FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

Compaq Goes Upscale

Leading personal computer manufacturers are concentrating on beefing up their business product lines. Only days after GATEWAY 2000 <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> decided to get more serious about selling servers with the acquisition of ADVANCED LOGIC RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AALR)") else Response.Write("(Nasdaq: AALR)") end if %>, COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> has announced that it will get in the fault-tolerant computer business with the purchase of a TANDEM COMPUTERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDM)") else Response.Write("(NYSE: TDM)") end if %>. Houston-based Compaq will purchase Tandem for approximately $2.6 billion in stock, exchanging 0.21 shares of Compaq common stock for each share of Tandem. Compaq slipped $1 3/4 to $105 this morning, while Tandem was up $6 1/4 to $21 1/4.

Compaq's ongoing transformation from a personal computer manufacturer to a soup-to-nuts vendor for both personal and enterprise computer systems has occurred over a number of years. The addition of Tandem to the Compaq fold gives Compaq a high-performance vendor of scaleable, fault-tolerant systems that can run 24-hours a day. These systems are used for transaction processing and other high volume, critical computer needs. Tandem's main competitors include NCR CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCR)") else Response.Write("(NYSE: NCR)") end if %> and STRATUS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SRA)") else Response.Write("(NYSE: SRA)") end if %>, with NCR probably the largest. Tandem seems well suited to Compaq because the company is transitioning to an Intel/Windows NT architecture for its computer systems, something that Compaq has a lot of experience with developing and servicing.

Compaq's acquisition of Tandem gives it a product to sell to large companies in search of processing-intensive solutions. Compaq Chief Executive Eckhard Pfeiffer believes that this acquisition has dramatically increased Compaq's potential market, "Our total addressable market has been doubled to approximately $650 billion." Compaq apparently does this at a relatively good price, as it is buying Tandem for about 1.4 times sales. Pfeiffer stated that the merger should be accretive to earnings immediately, meaning that Compaq will now be able to earn more money with the addition of Tandem. Unfortunately for Compaq shareholders, this may not change the published earnings estimates because even as Tandem adds to earnings, the merger will be done as a "pooling-of-interests," so Compaq will not be able to repurchase the stock it announced it would a few weeks ago.

RELEVANT MESSAGE BOARDS: Advanced Logic Research * Compaq Computer * Gateway 2000 * NCR Corp. * Tandem Computers

UPS

Motor oil, Jiffy Lube, and energy exploration and production company PENNZOIL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PZL)") else Response.Write("(NYSE: PZL)") end if %> jumped $18 7/8 to $78 1/2 after oil and gas driller UNION PACIFIC RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UPR)") else Response.Write("(NYSE: UPR)") end if %> announced an unsolicited tender offer for 50.1% of the company's stock for $84 per share in cash with the intent of doing a stock swap for the rest of the company.

WHITMAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WH)") else Response.Write("(NYSE: WH)") end if %> gained $2 5/8 to $26 after the largest bottler of Pepsi said it will spin off its Midas mufflers subsidiary and its Hussman refrigeration systems unit. The company also said that it expects to report Q2 EPS of $0.32 to $0.34, below estimates of $0.42 because of poor results at its Midas unit and because of competitive pricing in the soft drink market. To mitigate these disappointments, Whitman's board authorized a stock repurchase of five million shares.

Specialty finance company NORTH AMERICAN MORTGAGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NAC)") else Response.Write("(NYSE: NAC)") end if %> rose $1 to $24 1/4 after agreeing to be acquired by savings bank DIME BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DME)") else Response.Write("(NYSE: DME)") end if %> in an exchange of 1.37 Dime shares for each North American share, valuing North American at approximately $25 1/8 per share.

NATIONAL WESTMINSTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NW)") else Response.Write("(NYSE: NW)") end if %> gained $4 to $77 7/8 after Goldman, Sachs raised its rating on the UK bank to "market outperformer." The Sunday Telegraph, a British newspaper, wrote yesterday that BARCLAYS PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCS)") else Response.Write("(NYSE: BCS)") end if %> is considering a takeover bid for its smaller rival.

Maryland bank AMERICAN NATIONAL BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANBK)") else Response.Write("(Nasdaq: ANBK)") end if %> was re-priced at $19, up $2 7/8, after agreeing to merge with CRESTAR FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CF)") else Response.Write("(NYSE: CF)") end if %>, the country's 25th largest consumer lending bank, in an exchange of stock valuing American National at $25 1/4 per share.

Semiconductor equipment company INTEGRATED PROCESS EQUIPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPEC)") else Response.Write("(Nasdaq: IPEC)") end if %> picked up $2 11/16 to $23 1/4 after Morgan Stanley raised its rating on the company to "strong buy" from "outperform" because of demand for its products in general and for its 776 product in particular, according to Reuters.

GENZYME TISSUE REPAIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZL)") else Response.Write("(Nasdaq: GENZL)") end if %> moved up $1 1/4 to $12 1/2 on a delayed reaction to the company's announcement of FDA approval for its Carticel cartilage replacement.

Natural foods distributor UNITED NATURAL FOODS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UNFI)") else Response.Write("(Nasdaq: UNFI)") end if %> rose $1 1/2 to $19 3/4 after announcing a stock-for-stock $91.25 million merger for equally crunchy foods distributor Stow Mills Inc.

Broadcaster PAXSON COMMUNICATIONS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: PXN)") else Response.Write("(AMEX: PXN)") end if %> gained $1 1/4 to $13 5/8 on announcing an agreement to sell its radio group to CLEAR CHANNEL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCU)") else Response.Write("(NYSE: CCU)") end if %> for $693 million.

DOWNS

Computer consulting and Year 2000 company CACI INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CACI)") else Response.Write("(Nasdaq: CACI)") end if %> lost $4 to $15 3/8 after pre-announcing Q4 EPS of $0.14, below street estimates of $0.27, on revenues of $71 million.

VITECH AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VTCH)") else Response.Write("(Nasdaq: VTCH)") end if %> fell $3 1/8 to $13 3/4 after Barron's published a pretty negative article on the company this weekend, which Dow Jones summarized as follows: "Though the stock has been performing well, the company is quickly using up cash, is being pressured by creditors, and is run by two executives with checkered pasts."

Telemarketing services firm TELESPECTRUM WORLDWIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLSP)") else Response.Write("(Nasdaq: TLSP)") end if %> dropped another $1 1/8 to $7 5/8 after J.P. Morgan and Robinson-Humphrey both lowered their ratings on the stock following Friday's news that the company would report a loss -- below the mean estimate of $0.15 per share -- in its second quarter due to a revenue shortfall.

CONFERENCE CALLS

BRODERBUND SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BROD)") else Response.Write("(Nasdaq: BROD)") end if %>
(800) 642-1687 (ID#427430) -- replay available through 6/23

ECHLIN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECH)") else Response.Write("(NYSE: ECH)") end if %>
(800) 683-1535 (password: McCurdy) -- replay through 6/27

06/26/97 (Thursday)
COGNOS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COGNF)") else Response.Write("(Nasdaq: COGNF)") end if %>
(800) 997-6910 -- replay available from 1:15 p.m. EDT to midnight 6/30

THIS WEEK'S CONFERENCE CALL SYNOPSES

JABIL CIRCUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBIL)") else Response.Write("(Nasdaq: JBIL)") end if %> Q3 Call
ST. JOHN KNITS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SJK)") else Response.Write("(NYSE: SJK)") end if %> Q2 Call
MICRON ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %> Q3 Call
MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> Q3 Call

FOOL PORTFOLIO                  BORING PORTFOLIO

ATCT down $5/32 at $5           ATLS down $1/8 at $33
AOL down $1 1/8 at $58 3/8      BGP up $1/8 at $24 1/4
CHV down $7/8 at $73 5/8        CSL down $1/2 at $36 1/2
COMS up $9/16 at $50 7/16       CSCO up $1 1/16 at $70 7/16
DJT up $1/8 at $10 1/4          GNT down $1/2 at $37 1/2
GM up $1/8 at $55 3/4           ORCL up $5/8 at $48 7/8
IOM down $1/8 at $22 3/8        OXHP up $5/16 at $73 11/16
KLAC up $1 5/16 at $51 3/16     PMSI down $1/16 at $11 3/8
LU down $3/4 at $72 3/8         TDW up $1/8 at $43 1/2
MMM down $1 1/4 at $100 7/8
T down $1/2 at $36 3/4

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ANOTHER FOOLISH THING
Arizona Stock Analysis

Why Arizona? Because, like Delaware, many companies are chartered there, taking advantage of the beneficial business environment. Small, under-followed emerging Arizona growth companies were a terrific place to invest over the past few years and Stephen Barnes, the Editor of "Arizona Stock Analysis," believes this will continue in the future. His strategy of identifying winners before the Street catches on has been most profitable, with his average selection up an annualized 189% through March. Obviously, there can be no assurance that future selections will enjoy the same returns, but Yon believes there is considerable merit to picking up the winners before the Street's analysts pile on. Yon began sharing his views online in the fall of 1995 in the "Folly in Arizona" folder (part of the 50 states boards) and his analysis has led to the publication of the Arizona Stock Analysis, a monthly newsletter available by e-mail or fax. If this piques your interest, check it out at FoolMart, or e-mail [email protected].

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