CONFERENCE CALLS
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FOOL PLATE SPECIAL
Motorola Motors Down
A slightly-higher-than-expected book-to-bill ratio was doused this morning by a profit warning from none other than MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>. The Schaumburg, Illinois-based blue chip announced this morning that third quarter earnings would be "significantly" below weak second quarter results. How much is "significantly?" Try about 25% or more below the $0.54 earnings per share (EPS) that Motorola reported last quarter, compared to analyst expectations of somewhere in the neighborhood of $0.50 EPS. Motorola's press release and concomitant conference call fixed most of the blame on its Semiconductor Products Sector, although weak pricing in paging, cellular phones and modems did not help out very much. In response to the deteriorating earnings picture, Motorola has deferred capital expenditures in the Semiconductor Products Sector, reduced overall work schedules and slowed down manufacturing run rates.
Although Motorola's problems are serious, they are in no way a surprise to any avid followers of the semiconductor industry. The past few months have been a total catastrophe for many companies in the sector and Motorola has been no exception. Semiconductor chip prices plunged in late 1995 as lead times diminished and original equipment manufacturers realized they had way too much product in inventory. Orders dried up as manufacturers began to consume or dump their excess chips, leading to a debilitating price spiral that left some components priced 80% to 90% below year-ago levels. The fire sale continued until Spring, when prices finally stabilized. The 37.8% drop in new orders for semiconductors versus August of last year that the Semiconductor Industry Association (SIA) reported yesterday evening is simply an indication of the average drop in revenues over year-ago levels that semiconductor manufacturers are experiencing.
Motorola has been bid skyward twice in the past few months by an investment company eager to call the bottom in the semiconductor market. Both times gravity overwhelmed the shares and they retreated to the $50 level. Despite the fact that the seasonally-adjusted book-to-bill ratio came out at 0.90, slightly above the 0.88 that analysts were looking for, prices for the October-to-December quarter are going to be substantially below year-ago levels, well below first-quarter numbers, down from second-quarter sales, and at best, probably flat when compared to third-quarter revenues. The continued outbreaks of optimism claiming that the bottom of the "inventory correction" has been reached are doing nothing to help the stocks, as unreasonable expectations keep getting priced in and just as quickly priced out a few weeks later. Individual investors who can pick up shares of this wireless communications franchise on the days of maximum pessimism to build long-term positions could be well-served by this volatility, however. Motorola was down $1 5/8 to $49 this morning, below $50 for the first time since January.
UPS
PREMENOS TECHNOLOGY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRMO)") else Response.Write("(NASDAQ: PRMO)") end if %> got a big bump today when AT&T CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> announced that they would license the company's Templar EDI (Electronic Data Exchange) software. The software will allow secure and reliable business-to-business information transfer on AT&T's value-added network. Premenos was up $4 1/4 to $16 3/8 on the news.
Prudential Securities was obviously pleased with ELECTRONICS FOR IMAGING INC.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EFII)") else Response.Write("(NASDAQ: EFII)") end if %> announcement of the introduction of its next-generation Fiery XJ Color Server, upgrading the stock from a "hold" to a "buy." Electronics for Imaging supplies products which enable color copiers to act as high-speed color printers, and jumped $5 to $71 1/4.
CHEMPOWER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CHEM)") else Response.Write("(NASDAQ: CHEM)") end if %> is going to be acquired by AMERICAN ECO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ECGOF)") else Response.Write("(NASDAQ: ECGOF)") end if %> in a cash merger valued at $6.20 a share, making it a $50 million dollar deal. American Eco is a single-source major contractor for heavy industries, and it believes that the acquisition will strengthen its position as a contractor in the utility industry. Chempower soared $1 13/16 to $6 while American Eco remains unchanged at $10 3/8.
In more merger news, READICARE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RDIC)") else Response.Write("(NASDAQ: RDIC)") end if %> is going to be acquired by HEALTHSOUTH CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRC)") else Response.Write("(NYSE: HRC)") end if %>. Each ReadiCare shareholder will receive .2425 of Healthsouth shares, making the deal worth $70 million at current prices. Healthsouth, a provider of occupational healthcare services, will obtain a strengthened presence in California and Washington through the acquisition. Readicare was up $2 5/8 to $7 3/4, while Healthsouth was down $5/8 to $34 5/8.
PRUDENTIAL INSURANCE fumbled the ball and UNITED HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %> was right there to scoop it up. Prudential lost its exclusive healthcare contract with the American Association of Retired Person (AARP) worth $4.5 billion annually, in a bidding contest, to UNH and two other healthcare providers. UNH stands to gain $4 billion in additional annual revenues from the contract, and traded up $1 7/8 to $40 1/2.
Shares of drug delivery technology developer ADVANCED THERAPEUTIC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ATH)") else Response.Write("(AMEX: ATH)") end if %> popped up $1 1/8 to $35 5/8 after ELAN CORP PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELN)") else Response.Write("(NYSE: ELN)") end if %> decided to exercise its option to buy the company for $141 million ($36 per share).
DOWNS
Traders continue to exit positions in INVISION TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INVN)") else Response.Write("(NASDAQ: INVN)") end if %>, a manufacturer of bomb-detecting equipment that has been bid up in recent weeks on increased concern about airline security. Shares were down $1 1/4 to $26 1/2.
OAKLEY INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OO)") else Response.Write("(NYSE: OO)") end if %> dropped $2 1/4 to $46 3/4 in spite of declaring a two-for-one stock split. The sunglasses maker has been volatile because of troubles at SUNGLASS HUT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RAYS)") else Response.Write("(NASDAQ: RAYS)") end if %>, causing investors to be concerned about sales growth.
An influential brokerage has caused healthcare informatics developer QUALITY SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QSII)") else Response.Write("(NASDAQ: QSII)") end if %> to get pounded for $2 5/8 to $8 1/8 this morning. Pacific Growth Equities has cut its estimates for the company.
ITRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ITRI)") else Response.Write("(NASDAQ: ITRI)") end if %> was a $60 stock a few months ago. Today the wireless meter reader dropped another $6 3/4 to $22 1/4, announcing its second surprisingly bad quarter in a row. Third quarter revenues are going to be "significantly" below expectations.
Despite reports that service at E*TRADE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EGRP)") else Response.Write("(NASDAQ: EGRP)") end if %> has gotten better since its public offering, the general skepticism about the prospects of Internet-related companies is weighing on its shares, down $1 3/8 to $9 1/8 today.
MEMC ELECTRONIC MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFR)") else Response.Write("(NYSE: WFR)") end if %> is quoted as down $2 1/2 to $21 1/2 today, but the stock closed on the New York Stock Exchange at about $29 yesterday, meaning it has dropped close to $8. The silicon wafer company issued a third quarter warning.
Higher than expected manufacturing costs for its plastic children's toys have shares of EMPIRE OF CAROLINA <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: EMP)") else Response.Write("(AMEX: EMP)") end if %> down $1 7/16 to $3 15/16 this morning, after the firm said it anticipates reporting a net loss for the 1996 fiscal year in a few weeks.
FOOL PROTFOLIO STOCKS
Randy Befumo (MF Templar),
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Selena Maranjian (MF Selena)
another Fool