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FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay
Inflatable Growth
The biggest percentage gainer on the New York Stock Exchange this morning was transportation safety and energy absorption products company Simula Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SMU)") else Response.Write("(NYSE: SMU)") end if %>. The firm moved up $2 5/16 to $16 9/16 -- back to the level it achieved when it reported first quarter results earlier this year -- after announcing that TRW <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRW)") else Response.Write("(NYSE: TRW)") end if %> Vehicle Safety Systems is going to integrate Simula's inflatable tubular structure (ITS) into TRW's product line for side-impact protection systems. Simula's ITS product is the only one on the market designed specifically to protect the head and neck of vehicle occupants in the event of a side-impact collision, as well as potentially provide for the containment of occupants in rollover and secondary impact collisions.
Currently, U.S. side-impact safety standards only deal with the use of foam padding and structural beam support technology, but the National Highway Traffic and Safety Administration is in the process of examining head crash standards (as measured by quantifiable head injury criteria). This is due to the fact that side-impact collisions are the second leading category of injury accidents and the leading category of fatal accidents, accounting for approximately 25% of all injuries and 34% of all fatalities, with a significant majority of such injuries caused by impact to the head and neck. However, side impact protection in automobiles is still optional for manufacturers. Simula's patented airbags have thus far been adopted by BMW, and have received numerous endorsements from organizations like the Insurance Institute for Highway Safety. In March, Simula entered into a teaming agreement with Delphi Automotive Systems, a first tier automotive component supplier and subsidiary of General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>. And up until the end of May, Simula received a total of approximately $37 million in new orders.
TRW is the world's largest provider of occupant restraint systems (including air bags, seat belts, and steering wheel systems), and this morning's announcement holds out tremendous opportunity for the company. TRW and Simula are currently "integrating the ITS on two vehicle platforms and have agreed to work together on programs for at least two additional automotive customers." As well, TRW and Simula will work on joint programs to develop, market, and sell applications of the Simula ITS to other automotive manufacturers. Despite the fact that ITS is not currently Simula's most meaningful unit in terms of revenues, growth in this segment will be key to the company's profitability going forward. Investors this morning are banking on it -- before the actual numbers are released.
Electronic and online transaction processing services firm CheckFree Holdings Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CKFR)") else Response.Write("(Nasdaq: CKFR)") end if %> rose $1 7/16 to $25 1/16 after long-distance carrier AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> agreed to use CheckFree's billing services to allow AT&T residential customers to see and pay their phone bills through the websites of major online banks or at AT&T's own site.
Internet content provider CNET Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNWK)") else Response.Write("(Nasdaq: CNWK)") end if %> picked up $5 1/8 to $38 1/8 after General Electric's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> NBC television network agreed to buy an equity stake in CNET's Snap! Internet portal and search service and operate the service as a joint venture. NBC will acquire a minority stake in Snap!, with an option to increase its stake to 60%. NBC will also take a 4.99% equity stake in CNET.
The American depositary shares of Dr. Solomon's Group PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SOLLY)") else Response.Write("(Nasdaq: SOLLY)") end if %> rose $2 1/4 to $34 3/8 after the maker of anti-virus software products agreed to merge with rival Network Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NETA)") else Response.Write("(Nasdaq: NETA)") end if %> in a deal valued at about $640 million. Each Dr. Solomon's ADS will be converted into 0.82875 of share of Network Associates stock. The transaction will be "modestly dilutive" to Network Associates' fiscal Q3 earnings and "modestly accretive" to fiscal 1999 earnings.
Lycos Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> gained $2 5/8 to $52 7/8 after the Internet content aggregator received a patent for its "spider" technology for indexing and collecting targeted information from different sites on the Web.
Data networking products company Ascend Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> was lifted $2 to $49 after being chosen to replace Digital Equipment Corp. on the Standard & Poor's 500 Index. Digital is merging with number-one PC maker Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPQ)") else Response.Write("(Nasdaq: CPQ)") end if %>.
Disk drive maker Seagate Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> tacked on $1 3/8 to $23 after Salomon Smith Barney raised its rating on the company to "buy" from "neutral" with a 12-month price target of $30 per share.
Contract electronics manufacturer Jabil Circuit <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JBL)") else Response.Write("(NYSE: JBL)") end if %> rose $1 3/8 to $37 1/2 after Donaldson, Lufkin & Jenrette started coverage of the firm with a "buy" rating.
Organ transplant pharmaceutical developer Sangstat Medical Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SANG)") else Response.Write("(Nasdaq: SANG)") end if %> gained $2 1/4 to $27 11/16 after naming Jean-Jacques Bienaime president and COO. Salomon Smith Barney started coverage of the company with a "buy" rating and set a 12-month price target of $60 per share.
Supply chain management software firm Logility <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LGTY)") else Response.Write("(Nasdaq: LGTY)") end if %> climbed $1 3/4 to $11 1/2 after reporting fiscal Q4 EPS of $0.07 compared to a $0.03 loss a year ago, beating the Street's mean estimate by $0.04. Total revenues increased 46% to $9.5 million from last year, while software licensing fees jumped 51% to $5.4 million.
Internet software tools developer Macromedia Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MACR)") else Response.Write("(Nasdaq: MACR)") end if %> advanced $1 1/2 to $17 5/8 after agreeing to license its Flash computer animation software to Netscape Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> for use in its updated Navigator Internet browser software.
TV and video security communications equipment maker Odetics Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ODETA)") else Response.Write("(Nasdaq: ODETA)") end if %> rose $1 5/16 to $15 5/16 after a U.S. District Court judge handed down an injunction against Storage Technology Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STK)") else Response.Write("(NYSE: STK)") end if %> enjoining the maker of information storage devices from selling certain automated tape library systems until a final hearing on a patent infringement case between the two firms is held on July 1. Storage Technology fell $2 to $80 on the news.
Analog chip manufacturer Sipex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIPX)") else Response.Write("(Nasdaq: SIPX)") end if %> moved up $1 13/16 to $24 11/16 after Volpe Brown started coverage of the firm with a "buy" rating.
Washington Post Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WPO)") else Response.Write("(NYSE: WPO)") end if %> dipped $8�1/16 to $552�3/16 after Salomon Smith Barney cut its rating on the newspaper and broadcasting company to "outperform" from "buy" citing that the stock has jumped 34% since the brokerage issued the "buy" rating. Salomon predicts the shares will reach $620 in 12 to 18 months.
Bank merger partners Wells Fargo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFC)") else Response.Write("(NYSE: WFC)") end if %> dropped $13�13/16 to $351�15/16 and Norwest Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOB)") else Response.Write("(NYSE: NOB)") end if %> was shaved for a $1�1/16 loss to $35�3/4 as the market priced in uncertainty over the companies' ability to execute their post-merger strategic plan.
Discount department store Stein Mart <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMRT)") else Response.Write("(Nasdaq: SMRT)") end if %> plummeted $3 1/16 to $11 15/16 after warning that its second quarter earnings will be below analysts' estimates of $0.26 per share and will be more in line with the $0.20 the company reported in Q2 1997. The company is also considering the impact of the adoption of AICPA Statement of Position 98-5 relating to the write-off of new store pre-opening expenses as incurred. Stein Mart has historically capitalized pre-opening expenses prior to actual store openings and amortized the costs over the rest of the year.
Third party billing clearinghouse Billing Concepts <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BILL)") else Response.Write("(Nasdaq: BILL)") end if %> plunged $3 9/16 to $14 7/16 after warning that lower-than-expected revenues and earnings from its Local Exchange Carrier billing business likely will mean it will report third quarter earnings between $0.19 and $0.20 per share. Analysts had expected EPS of $0.23. The company anticipates that the pressure on revenues will continue through the fourth quarter, which additionally may cost the company up to $0.04 per share.
Medical diagnostic products developer Chromatics Color Sciences <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCSI)") else Response.Write("(Nasdaq: CCSI)") end if %> shed another $3 1/32 to $5 25/32 after institutional investment and equity research firm Asensio & Co. initiated coverage of the company with a "strong sell" and "short sell" recommendation. Asensio charged that the company made false claims on its medical instrument Colormate III when it said that the market for the product will be between $330 million and $510 million. In fact, according to Asensio, the Colormate III is not a unique product and the market for it is estimated to be less than $2.5 million.
BMC Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMC)") else Response.Write("(NYSE: BMC)") end if %>, which makes aperture masks for color picture tubes used in TVs and PC monitors, tanked $2 7/16 to $10 1/2 after announcing it expects Q2 EPS of $0.08 to $0.13, substantially below analysts' expectations of $0.26, due to soft market conditions confronting its mask operations division. The company may also take a one-time charge related to in-process research and development projects purchased in conjunction with its recent acquisition of Orcolite.
Critical and cardiac care devices maker Arrow International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARRO)") else Response.Write("(Nasdaq: ARRO)") end if %> sank $5 3/16 to $29 7/8 after announcing it expects to report Q3 EPS in the range of $0.42 to $0.44, short of the $0.47 mean estimate of the analysts surveyed by First Call. For the fourth quarter ending Aug. 31, the company anticipates revenues to exceed those of Q3, but earnings may be hit by the strength of the dollar against major foreign currencies.
Business communications products company Moore Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCL)") else Response.Write("(NYSE: MCL)") end if %> dropped $15/16 to $13 1/8 after warning it will report "unsatisfactory" Q2 results, including an operating loss for the quarter. Analysts had expected a profit of $0.08. The company attributed the shortfall to seasonal weakness, Year 2000 spending, and lower volumes and high costs in its form business.
Non-contact manufacturing sensors and systems maker CyberOptics Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYBE)") else Response.Write("(Nasdaq: CYBE)") end if %> tumbled $2 to $14 after announcing that it expects to report Q2 EPS around $0.20, short of analysts' mean estimate of $0.30, according to First Call. The company is also revising its outlook for the year and now expects 1998 sales growth in the range of 15%.
Fully furnished temporary housing provider BridgeStreet Accommodations <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEDS)") else Response.Write("(Nasdaq: BEDS)") end if %> was pummeled for $4 1/8 to $5 1/8 after warning that its Q2 earnings won't meet analysts' expectations of $0.14 a share. The company anticipates Q2 EPS of around $0.06 and blamed the shortfall on underperforming markets and overcapacity of available apartments.
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
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