FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

Long Distance Love

The telecommunications industry continues to roil with mergers in the wake of landmark telecommunications reform passed last year by Congress. Although today's merger between competitive long-distance providers EXCEL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECI)") else Response.Write("(NYSE: ECI)") end if %> and TELCO COMMUNICATIONS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCGX)") else Response.Write("(Nasdaq: TCGX)") end if %> would have been possible before the bill became law, the urgency to merge in the face of future competition from the titanic Regional Bell Operating Companies (RBOCs) is certainly a few notches higher. Executives at both companies stressed the combined company will be much better poised to enter the local market as well as the market for wireless services in the future, a dream only possible after the substantial deregulation that occurred in 1996. Obviously, investors agreed that the merger made the resulting company much more competitive as they not only boosted Telco Communications shares $4 5/8 to $26 5/8 but also pushed EXCEL Communications up $1 1/2 to $20 1/4.

EXCEL Communications will exchange 0.7595 of its own shares and $15 cash for each outstanding share of Telco Communications in deal that values Telco at $1.1 billion. The combined company's market capitalization will be $2.9 billion plus the $1 billion in credit Excel received from Lehman Brothers in order to complete the deal. On the plus side of the merger ledger, the company will have 6.3 million customers on 100,000 miles of DS-3 fiber optic lines that generated $2 billion in revenues last year. EXCEL management also believes that it can generate $100 million in cost savings in the first full fiscal year following the merger by putting EXCEL's off-peak minutes on Telco's network, cutting the cost of delivering that long-distance service by 20%, as well as by gaining the normal savings in general and administrative expenses one would expect by consolidating information technology and billing systems.

The fourth-largest residential long-distance carrier in the country, EXCEL Communications utilizes a network marketing system to sell its long-distance service by encouraging "salespeople" to sign up friends, family and neighbors by offering commissions for each account. EXCEL recently had problems with its current network provider, FRONTIER COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRO)") else Response.Write("(NYSE: FRO)") end if %>, which may have precipitated today's merger. Telco Communications has quite a bit of fiber in the ground, and is the largest provider of "dial-around" long-distance service -- where you bypass conventional long-distance carriers by entering a five-digit code before dialing a long-distance number. As the combined companies were only estimated to make $222.3 million in fiscal 1998, the $100 million in savings they project would be a substantial increase. With 137 million shares outstanding following the merger, not counting the authorization the company has to repurchase 10 million shares on the open market, earnings for fiscal 1998 could be as high as $2.35 per share if the company hits its cost-savings target.

UPS

ULTRAFEM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UFEM)") else Response.Write("(Nasdaq: UFEM)") end if %> gained $1 5/8 to $16 1/8 after the women's healthcare products company announced that CVS, Rite-Aid, and REVCO will distribute its INSTEAD product, adding 6,800 stores to that product's distribution channel.

A "long-term buy" rating from Merrill Lynch propelled the shares of EINSTEIN/NOAH BAGEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENBX)") else Response.Write("(Nasdaq: ENBX)") end if %> $13/16 higher to $15 1/16 this morning.

TRICO MARINE SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TMAR)") else Response.Write("(Nasdaq: TMAR)") end if %> tacked on $3 5/8 to $43 1/2 after Jeffries & Co. initiated coverage of the energy industry supply and support boat company with a "buy" rating.

Time-share resorts company SIGNATURE RESORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIGR)") else Response.Write("(Nasdaq: SIGR)") end if %> rose $2 to $30 7/8 after signing a definitive agreement to acquire LSI Group Holdings, which owns 11 resorts located in England, Spain and Austria claiming 25,000 members.

HONG KONG TELECOMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HKT)") else Response.Write("(NYSE: HKT)") end if %> jumped $2 to $24 1/4, a new all-time high, on speculation that the Chinese central government will take an ownership stake in the company. British telecom company CABLE & WIRELESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CWP)") else Response.Write("(NYSE: CWP)") end if %> also gained $1 3/8 to $25 7/5, as it owns the majority of Hong Kong Telecom.

Russia's largest wireless telecom company VIMPEL TELECOMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VIP)") else Response.Write("(NYSE: VIP)") end if %> added $1 5/8 to $31 3/8 after reporting Q1 earnings per share (EPS) of $0.65, up 124% year-over-year.

DOWNS

RAID storage systems and tape drive systems maker STORAGE DIMENSIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STDM)") else Response.Write("(Nasdaq: STDM)") end if %> lost $4 to $6 after pre-announcing a 10% to 15% decline in first quarter revenues and a loss per share, below estimates of $0.17 per share, due to a litany of complaints about industry pricing and staffing levels.

AKSYS LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AKSY)") else Response.Write("(Nasdaq: AKSY)") end if %> plunged $3 1/8 to $5 3/4 after the developer of a home dialysis machine said that the application for FDA approval of that device will be delayed by nine months.

Call center help desk software company VERSATILITY INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VERS)") else Response.Write("(Nasdaq: VERS)") end if %> slid $2 7/8 to $10 7/8 after announcing Q4 revenues of $6.2 million and EPS of $0.12, up 50% over last year. Merrill Lynch downgraded the shares this morning to "near-term neutral" from "near-term buy."

OPTICAL CABLE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OCCF)") else Response.Write("(Nasdaq: OCCF)") end if %>, home of the do-it-yourself IPO and sagacious financial guidance, lost $1 1/4 to $8 5/8 after reporting Q2 EPS of $0.04, which was flat year-over-year as were revenues.

Glad Bag, STP Oil Treatment, Simonize, and cat litter company FIRST BRANDS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FBR)") else Response.Write("(NYSE: FBR)") end if %> fell $3 1/4 to $22 3/4 after guiding down Q4 EPS estimates as much as 42% below the current mean estimate of $0.48. The company also forecast soft earnings growth for the first half of 1998.

CHAMPION ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHB)") else Response.Write("(NYSE: CHB)") end if %> fell $1 1/8 to $14 5/8 after the manufactured home company warned that industry growth estimates of 4% to 7% for 1997 were too high and that dealer inventories need to be reduced. It also warned that Q2 EPS estimates might be too high, suggesting that earnings might be down from last year's Q2 EPS of $0.39.

European chipmaker SGS-THOMSON N.V. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STM)") else Response.Write("(NYSE: STM)") end if %> slid $3 5/8 to $76 7/8 on pre-announcing sequential revenue growth in Q2, but flat EPS around $0.65, below estimates of $0.85.

CONFERENCE CALLS

DIGEX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIGX)") else Response.Write("(Nasdaq: DIGX)") end if %>
(Re: Agreement to be acquired by INTERMEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ICIX)") else Response.Write("(Nasdaq: ICIX)") end if %>
(800) 633-8284 (ID # 2832850) -- replay available for 24 hours

06/09/97 (Monday)
Boeing Business Jets (A joint venture between GE and BA)
(News conference for major business announcement)
(800) 633-8284 (code: 2815407) -- replay from 8:00 p.m. EDT

THIS WEEK'S CONFERENCE CALL SYNOPSES

NOVELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOVL)") else Response.Write("(Nasdaq: NOVL)") end if %> Q2 Call
CIRCUS CIRCUS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CIR)") else Response.Write("(NYSE: CIR)") end if %> Q1 Call
INTUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> Q3 Call

FOOL PORTFOLIO                  BORING PORTFOLIO

ATCT up $1 3/32 at $5 23/32     ATLS down $3/16 at $28 5/16
AOL down $5/8 at $56 7/8        BGP unch. at $23 1/8
CHV up $1 at $73                CSL down $1/8 at $30 1/2
COMS up $13/16 at $45           CSCO unch. at $64 3/4
DJT unch. at $9 3/4             GNT up $5/8 at $36 1/4
GM down $1/4 at $56 1/2         ORCL up $1/2 at $48
IOM down $1/2 at $19 3/4        OXHP down $1/8 at $71 7/8
KLAC down $1/8 at $46 1/4       PMSI down $1/16 at $11 5/8
LU down $1/4 at $63 3/8         TDW up $1/8 at $43 7/8
MMM up $1 3/8 at $92 3/8
T down $1/8 at $35 3/8

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Randy Befumo (TMF Templr), a Fool
Fool Plate Special

Dale Wettlaufer (TMF Ralegh), another Fool
Ups & Downs

Brian Bauer (TMF Hoops), and yet another Fool
Editing