CONFERENCE CALLS
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FOOL PLATE SPECIAL
Where In the World Are Broderbund's Earnings?
BRODERBUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BROD)") else Response.Write("(NASDAQ: BROD)") end if %> got smashed today, trading down $3 5/8 to $25 1/4 on heavy volume after the educational and entertainment software developer announced it would not meet fourth quarter expectations. The company announced that revenues look to be down 10% to 15% below year ago levels, signaling earnings that are slightly below the $0.27 EPS consensus estimates analysts were expecting. Broderbund earned $0.33 EPS in the fourth quarter last year, results which topped their best year ever.
Slowing growth in end-user demand for Broderbund's educational, entertainment and productivity software lines, domestically and internationally, as well as flagging sales for its affiliated label products lines were to blame for the weak revenue growth. A net loss from the Living Books joint venture between Broderbund and Random House was not very helpful to overall growth in the bottom line, either. Finally, some financial difficulties among its distributors capped off what was a pretty lousy quarter for them.
Broderbund remains a hit-driven software developer with one of the most extensive catalogs of brandnames in the industry. The company can consistently generate revenues off of their existing backlog of superior products like Print Shop, Where in the World is Carmen Sandeigo? or Myst. However, contrary to the company's stated opinion, they remain very dependent on one or two "hits" a year to juice up financial results. Last year, they had Myst. This year, Myst II was delayed until next Christmas, creating a situation where Broderbund was sure to disappoint unless they could roll out a satisfactory replacement.
At $24 1/8 a stub, Broderbund has a market capitalization of $517.1 million with absolutely no debt and $174.5 million in cash, giving the firm an enterprise value of $342.6 million. Relative to their trailing revenues of $191.2 million, this is still 1.8 times sales, even after netting out the cash. However, Broderbund has already announced it is repurchasing 10% of its stock, and with as much cash as it has on hand, Broderbund might buy back even more to stave off any kind of takeover. This buying will take some time to kick in and assist the company, as it is still widely held by institutions.
In the end, Broderbund's upside is a little more than a year away and is tied to preliminary sales of Myst II, the follow-up to their massive 1995 success. Short of a major hit, the upside appears to be limited to the amount of stock the company can repurchase. The next twelve months or so certainly looks cloudy. The question for investors to ponder today is whether or not the value of Broderbund's various franchises is greater than the current market capitalization of the company. How much money would have to be spent just to recreate Carmen Sandiego or Print Shop? When this number is higher than the current market value of Broderbund, purchasing the shares begins to make sense.
(For more details on their product line, check out Broderbund's website at http://www.broderbund.com.
UPS
Meat distributor cum networking concern DIANA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %> popped $5 to $46 3/4 this morning, gaining more on Friday's news that a fund manager whose fund had been short 57,000 shares recently bought 20,000 shares at $20 1/2 for his own account.
POLARIS INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PII)") else Response.Write("(NYSE: PII)") end if %>, a snowmobile and watercraft manufacturer, rose $1 to $24 after a Barron's article emphasized that though it announced that sales were down, the company pays a large and relatively secure dividend of 2.5%, a 25% payout ratio. Of course, its snowmobile competitor ARCTIC CAT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARTC)") else Response.Write("(NYSE: ARTC)") end if %> has a 2.5% dividend yield as well and has not moved for more than a year since it announced slowing sales growth last June.
Acquisitive drug store chain REVCO DS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RXR)") else Response.Write("(NYSE: RXR)") end if %> is going after another competitor -- the company made a $15 a share cash bid for all of the outstanding stock of southern-based BIG B <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BIGB)") else Response.Write("(NYSE: BIGB)") end if %> this morning. Big B jumped $2 7/8 to $15 1/2 while Revco was up $1/8 to $25 3/4. The Federal Trade Commission recently threatened to block a Revco bid to take out RITE-AID <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RAD)") else Response.Write("(NYSE: RAD)") end if %>, scrubbing the deal.
NETMANAGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NETM)") else Response.Write("(NYSE: NETM)") end if %> soared $1 3/16 to $9 1/4 after the company announced the first Windows 95 TCP/IP solutions approved for use with AT&T'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> Cellular Digital Packet Data, also known as the AT&T Wireless Packet Data Service.
A deal with Dow stock EASTMAN KODAK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %> has sent another company spiraling today. Shares of DANKA BUSINESS SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DANKY)") else Response.Write("(NASDAQ: DANKY)") end if %> jumped $5 1/8 to $35 after the company announced it was purchasing Eastman Kodak's office imaging business for $684 million in cash.
ZEBRA TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZBRA)") else Response.Write("(NASDAQ: ZBRA)") end if %> hurtled up $1 7/8 to $23 3/8 after Robert Baird upgraded the bar code printing manufacturer to "aggressive buy" from "moderately attractive." The brokerage firm has an estimate of $1.20 EPS for 1996.
Although the short interest is pretty high for ol' BIOVAIL <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BVF)") else Response.Write("(AMEX: BVF)") end if %>, a Barron's story highlighting the fact that its time-release drug technology has been successfully used with a high blood pressure medication hoisted the stock $3 1/2 to $30 1/2 this morning.
ACUSON CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ACN)") else Response.Write("(NYSE: ACN)") end if %> rose $1 1/2 to $15 1/8 after Morgan Stanley raised the stock to "outperform" from "neutral." Acuson makes a new type of ultrasound imaging system used in scanning for abdominal disorders.
DOWNS
LOGAL EDUCATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LOGLF)") else Response.Write("(NASDAQ: LOGLF)") end if %>, a producer of interactive, simulation-based, educational science and math software for use in high schools and colleges, dropped $1 5/8 to $5 1/2 after the Israeli firm revealed it would not make its third quarter estimates.
Another casualty amongst the semiconductor manufacturers -- DII GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DIIG)") else Response.Write("(NASDAQ: DIIG)") end if %> plunged $4 to $19 after announcing it was experiencing an order slowdown that would reduce second half revenues by $40 million and earnings by $0.35 EPS.
DAKA INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DKAI)") else Response.Write("(NASDAQ: DKAI)") end if %> tumbled $5 1/8 to $10 1/4 after reporting it does not expect to meet current fiscal 1997 estimates, saying it will take "some time to return to acceptable earnings." The company estimated $0.70 EPS to $0.80 EPS for this year.
The high price of cream is taking the icing off of BEN & JERRY'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BJICA)") else Response.Write("(NASDAQ: BJICA)") end if %> this morning, dumping shares of the ice cream manufacturer $1 1/8 to $13 1/4. The maker of such favorites as Chunky Monkey, Cherry Garcia and Rainforest Crunch will miss its third quarter estimates, bringing in less than the $0.35 EPS it made last year.
REX STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RSC)") else Response.Write("(NYSE: RSC)") end if %> fell $3/4 to $12 3/4 after the electronics retailer reported a dismal second quarter. Total sales slipped 1.6%, same store sales dropped 15.5% and the company only earned $0.16 EPS compared to $0.25 EPS a year ago.
FOOL PROTFOLIO STOCKS
Randy Befumo (MF Templar),
a Fool
Selena Maranjian (MF Selena)
another Fool