FOOL PLATE
SPECIAL
An Investment Opinion by
Randy Befumo
Chips and Dips
Wall Street's vision of the basic business of manufacturing semiconductor chips has changed dramatically since the crazed days of 1995. Instead of viewing these manufacturers as magic money machines, the vision has become much darker. Now the manufacture of semiconductor chips is seen as it truly is, a relentlessly competitive business where capital goods manufacturers race against one another to build a better mousetrap at a lower cost. When specific manufacturers face stiff competition, difficult product transitions, and obsolescence, Wall Street gets worried. Any word of slackening production or falling margins is enough to send a stock spiraling to its doom.
One semiconductor manufacturer reported both slackening production and falling margins, sealing its fate for today's trading session. ESS TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESST)") else Response.Write("(Nasdaq: ESST)") end if %> was lucky enough to beat first quarter consensus earnings estimates by a penny, but a decline in its gross margins has Wall Street running the other way. The stock was down $8 5/8 to $13 7/16 on word that gross margins would also be down in the fiscal second quarter as the company completed a product transition and its new video chip products were shipping in volume. ESS Technology has been a hot topic over the last few months as the company has muscled C-CUBE MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CUBE)") else Response.Write("(Nasdaq: CUBE)") end if %> out of some contracts with Chinese manufacturers of digital video players. Although C-Cube dropped after it was forced to cut prices in response to ESS Technology, apparently executives at that firm are having the last laugh today.
Another former darling of the semiconductor crowd is getting pounded today as well, due to what appears to be a difficult product transition. DSP COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DSPC)") else Response.Write("(Nasdaq: DSPC)") end if %> plunged $3 3/4 to $7 this morning after missing consensus earnings estimates by a penny. The manufacturer of digital signal processors reported earnings of $0.13 per share versus $0.09 in the year ago period on a 17% increase in revenues, a solid but not blistering performance. DSP began its ugly descent in late October of 1996 when the company attempted to purchase PROXIM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PROX)") else Response.Write("(Nasdaq: PROX)") end if %> in a stock deal that used the company's highly valued shares as currency. When DSP's stock proceeded to crash and burn, Proxim backed out of the deal and the company continued to crater all the way down to today's mid-single digit price. Product transition in the cellular phone industry has caused DSP to slash production volumes as customers phase-out DSP's existing products. News that DSP would buy back 2 million of its 44.4 million shares outstanding did not stem the decline.
UPS
Laser systems company GENERAL SCANNING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GSCN)") else Response.Write("(Nasdaq: GSCN)") end if %> gained $2 3/8 to $9 3/8 after the company scored a 15% increase in Q1 earnings per share (EPS) of $0.15, meeting estimates even with dollar strength keeping revenues down.
CYRIX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYRX)") else Response.Write("(Nasdaq: CYRX)") end if %> jumped $4 1/8 to $21 7/8 after the semiconductor company reported Q1 revenues of $75.6 million and EPS of $0.33, stomping estimates of $0.09 per share.
Israeli semiconductor foundry TOWER SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TSEMF)") else Response.Write("(Nasdaq: TSEMF)") end if %> added $1 15/16 to $13 13/16 after reporting Q1 revenues of $29.1 million, up 34% sequentially, and EPS of $0.33, which beat the mean estimate of $0.16 per share.
AVANT! CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVNT)") else Response.Write("(Nasdaq: AVNT)") end if %> gained $1 5/16 to $11 1/8 after the semiconductor design software company reported last night Q1 EPS of $0.25 on revenues of $31 million.
Electronics manufacturing equipment company and semiconductor distributor REPTRON ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: REPT)") else Response.Write("(Nasdaq: REPT)") end if %> rose $2 1/4 to $19 7/8 after announcing that it has withdrawn plans to sell two million shares, citing market conditions.
BDM INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BDMI)") else Response.Write("(Nasdaq: BDMI)") end if %> ticked $3 1/8 higher to $23 1/8 after the systems integration company reported Q1 EPS of $0.23, up 21% year-over-year and a penny per share above estimates.
Data storage software company VERITAS SOFTWARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VRTS)") else Response.Write("(Nasdaq: VRTS)") end if %> scampered $3 5/8 higher to $30 1/4 on reporting Q1 revenues of $12.4 million and EPS of $0.26, handily beating estimates of $0.17 per share.
SIERRA SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SERA)") else Response.Write("(Nasdaq: SERA)") end if %> climbed $1 7/16 to $17 after the networking semiconductor company reported Q1 revenues of $33.6 million and EPS of $0.27, beating estimates of $0.19 per share.
Adult education company STRAYER EDUCATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STRA)") else Response.Write("(Nasdaq: STRA)") end if %> rose $1 7/8 to $22 7/8 after announcing a 1.15 million share stock offering at $21 per share.
TRIQUINT SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TQNT)") else Response.Write("(Nasdaq: TQNT)") end if %> jumped $3 1/8 to $26 after the communications semiconductor chip company reported Q1 EPS of $0.20, in line with estimates.
Local loop telco equipment company ADVANCED FIBRE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AFCI)") else Response.Write("(Nasdaq: AFCI)") end if %> picked up $1 7/8 to $34 3/4 on reporting an 84% advance in Q1 revenues of $44.4 million and EPS of $0.13, which beat estimates by 30%.
DIGITAL EQUIPMENT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEC)") else Response.Write("(NYSE: DEC)") end if %> gained $2 1/4 to $28 1/4 after the Massachusetts computer company reported Q3 revenues of $3.3 billion and EPS of $0.27, which was better than expected.
Minicomputer company DATA GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DGN)") else Response.Write("(NYSE: DGN)") end if %>, which has turned to the Windows NT operating system like DEC, added $1 1/8 to $18 1/8 after reporting record quarterly revenues of $389 million and EPS of $0.32, beating estimates of $0.27 per share.
PROGRESSIVE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PGR)") else Response.Write("(NYSE: PGR)") end if %> gained $3 7/8 to $68 7/8 after the property and casualty insurer reported Q1 operating EPS of $1.05, in line with estimates.
Hospital management company UNIVERSAL HEALTH SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UHS)") else Response.Write("(NYSE: UHS)") end if %> rose $2 3/4 to $36 3/4 on reporting Q1 EPS of $0.65, up 20% year-over-year.
DOWNS
Used-car finance company FIRST MERCHANTS ACCEPTANCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FMAC)") else Response.Write("(Nasdaq: FMAC)") end if %> tumbled $3 1/2 to $3 1/8 after the company announced the discovery of bookkeeping irregularities and the sacking of its CEO in connection with those irregularities.
DIGITAL LIGHTWAVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIGL)") else Response.Write("(Nasdaq: DIGL)") end if %> lost $3 1/2 to $4 after the telecom equipment company reported Q1 revenues of $1.5 million and a larger-than-expected loss of $0.05 per share.
Storage management software company LEGATO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LGTO)") else Response.Write("(Nasdaq: LGTO)") end if %> stumbled $5 to $11 5/8 after reporting Q1 revenues of $16.6 million and EPS of $0.17, missing estimates of $0.18 per share.
ANDREW CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANDW)") else Response.Write("(Nasdaq: ANDW)") end if %> dropped $10 to 25 5/8 after the institutional investors' favorite wireless infrastructure company reported Q2 revenues of $208 million, which disappointed analysts who were looking for revenue growth above 14%.
Materials sciences and electronics manufacturing company RAYCHEM CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RYC)") else Response.Write("(NYSE: RYC)") end if %> fell $13 3/8 to $68 after reporting Q3 EPS of $1.49 on revenues of $428 million, which were restrained by dollar strength against the currencies of trading partners.
COASTCAST CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAR)") else Response.Write("(NYSE: PAR)") end if %> fell $2 1/8 to $11 3/4 after the titanium foundry reported flat Q1 revenues and a 66% decline in EPS, to $0.13 per share, which missed estimates of $0.18.
Medical equipment company INVIVO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SAFE)") else Response.Write("(Nasdaq: SAFE)") end if %> lost $7/8 to $9 on reporting a 40% decline in Q3 EPS of $0.12.
CONFERENCE CALLS
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
(800) 475-6701 (code: 336995) -- replay through 4/18 (North America)
(320) 365-3844 (code: 336995) -- replay through 4/18 (International)
INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>
(402) 280-9021 -- replay through 4/18
360 COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay through 4/22
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>
1-800-633-8284 (reservation # 2584848) -- replay avail through 4/22
APPLIED DIGITAL ACCESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADAX)") else Response.Write("(Nasdaq: ADAX)") end if %>
(402) 220-6032 -- replay through 4/22
FREDDIE MAC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRE)") else Response.Write("(NYSE: FRE)") end if %>
1-800-938-0928 -- replay from 8:00 a.m. EDT on 4/16
through 4:00 p.m. EDT on 4/18
FORD MOTOR CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>
(703) 736-7228 -- replay at 2:00 PM EDT on 4/17
IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %>
(800) 633-8284 (reservation # 2593689)
Replay from 6:30 PM ET through 4/23
MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
(800) 456-5304 (passcode: 1017) -- replay through 4/21
SHIVA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHVA)") else Response.Write("(Nasdaq: SHVA)") end if %>
After 6:00 PM EDT
(800) 458-7879 (code: 679903) -- replay
THIS WEEK'S CONFERENCE CALL SYNOPSES
NIKE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NKE)") else Response.Write("(NYSE: NKE)") end if %> Q3 Conference Call
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