FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

Microsoft Deploys Cash in Cable

COMCAST CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSA)") else Response.Write("(Nasdaq: CMCSA)") end if %> soared $3 7/16 to $21 11/16 after cash-rich MICROSOFT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> announced it would invest $1 billion into the cable provider. Microsoft's money will be used to enable Comcast to deploy high-speed data and video services via its cable system. Microsoft Chairman Bill Gates stated that Microsoft chose Comcast because of its "integrated approach to cable distribution, programming and telecommunications." Gates will now work closely with Comcast President Brian Roberts on creating a mutually beneficial long-term strategy that shepherds the convergence of conventional television and the desktop personal computer into a single home entertainment application.

Microsoft's cash will be used to transform Comcast's cable system into a broadband pipe to deliver high bandwidth applications for personal computers. Because video applications are so large, it is impossible to beam them out to personal computers through conventional copper wire without using some sort of amplifying technology. To ensure that TV and PC converge quickly, many have focused on the cable boxes already in millions of homes as the quickest way to deliver high bandwidth entertainment. With the fourth largest base of cable subscribers in the country, Comcast makes a decent strategic partner for Microsoft. Its cable system is concentrated in the densely populated Northeast, and it is already working with a consortium of cable providers on another high bandwidth cable to computer application -- the @Home Network.

In return for the cash, Microsoft will receive roughly 24.6 million shares of Class A Special Common Stock (CMCSK) at an average price of $20.29 per share as well as $500 million in a new Class B Convertible Preferred stock yielding 5.25%. The convertible has a final maturity of 20 years, although it can be called by either party after seven years at a conversion price of $23.54 per share. The purchase gives Microsoft control of 8.7% of the Class A Special Common Stock and will give them 70.8% of the Class B Stock once the convertible bond is converted. While the Class A Special Stock has no voting rights, what is interesting about the convertible shares is that each share of Class B stock has 15 votes. Currently all of the Class B shares are owned by Chairman Ralph Roberts. If Microsoft were to convert, it would acquire voting control of Comcast, suggesting that Microsoft's media ambitions continue to be quite substantial.

UPS

PRIME SERVICE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PRS)") else Response.Write("(NYSE: PRS)") end if %>, the nation's second largest equipment rental company, jumped $6 3/4 to $32 after agreeing to be bought out by Swedish company Atlas Copco for $32 per share in cash.

Property/casualty insurer AMERICAN STATES FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASX)") else Response.Write("(NYSE: ASX)") end if %> gained $7 1/4 to $45 3/8 after annuities and reinsurance company LINCOLN NATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LNC)") else Response.Write("(NYSE: LNC)") end if %> agreed to sell its 83.3% interest in the company to broadline insurer SAFECO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SAFC)") else Response.Write("(Nasdaq: SAFC)") end if %> for $47 per share in cash.

EXCEL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECI)") else Response.Write("(NYSE: ECI)") end if %> rose another $1 1/4 to $22 following Friday's announcement that it will merge with interexchange carrier TELCO COMMUNICATIONS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCGX)") else Response.Write("(Nasdaq: TCGX)") end if %>.

Charlie Munger investment vehicle WESCO FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: WSC)") else Response.Write("(AMEX: WSC)") end if %> surged $42 1/2 to $307 after the New York Times ran a piece about the company this weekend, highlighting the 80% ownership interest of, and similarity to, BERKSHIRE HATHAWAY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK.A)") else Response.Write("(NYSE: BRK.A)") end if %>. Berkshire is co-chaired by Warren Buffett and Munger.

ARKANSAS BEST CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABFS)") else Response.Write("(Nasdaq: ABFS)") end if %> rose $1 to $8 1/4 after Alex. Brown raised its rating on the freight company to "buy" from "market perform."

Research Triangle-based CREE RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREE)") else Response.Write("(Nasdaq: CREE)") end if %> added $1 to $14 after demonstrating its "electrically pulsed gallium nitride based blue laser" at room temperature.

ATLAS AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %> climbed $2 11/16 to $31 7/16 after the air cargo carrier announced it will purchase ten new Boeing 747-400 aircraft.
BANKAMERICA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> picked up $1 3/4 to $125 after announcing it will acquire San Francisco-based investment bank and asset manager Robertson Stephens, Inc.
TELE-COMMUNICATIONS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %> surged $1 1/8 to $16 3/16 after the nation's largest cable company announced it will exchange its New York City metro area cable systems for 12 million shares of CABLEVISION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: CVC)") else Response.Write("(AMEX: CVC)") end if %> worth $512 million as of noon today. Cablevision made a $7 1/2 move higher to $42 1/8, not only on announcing additional capabilities that it intends to add to the TCI system, namely telephony, but also on the Microsoft-Comcast news.

Other cable companies making headway today include U.S. WEST MEDIA GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UMG)") else Response.Write("(NYSE: UMG)") end if %>, gaining $1 1/8 to $21 1/4; COX COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COX)") else Response.Write("(NYSE: COX)") end if %>, rising $1 7/8 to $24 5/8; and TIME WARNER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TWX)") else Response.Write("(NYSE: TWX)") end if %>, which made a $1 1/4 move to $48.

DOWNS

Oilfield equipment manufacturer NATIONAL OILWELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOI)") else Response.Write("(NYSE: NOI)") end if %> fell $3 1/8 to $50 3/8 on a Robinson-Humphrey rating downgrade to "short-term market perform" from "buy."

HAMBRECHT & QUIST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HQ)") else Response.Write("(NYSE: HQ)") end if %> lost $2 1/2 to $25 1/4 on the Robertson Stephens news, apparently as disappointed traders move on, having hoped last week for a takeover.

CONFERENCE CALLS

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06/11/97 (Wednesday)
VERITAS DGC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VTS)") else Response.Write("(NYSE: VTS)") end if %>
11:00 a.m. EDT (800) 683-1535 -- live

FOOL PORTFOLIO                  BORING PORTFOLIO

ATCT up $3/8 at $6 1/16         ATLS up $2 1/2 at $31 1/4
AOL up $3/4 at $57 7/8          BGP up $1/2 at $23 5/8
CHV up $1/4 at $72 5/8          CSL up $3/4 at $31 1/4
COMS up $1 1/16 at $47 3/8      CSCO up $1 11/16 at $66 5/8
DJT up $3/8 at $10 1/4          GNT up $1/2 at $36 1/2
GM down $1/8 at $56 1/2         ORCL up $1/8 at $49 1/8
IOM up $1/4 at $20 3/8          OXHP up $2 1/4 at $73
KLAC up $1 1/4 at $48 13/16     PMSI unch. at $11 3/4
LU up $3/8 at $65 1/4           TDW down $5/8 at $41 7/8
MMM up $1/4 at $92 3/4
T up $3/8 at $36 1/8

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Randy Befumo (TMF Templr), a Fool
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Dale Wettlaufer (TMF Ralegh), another Fool
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Brian Bauer (TMF Hoops), and yet another Fool
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