June 17, 1998
Stocks for Dad Part I

To Larry from Karen
by Karen Kosoy (TMF Karen)

General Magic Inc.
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420 North Mary Avenue
Sunnyvale, California 94086
http://www.generalmagic.com
$12 3/16 as of June 15, 1998

Larry, Happy Father's Day! Here's a stock I think you might like looking into. Well, actually, it's this cool, new product it has called Portico,which may help you spend more time with us at home. You know how many hours you spend traveling around only to come home and spend more hours returning phone calls, faxing estimates, answering e-mail, and setting up your next day's schedule? By the time you're finished, our evening is half over. The kids and I miss you!

Take a look at General Magic. General Magic makes software for producers of communications products and networking systems. The company has developed an operating system for Personal Digital Assistants (PDAs) and other communication systems called Magic Cap, which joins e-mail, fax, telephone, and paging capabilities. The company is also developing and marketing its own handheld communication devices based on Magic Cap. The first of these devices, called DataRover 840, was commercially released in February 1998.

General Magic is concentrating on commercializing Portico, a computerized, voice-recognizing assistant for workers away from the office. It is targeting a market of 45 million mobile professionals. Portico will also have the capability to be accessed through the Internet and will work with other popular handheld devices such as 3Com's Palm Pilot.

Larry, we both know that voice-recognition is an exciting development for the future. At some point, you'll be able to use this technology to have your favorite websites read to you while you drive� by your own virtual personal assistant. You might even be able to buy that Mother's Day gift from the Victoria's Secret website right over your cellular phone.

The company is at an early stage of development in its new business strategy and has significant risks as an investment. But you and I have taken many risks in our 20-year marriage, and I think General Magic still may be worth looking at. Our long- term portfolio is well-diversified, so a "story stock" in the portfolio won't impact our total returns if it doesn't work out the way we hope. Microsoft and Sony have made an investment in General Magic, so we aren't alone in our thinking.

General Magic hasn't made any money yet and, in fact, reported a $28.4 million loss for the year ending December 1997, which translates into a loss of $1.20 a share. The loss is significantly less than the previous year's loss of $ 45.6 million, so things are slowly improving. Total revenue declined due to a decline in support services provided by the company to licensees of Magic Cap technology. The company expects to see an increase in 1998 total revenue due to the release of Portico and its DataRover device, but it does warn that it does not expect to be profitable in 1998. The risk investors take is that these new products won't be accepted by the marketplace. Of course, it's very important to read the company's SEC filings to understand the risks involved when investing in General Magic or any other company.

Should the Portico service become a standard service offered to mobile customers, it will mean recurring revenues for General Magic. This is something I like to look for in a company, because it means revenues can repeat on a monthly basis and should increase as more subscribers sign up.

General Magic's management is excited about the potential of Portico. In the last month, General Magic signed up with some major cellular phone companies for trials of Portico. These include Bell Atlantic Mobile, BellSouth Cellular Corp., Cellular One (San Francisco Bay Area), and Triton Communications (a member of the AT&T Wireless Services Network). Recently, the company announced that Associated Press, Business Wire, and PR Newswire will provide news and information by satellite for Portico users. Imagine getting the latest news on your investments read to you while you drive home from work!

Larry, you should take a look at General Magic's website. There is a very impressive demo of the Portico system. I think the kids would enjoy it, as well. It really shows the potential of the operating system. The website also has a lot of information, including press releases, a company history, and much more. The Fool recently did a profile of General Magic in the Daily Double.

If General Magic succeeds in deploying the Portico service to mobile professionals, there will be some happy families. I'll bet you'll be happy too, Larry, if it frees up a few extra hours for you to hit the golf course!

With love from your wife,

Karen

* A Stock for dad represents the opinion of one Fool and in no way should be taken as the opinion of either the Motley Fool, Inc., the company in question or representative of anyone or anything else other than that specific Fool's thoughts.