the combined entity will have 30% annualized revenue growth, the company officals forecast earnings dilution for up to three years as a result of the price being paid today. The companies believe that the savings from the merger will end up paying for this dilution, however.

The real value in this transaction is that Worldom, MFS Communications and UUNet are all focused primarily on the higher margin business telecommunications service, rather than being saddled by federal regulations with having to provide lower margin consumer service. Many Baby Bells make all of their money in local phone service on business customers, breaking even on their consumer services. Because MFS Worldcom will not be bound by these rules, it has a key advantage over the Bells. Add to this that, according to the Telecommunications Reform Act, the Baby Bells need to meet a 14-point checklist showing their markets are open to competition before they can offer long distance service, and MFS Worldcom has an even greater advantage. MFS Communications will already have a fiber-optic long distance network criss-crossing the country, fiber-optic local networks in most major downtown business districts, and probably the best Internet backbone in the business.

MFS Communications surged $8 1/4 to $43 1/8 while Worldcom dropped $4 1/8 to $22 1/4 as the Street digested this news. The effect of today's announcement is not limited to just the two companies involved. AMERICAN COMMUNICATIONS SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACNS)") else Response.Write("(NASDAQ: ACNS)") end if %>, a local service provider in the South and Southwest which recently withdrew a seven million share secondary offering, drove ahead $1 3/8 to $11 3/8 as the purchase of MFS raised the spectre of other long-distance companies like Worldcom following suit. Other local telephone providers making big moves today? TELEPORT COMMUNICATIONS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TCGI)") else Response.Write("(NASDAQ: TCGI)") end if %> rose $2 3/4 to $25, MCLEOD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MCLD)") else Response.Write("(NASDAQ: MCLD)") end if %> jumped $2 to $33 1/2, WINSTAR COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WCII)") else Response.Write("(NASDAQ: WCII)") end if %> leapt $1 9/16 to $20 5/8, BROOKS FIBER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BFPT)") else Response.Write("(NASDAQ: BFPT)") end if %> surged $3 1/2 to $31 and INTERMEDIA COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ICIX)") else Response.Write("(NASDAQ: ICIX)") end if %> cruised ahead $1 1/4 to $29 1/4.

UPS

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CONSECO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CNC)") else Response.Write("(NYSE: CNC)") end if %> is seeking to solidify its market position and enhance shareholder value in a series of transactions announced today. The diversified life, health and worker's compensation insurer:

- purchased all 18 million shares of long-term insurance concern AMERICAN TRAVELLERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATVC)") else Response.Write("(NASDAQ: ATVC)") end if %> with $32 to $35 worth of Conseco stock and is redeeming American's convertible debt, a total of $793 million. Travellers jumped $3 to $31 3/8.

- snapped up 17.8 million shares of CAPITOL AMERICAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAF)") else Response.Write("(NYSE: CAF)") end if %>, trading $30 in cash and $6.50 in Conseco stock for each stub. This will cost $680 million, including $34 million in debt that will be assumed by Conseco. Capitol American surged $10 1/4 to $35 1/4.

- Conseco is buying all of the shares that it does not already own of AMERICAN LIFE HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ALHCP)") else Response.Write("(NASDAQ: ALHCP)") end if %> for $23 in cash and BANKERS LIFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BLH)") else Response.Write("(NYSE: BLH)") end if %> for $25 in cash for a total of $282 million, driving shares of Banker's Life up $2 1/4 to $24.

PENN TREATY AMERICAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PTAC)") else Response.Write("(NASDAQ: PTAC)") end if %>, which underwrites accident and health insurance, rose $1 9/16 to $22 1/4 this morning, apparently in sympathy with all of the properties that Conseco was seen scooping up this morning.

Tobacco stocks are smoking today, with PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> up $3 to $91 after an Indiana jury found that four tobacco companies were not liable for the death of a smoker in a civil trial. RJR NABISCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %> rose $1 1/4 to $26 3/4.

WELLPOINT HEALTH NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLP)") else Response.Write("(NYSE: WLP)") end if %> jumped $7/8 to $27 1/4 as Morgan Stanley initiated coverage of the firm with an "outperform" rating. Wellpoint runs health maintenance organizations in California and has a nationwide pharmacy network.

Merrill Lynch initiated coverage of titanium production technology concern OREGON METALLURGICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OREM)") else Response.Write("(NASDAQ: OREM)") end if %> with a "near- and long-term buy," boosting shares $1 7/8 to $26 7/8. Merrill underwrote an offering of 4 million shares of Oregon's stock last week.

CENTOCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CNTO)") else Response.Write("(NASDAQ: CNTO)") end if %> shares popped up $3/4 to $36 1/8 on news that the company's ReoPro product significantly reduces angioplasty-related complications. Centocor will release the full data from the long-term trials next week.

CAREER HORIZONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHZ)") else Response.Write("(NYSE: CHZ)") end if %> flew up $5 1/2 to $37 3/8 as the company announced it would be acquired by ACCUSTAFF <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASTF)") else Response.Write("(NASDAQ: ASTF)") end if %> for 1.53 Accustaff shares for each 1.0 of Career, about a billion in stock. The combined company will have $1.7 billion in revenues in fiscal 1997.

Sugar and confectionary concern SPRECKELS INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: YALE)") else Response.Write("(NASDAQ: YALE)") end if %> skyrocketed $4 1/4 to $23 5/8 on news that it would be acquired for $24 per share by hoist manufacturer COLUMBUS MCKINNON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CMCO)") else Response.Write("(NASDAQ: CMCO)") end if %>. Spreckels recently rejected a $16 1/2 bid from American Enterprises as "inadequate."

TELLABS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TLAB)") else Response.Write("(NASDAQ: TLAB)") end if %> advanced $1 1/2 to $64 1/4, with Oppenheimer & Co. raising its estimates and reiterating its "buy" rating. Tellabs manufactures telecommunications equipment used to build the backbones of voice and data networks.

Been staying up late at night buying stuff from those cable channels? SILVER KING COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SKTV)") else Response.Write("(NASDAQ: SKTV)") end if %> has. The Barry Diller-controlled company purchased HOME SHOPPING NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HSN)") else Response.Write("(NYSE: HSN)") end if %> for 0.45 shares of stock, pushing Home Shopping up $5/8 to $11 7/8.

DOWNS

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Chip-maker AETRIUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATRM)") else Response.Write("(NASDAQ: ATRM)") end if %> got fried today, warning that it expects to make roughly half of the $0.38 per share that was expected. Shares plunged $2 3/4 to $10 1/4. The company makes automated test handlers for the semiconductor industry.

TEGAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TGAL)") else Response.Write("(NASDAQ: TGAL)") end if %> was another semiconductor equipment manufacturer on the skids today. The designer of plasma etch equipment sees quarterly revenues and earnings below forecasts and will cut 12% of its workforce. Tegal was down $1 3/16 to 5 1/16.

We hope that Fred Hickey of the High Tech Strategist doesn't get as much hate mail for panning MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> as we recently did. Shares of the commodity memory producer dropped $1 1/8 to $22 1/2 as his newsletter hit mailboxes across the country.

DOLLAR TREE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DLTR)") else Response.Write("(NASDAQ: DLTR)") end if %> shares slumped $2 1/4 to $32 1/4 on a Goldman Sachs downgrade from "recommended list" to "trading buy." At more than 40 times earnings, the discount retailer was vulnerable to bad news.

Taking on a tremendous amount of leverage to acquire GANNETT'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GCI)") else Response.Write("(NYSE: GCI)") end if %> billboards has driven shares of OUTDOOR SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OSIA)") else Response.Write("(NASDAQ: OSIA)") end if %> ahead for a well, but the stock dropped back $1 7/8 to $36 1/8 in apparent profit-taking.

BRUSH-WELLMAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BW)") else Response.Write("(NYSE: BW)") end if %> dropped $1 3/8 to $19 after hosting a conference call this morning where it discussed recent lawsuits over beryllium poisoning, a metal that it makes. The firm is vigorously defending itself against suits by former employees.

ANOTHER FOOLISH THING: Desktop Video

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Okay. You've figured out that "the technology sector" isn't really one big mass, and that it is really made up of discrete smaller groups of stocks. Have you discovered yet that one of the most compelling and growing technology niches is Desktop Video? Check out MF Ben's Desktop Video industry area (at Keyword: Sector) and you'll find stock reports on the likes of C-Cube, Zoran, Radius and Oak Technologies and you'll learn how Digital Versatile Disks (DVD) might change our future. If you've been wondering what the heck "DBS", "JPEG", and "compression" really are, you'll appreciate the handy DTV glossary. And if you just want to toss around some ideas or pick other investors' brains, head on over to the DTV message board. AOL 3.0 for Windows people can just click here to go directly to the Desktop Video area.

Randy Befumo (MF Templar), a Fool

Selena Maranjian (MF Selena) another Fool

(c) Copyright 1996, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.

Transmitted: 8/26/96

Randy Befumo (MF Templar), a Fool

Selena Maranjian (MF Selena) another Fool