FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

Ascend Reverses Course

ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> reversed course today, plunging $4 15/16 to $42 11/16 after analysts expressed concern about the company's current quarter. Shares of earnings-driven companies like Ascend are susceptible to even a whiff of disappointment -- particularly when the company is richly valued based on trailing earnings and sales. Ascend's woes began last week when CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> introduced its first carrier-class remote access concentrator, a product that competes directly with Ascend's MAX family of products. Cisco has been losing market share in the remote access category over the last quarter and priced the new product competitively in order to reverse this trend. Cisco claims its AS-5200 family has a cost per port equal to or lower than Ascend's and is designed to include a router, something that has to be added on the back-end for the Ascend product. Cisco begins shipping the product in about 85 days, possibly creating some hesitation among potential customers as they wait to evaluate the new product.

If this new element was not enough for the market to consider, Ascend then reported on Friday that a software glitch with its new Rockwell-based 56 kilobit-per-second modem technology had delayed shipments of its MAX-TNT products. Although Ascend stated at the time that the glitch was fixed and it was shipping product out the door, it described the quarter as "back-end loaded," meaning that it would book the majority of its sales in the last weeks of the quarter. Given that both management and analysts have less "visibility" on the earnings and revenues in a back-end loaded quarter because so much happens in a short period of time, it was inevitable that investors price in the additional risk, deducting the risk premium from the current price of Ascend's shares. The perception of increased risk requires investors to pay less for the shares, regardless of whether or not the previous "safety" was the illusory product of no information.

Today's downgrade by UBS Securities analyst Nikos Theodosopoulos follows this inevitable logic flawlessly. Theodosopoulos cited uncertainty about how much Ascend's offer of free 56 kb/s modem cards for MAX and TNT cards would hurt earnings in the quarter, clearly saying he would reconsider his move to "hold" from "buy" if he got a better sense of what the actual costs might be. Because the level of uncertainty had increased, for Theodosopoulos the level of risk had increased as well and required that he reduce his rating even as he stated that "longer-term prospects remain good for the company." Increasing the level of anxiety on the Street even more were comments by Hambrecht & Quist analyst Joseph Noel that the TNT line remained held up by one undisclosed "minor issue," meaning that it was in fact not shipping after all. Given all this information, for Ascend and merger partner CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> to return to their April lows, when everyone was uncertain about the entire networking sector, was probably, in retrospect, inevitable. Should Ascend manage a solid quarter in spite of the fretting, this new risk premium will disappear just as quickly as it came.

Correction: In yesterday's Fool Plate Special, we wrote that Comcast's Series B convertible shares to be held by Microsoft will convert into Class B common shares. We were mistaken. That class of preferred shares converts into Class A Special common stock <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSK)") else Response.Write("(Nasdaq: CMCSK)") end if %>. We apologize for the error.

UPS

Fifth-largest Virginia-based bank JEFFERSON BANKSHARES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBNK)") else Response.Write("(Nasdaq: JBNK)") end if %> jumped $8 1/4 to $38 1/4 after agreeing to merge with WACHOVIA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WB)") else Response.Write("(NYSE: WB)") end if %> in a deal valuing each Jefferson share at 0.625 shares of Wachovia, or $38.83 at midday. Jefferson has 96 offices and total assets of $2.1 billion.

MASTECH CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAST)") else Response.Write("(Nasdaq: MAST)") end if %> gained $2 3/8 to $20 1/4 after the information technologies consultant announced that Holland America Line Westours had awarded the company a "major" Year 2000 software compliance contract.

Wireless telecom equipment producer ORTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORTL)") else Response.Write("(Nasdaq: ORTL)") end if %> climbed $1 1/2 to $17 3/8 after announcing that it has signed a licensing agreement with QUALCOMM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QCOM)") else Response.Write("(Nasdaq: QCOM)") end if %> to manufacture products containing that company's CDMA multiplexing software.

COMPUTER LEARNING CENTERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLCX)") else Response.Write("(Nasdaq: CLCX)") end if %> surged $4 1/4 to $33 3/4 on reporting a 49% increase in Q1 revenues of $20.8 million and earnings per share (EPS) of $0.27, which clobbered estimates of $0.21.

U.K. cable company TELEWEST COMMUNICATION PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TWSTY)") else Response.Write("(Nasdaq: TWSTY)") end if %> gained $1 5/8 to $14 on the heels of yesterday's $1 billion investment in COMCAST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSA)") else Response.Write("(Nasdaq: CMCSA)") end if %> by MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>. GENERAL CABLE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GCN)") else Response.Write("(NYSE: GCN)") end if %> also benefited from new interest in the industry, gaining $1 3/4 to $24 3/8 as Merrill Lynch and Dillon Read both started coverage of the cable products manufacturer with "buy" ratings.

CABLEVISION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: CVC)") else Response.Write("(AMEX: CVC)") end if %> gained another $5 1/2 to $49 7/8 after agreeing yesterday to purchase 10 cable systems in the New York City area from TELE-COMMUNICATIONS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %> for $1.09 billion in stock.

CYPRESS SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CY)") else Response.Write("(NYSE: CY)") end if %> rose $1 3/4 to $15 1/4 on a Morgan Stanley upgrade to "outperform" from "neutral."

Furniture retailer HEILIG MEYERS CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMY)") else Response.Write("(NYSE: HMY)") end if %> added $1 to $17 5/8 after announcing a 4.8% increase in May same-store sales.

Generic drug maker BARR LABORATORIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BRL)") else Response.Write("(AMEX: BRL)") end if %> gained another $3 1/8 to $35 1/2 as the company said investors are boosting the shares in anticipation of the company's marketing of the generic version of DuPont Merck's blood-thinning drug Coumadin.

CIENA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> rose $2 7/16 to $52 1/8 after the optoelectronics company said that it has received an order from CABLE & WIRELESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CWP)") else Response.Write("(NYSE: CWP)") end if %> for its MultiWave Sentry system for a Cable & Wireless transoceanic link.

DOWNS

PROSOURCE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSDS)") else Response.Write("(Nasdaq: PSDS)") end if %> was thrown for a $3 7/8 loss to $8 3/4 after the food service distributor warned that Q2 earnings will be significantly down year-over-year because of softer sales and higher expense levels.

LongHorn Steakhouse and Bugaboo Creek restaurant operator RARE HOSPITALITY INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RARE)") else Response.Write("(Nasdaq: RARE)") end if %> was seared for a $4 9/16 loss to $11 1/2 after pre-announcing Q2 earnings of $0.16 to $0.18 per share, below the First Call mean estimate of $0.26 per share.

BDM INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BDMI)") else Response.Write("(Nasdaq: BDMI)") end if %> dropped $5 3/4 to $21 3/4 after the systems integrator said Q2 revenues will come in lower than expected at $275-$280 million due to contract delays and foreign exchange effects and that EPS will be in the $0.14 to $0.16 range, below analysts' estimates of $0.25.

Supply chain management software company I2 TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITWO)") else Response.Write("(Nasdaq: ITWO)") end if %> lost $5 1/4 to $37 7/8 after Goldman Sachs analyst Rick Sherlund took the shares off that firm's "recommended list," saying that earnings visibility for the quarter was not as strong as previous quarters.

XYLAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XYLN)") else Response.Write("(Nasdaq: XYLN)") end if %> slid $2 5/8 to $14 5/8 on announcing that it expects a possible sequential decline in quarterly EPS and revenues due to lower-than-expected orders from a large OEM and lower-than-planned shipments of ethernet products. Its guidance for EPS is below current estimates of $0.14 per share for the second quarter.

Semiconductor yield enhancement equipment maker KLA-TENCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> ticked down $2 3/8 to $45 11/16 on a Hambrecht & Quist rating downgrade to "hold" from "buy." On the same rating treatment, PRI AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRIA)") else Response.Write("(Nasdaq: PRIA)") end if %> lost $2 5/16 to $36 5/8 and APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> slipped $1 7/8 to $62 1/2.

CONFERENCE CALLS

MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, COMCAST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSA)") else Response.Write("(Nasdaq: CMCSA)") end if %>
To Discuss Microsoft's investment in Comcast
(800) 388-4950
Available through June 13

Boeing Business Jets (A joint venture between GE and BA)
(News conference for major business announcement)
(800) 633-8284 (code: 2815407)

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

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GM down $5/8 at $56 1/2         ORCL down $1/8 at $48 7/8
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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