The Motley Fool, 7/16/97: The Lunchtime News

FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

Ascend on the Rise

Things looked touch and go for ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> last night. The maker of remote access networking gear reported earnings of $0.31 per share, well below the $0.35 per share that analysts were anticipating. Shares of the company dropped as low as $51 in after-hours trading before the company's conference call was finished. Ascend's results, however, were muddled a bit by the company's merger with frame-relay wide-area network (WAN) equipment manufacturer Cascade Communications. Looking at Ascend's results without Cascade Communications, Ascend made $0.35 EPS -- right in line with estimates.

Setting the estimate shenanigans aside for a moment, the quarter was a strong one for Ascend Communications as measured in absolute terms. Earnings grew 34% from $0.23 per share in the same quarter last year and were up 15% from the $0.27 per share reported last quarter. Sales climbed 52.2% to $311.7 million for the combined company, putting it on track to book more than $1.2 billion in sales this fiscal year. Although these results do represent a slowing of Ascend's rapid growth rate as the company matures, given the sluggishness in the networking arena this quarter, Ascend has certainly grown faster than number two networker 3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> and has quite possibly outdone number one CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>. But this will not be known for sure until Cisco reports its own quarterly results.

During the conference call, Ascend detailed its progress over the quarter and in the last month since the quarter closed. The company is now shipping its MAX-TNT remote access concentrators with the 56-K FLEX modem card installed -- something that was a bit of a problem a several weeks back. Ascend's new GRF router saw a 40% sequential increase in business and accounted for 4% of Ascend's total revenues, up from 3% last quarter. Although many investors are concerned that sales for the GRF will dry up when Cisco introduces its BFR (big fast router) later in the year, the performance is still impressive for a new router product only introduced last year. On the Cascade side of the house, Cascade's revenue from its ATM (asynchronous transfer mode) switches was up to 11.9% of its total revenues, up from 10.4% last quarter. ATM was 4% of the combined company's revenues. The balance of Cascade revenues came from its frame-relay switches.

UPS

Thermal transfer ribbon manufacturer INTERNATIONAL IMAGING MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMAK)") else Response.Write("(Nasdaq: IMAK)") end if %> jumped $6 to $22 1/2 after signing a merger agreement with apparel identification products and thermal transfer printer manufacturer PAXAR CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PXR)") else Response.Write("(NYSE: PXR)") end if %> for $24 per share in Paxar stock.

MEDIMMUNE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MEDI)") else Response.Write("(Nasdaq: MEDI)") end if %> gained $5 3/8 to $25 after the biotech company reported success in the Phase III trial of MEDI-493, a treatment designed to "prevent respiratory syncytial virus (RSV) disease in high-risk infants and children." Merrill Lynch raised its rating on the company to "near-term and long-term buy" from "accumulate."

Food packing company ULTRA PAC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UPAC)") else Response.Write("(Nasdaq: UPAC)") end if %> rose $3/4 to $7 7/8 after guiding investors to expect higher gross margins this quarter due to favorable pricing in PETE resin and recycled material.

THERAGENICS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THRX)") else Response.Write("(Nasdaq: THRX)") end if %> moved up $2 5/8 to $27 1/8 after the maker of a treatment for localized prostate cancer reported Q2 EPS of $0.15, crunching the mean estimate of $0.10, on revenues of $6.2 million.

Wide area network access products maker DIGITAL LINK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLNK)") else Response.Write("(Nasdaq: DLNK)") end if %> stepped up $3 to $25 1/4 on reporting Q2 EPS of $0.18, up 100% year-over-year and $0.03 better than estimates.

SPLASH TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLH)") else Response.Write("(Nasdaq: SPLH)") end if %> added $3 7/16 to $40 7/16 after the color print server company, a veritable ELECTRONICS FOR IMAGING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EFII)") else Response.Write("(Nasdaq: EFII)") end if %> for high-end jobs, reported Q3 EPS of $0.32 (before charges), stomping estimates of $0.26.

INTERNEURON PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPIC)") else Response.Write("(Nasdaq: IPIC)") end if %> climbed $1 1/2 to $19 1/2 after reporting improved neurological function among stroke victims who had taken the company's oral citicoline 500 milligrams treatment in a Phase III trial.

CPU sovereign INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> gained $4 31/32 to $85 7/8 on reporting Q2 EPS of $0.92, beating estimates of $0.90. In its conference call, Intel guided investors to expect flat to slightly higher revenues for Q3 as well as flat to slightly down gross margins.

Trucking company YELLOW CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YELL)") else Response.Write("(Nasdaq: YELL)") end if %> drove $1 7/8 higher to $25 1/2 on reporting second quarter financials.

WESTERN DIGITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %> spun out a $3 5/8 gain to $43 15/16 as it approaches this evening's quarterly earnings release, when investors are expecting EPS of $0.96. Head maker and supplier to Western Dig, APPLIED MAGNETICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: APM)") else Response.Write("(NYSE: APM)") end if %>, gained another $2 13/16 to $34 after reporting earnings on Monday evening.

Hotel and casino operator ITT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ITT)") else Response.Write("(NYSE: ITT)") end if %> jumped $5 1/16 to $67 11/16 after the company announced Q2 EPS of $0.72 (excluding one-time events), right in line with estimates. ITT also said it will split itself into three parts: a gaming and hospitality company, a telephone directories company, and a technical schools company. The company will also repurchase 30 million shares for $70 per share and call in $2 billion in debt.

LUCENT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> exploded $6 3/16 higher to $88 15/16 after the Bell Labs people reported Q3 revenues of $6.3 billion and EPS of $0.33, swamping estimates of $0.25.

DOWNS

Disappointing again, wireless telecom infrastructure manufacturer ANDREW CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANDW)") else Response.Write("(Nasdaq: ANDW)") end if %> lost $3 15/16 to $29 1/16 after reporting a 5% order decline from last year and somewhat anemic revenue growth of 10% year-over-year. EPS from continuing operations of $0.27 missed estimates of $0.30.

EASTMAN KODAK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %> slumped $8 5/8 to $68 1/4 after the photographic film and imaging products company reported Q2 EPS of $1.12, falling short of estimates of $1.39 due to higher expenses for marketing its Advantix system, the strong dollar, and losses in its digital imaging products lines. The company said it sees difficulty in growing 1997 operating earnings past 1996 levels.

Specialty printer and plotter manufacturer ENCAD INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENCD)") else Response.Write("(Nasdaq: ENCD)") end if %> dropped $5 5/8 to $39 1/8 after reporting Q2 EPS of $0.35, which beat estimates of $0.34. Prudential Securities downgraded the shares to "hold" from "buy" based on price.

CONFERENCE CALLS

HEILIG-MYERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMY)") else Response.Write("(NYSE: HMY)") end if %>
(Re: June sales and the purchase of Mattress Discounters)
(804) 254-3939 (option 1) -- replay

HARLEY-DAVIDSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HDI)") else Response.Write("(NYSE: HDI)") end if %>
(402) 222-9905 -- replay

FREDDIE MAC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRE)") else Response.Write("(NYSE: FRE)") end if %>
(800) 475-6701 (access #348319) -- replay through 7/16

ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
(800) 475-6701 (code: 348047) -- replay through 7/25

07/16/97 (Wednesday)
FORD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>
(703) 736-7362 -- replays @ 12:00 p.m. EDT on 7/16 and 2:00 p.m. EDT on 7/17

07/16/97 (Wednesday)
360 COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay available through 7/23

07/16/97 (Wednesday)
APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %>
(816) 650-0766 (Password: Apple Conference Call) -- replays on 7/16 @ 7:00 p.m. and 9:00 p.m. EDT, and on 7/17 @ 12:00 noon EDT

07/17/97 (Thursday)
SPRINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %>
(800) 659-4363 -- replay at 10:30 a.m. and 2:30 and 4:30 p.m. EDT
(816) 650-0613 -- replay number for international callers

07/17/97 (Thursday)
IOMEGA CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %>
(800) 633-8284 (code: 2854533) -- replay through 7/21

07/17/97 (Thursday)
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>
(800) 633-8284 (reservation # 2689889) -- replay through 7/20
(303) 248-1201 (reservation # 2689889) -- replay for international callers

07/17/97 (Thursday)
APPLIED DIGITAL ACCESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADAX)") else Response.Write("(Nasdaq: ADAX)") end if %>
(402) 220-6028 -- replay available for 7 days

07/17/97 (Thursday)
MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
(800) 456-5304 (code: 1017) -- replay through 7/21
(402) 344-6835 (code: 1017) -- replay for international callers

THIS WEEK'S CONFERENCE CALL SYNOPSES

SHAW GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGR)") else Response.Write("(NYSE: SGR)") end if %> Call
ASCEND <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> Call
INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> Call
MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> Call
SEAGATE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> Call

FOOL PORTFOLIO STOCKS

FOOL PORTFOLIO                BORING PORTFOLIO

ATCT down $1/8 at $4 /34      ATLS down $3/8 at $23 1/4
AOL down $1/2 at $72 1/2      BGP up $26 15/16 at $26 15/16
CHV up $5/16 at $76 15/16     CSL up $3/16 at $35 1/2
COMS up $15/16 at $58 15/16   CSCO up $1 5/32 at $79 1/8
DJT down $3/16 at $11 1/16    GNT up $1 1/16 at $38 13/16
GM up $1 11/16 at $55 15/16   ORCL up $1 27/32 at $58 5/16
INVX up $1 5/8 at $35 7/8     OXHP up $1/4 at $81 5/8
IOM up $1 1/16 at $22 15/16   PMSI up $1/8 at $12
KLAC up $3/16 at $58 1/16     TDW up $9/16 at $46 1/2
LU up $6 at $88 3/4
MMM down $2 1/4 at $100 1/4
T down $1/16 at $34 15/16

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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