FOOL PLATE SPECIAL
An Investment Opinion by MF Templar

3Com Merges with U.S. Robotics

The data-networking world got a little smaller last night after 3COM CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> announced it intended to acquire all of the outstanding shares of U.S. ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USRX)") else Response.Write("(Nasdaq: USRX)") end if %>. The Santa Clara, California-based networker proposed swapping 1.75 shares of 3Com common stock for each share of U.S. Robotics. Initially shareholders of U.S. Robotics were jubilant, pushing shares past $65 a stub in after-hours trading. This morning U.S. Robotics is only up $2 1/2 to $63 1/2, while shares of 3Com slid $2 5/8 to $36 3/8. 3Com is issuing 154.2 million shares to acquire U.S. Robotics, valuing the Skokie, Illinois-based company at roughly the same price as the market currently estimates 3Com is worth. The combined company will be worth $11.9 billion, with $5.1 billion in trailing sales, 11.7% profit margins and $1.78 in trailing earnings per share (EPS).

Shareholders of both companies have had a rough ride over the last few months and given the market reaction to the merger, things are probably not going to improve anytime soon. 3Com has been crushed since hitting the low $70s in early January due to much-publicized price-cuts on network interface cards (NICs) and some price promotion on low-end hubs and switches. U.S. Rob tics has been on a roller-coaster ride as its lead-time in the race to bring 56 bits/second modem technology to market has apparently been reportedly diminished, as ROCKWELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ROK)") else Response.Write("(NYSE: ROK)") end if %> says it will have its competing 56KFLEX on the shelves in early March. Given Robotics only shipped on Monday, if Rockwell can manage to keep its promise the two standards will be available to consumers within a two-week period, costing Robotics a critical advantage.

Combined estimates call for the combined company to make roughly $2.00 in EPS this fiscal year and $2.61 the next year, assuming that profit forecasts remain intact. These numbers were calculated by taking the current estimates, multiplying them by the current shares outstanding for each specific company and then dividing the sum of the earnings by the new number of shares outstanding. As 3Com and U.S. Robotics say that there will be no dilution and that the merger might be slightly accretive to next year's earnings as they will save on research, development, general and administrative costs, these numbers are probably a pretty good start for investors. This values the entire company at 20 times trailing earnings, 18 times this year's estimates, and 13.7 times next year's estimates. At 2.3 times sales with operating margins of roughly 17% to 18%, if the combined company can merge with minimal chaos, this could be an attractive longer-term opportunity.

UPS

CADUS PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KDUS)") else Response.Write("(Nasdaq: KDUS)") end if %> gained $3 1/2 to $18 after signing a biotech research agreement with SMITHKLINE BEECHAM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBH)") else Response.Write("(NYSE: SBH)") end if %>, which will bring the company $43 million over five years in the form of research funds, equity investments, and incentive awards.

Fool Portfolio holding ATC COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATCT)") else Response.Write("(Nasdaq: ATCT)") end if %> moved up $1 3/8 to $8 after the company announced it has retained a marketing firm to boost sales. The company was also mentioned on this morning's CBNC Squawk Box.

PATRICK INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PATK)") else Response.Write("(Nasdaq: PATK)") end if %> gained $1 3/8 to $16 5/8 after the building products maker was also mentioned on CNBC this morning.

Computer distributor CHS ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHSE)") else Response.Write("(Nasdaq: CHSE)") end if %>, which serves the Latin American and European markets, rose $1 7/8 to $21 on reporting Q4 sales of $860 million and earnings per share (EPS) of $0.57 (before charges), beating estimates of $0.33.

SANDISK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNDK)") else Response.Write("(Nasdaq: SNDK)") end if %> gained $7/8 to $13 1/2 after the U.S. International Trade Commission ruled that Samsung infringed on the company's flash memory patents.

Transmission equipment and cutting tools company REGAL-BELOIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: RBC)") else Response.Write("(AMEX: RBC)") end if %> moved up $2 1/8 to $23 following the company's announcement that it will acquire Marathon Electric, a manufacturer of electric motors and generators, for $240 million in cash.

SHIVA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHVA)") else Response.Write("(Nasdaq: SHVA)") end if %> gained $1 1/2 to $16 3/4 as investors pick over possible acquisition targets in the networking world.

DOWNS

CITRIX SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTXS)") else Response.Write("(Nasdaq: CTXS)") end if %> plunged $15 to $11 1/4 after the client-server software company said MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> will incorporate Citrix functions into Windows NT refinements.

NOVELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOVL)") else Response.Write("(Nasdaq: NOVL)") end if %> lost $2 1/8 to $10 3/4 after reporting Q1 sales of $375 million and EPS of $0.15, missing estimates of $0.18. Brown Brothers Harriman cut its rating on the network operating systems company to "short-term avoid" from "buy."

Medical practice management firm FPA MEDICAL MANAGEMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FPAM)") else Response.Write("(Nasdaq: FPAM)") end if %> fell $3 to $25 3/4 on reporting Q4 EPS of $0.18, beating estimates of $0.16, on a 166% increase in sales of $151 million.

AMWAY JAPAN LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AJL)") else Response.Write("(NYSE: AJL)") end if %> lost $2 to $13 after the consumer product network marketing company said it expects sales to be flat in 1997 and earnings to drop 6.8% in yen terms.

Outlet stores real estate investment trust HORIZON GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HGI)") else Response.Write("(NYSE: HGI)") end if %> fell $1 1/8 to $13 1/2 after reporting Q4 funds from operations (FFO) of $0.51 per share vs. $0.68 last year.

ADE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADEX)") else Response.Write("(Nasdaq: ADEX)") end if %> slipped $1 1/2 to $17 1/2 after the semiconductor wafer inspection equipment maker reported Q3 EPS of $0.38, beating estimates of $0.36.

Oilfield services company DAWSON PRODUCTION SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DPSI)") else Response.Write("(Nasdaq: DPSI)") end if %> lost $1 1/8 to $11 5/8 after announcing the appointment of a new chief operating officer.

U.S. SATELLITE BROADCASTING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USSB)") else Response.Write("(Nasdaq: USSB)") end if %> lost $1 to $13 1/4 on a "sell" recommendation from Unterberg Harris Securities.

Laptop computer network access device maker XIRCOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XIRC)") else Response.Write("(Nasdaq: XIRC)") end if %> fell $2 1/8 to $21 1/2 and wide area network switch maker ASCEND <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> lost $3 1/4 to $59 1/8 in reaction to the 3Com-U.S. Robotics deal.

CONFERENCE CALLS

3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> -US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USRX)") else Response.Write("(Nasdaq: USRX)") end if %>
To Discuss Merger Proposal
(800) 633-8284 (code 2531747) -- replay

LIMITED INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTD)") else Response.Write("(NYSE: LTD)") end if %>
(800) 805-3502

MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRRW)") else Response.Write("(Nasdaq: MRRW)") end if %>
(201) 628-6885 replay until 2/28

ELTEK LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELTKF)") else Response.Write("(Nasdaq: ELTKF)") end if %>
(913) 661-0487 code: 314285

HOME DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %>
(402) 220-3005 -- replay after 12:00 noon until 2/28

ORTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORTL)") else Response.Write("(Nasdaq: ORTL)") end if %>
(402) 220-5186 -- replay through 3/7

NOVELL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOVL)") else Response.Write("(Nasdaq: NOVL)") end if %>
(402) 280-9008 -- replay

INTUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %>
(800) 938-1160 -- replay

02/28/97 (Friday)
Duff & Phelps Credit Rating Co.
(Call discussing the subprime auto finance industry)
10:30 a.m. EST
(888) 659-7023 (password DCR) -- live
(888) 441-5984 (password DCR) -- replay @ 12:30 PM EST only

FOOL PORTFOLIO STOCKS

FOOL PORTFOLIO                 BORING PORTFOLIO
ATCT up $1 1/2 at $8 1/8       BGP down $1/8 at $42 7/8
AOL down $5/8 at $38 1/2       CSL down $3/8 at $33 5/8
CHV down $1/4 at $66 3/4       CSCO down $1 3/8 at $56 3/4
COMS down $2 1/4 at $36 3/4    GNT up $7/8 at $38 1/8
GM down $1/4 at $58 1/2        ORCL down $1/2 at $40 1/4
IOM down $3/8 at $15 7/8       OXHP down $3/8 at $56
KLAC down $1 1/4 at $42 7/8    PMSI down $1/4 at $11 1/2
LU up $1 5/8 at $56 3/4        SLR down $3/4 at $55 1/8
MMM down $1/8 at $89 7/8       TDW down $7/8 at $42 3/4
T down $1/4 at $40 1/2