FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
Boeing Takes a Nosedive
One of America's biggest technology companies pre-announced a loss this morning, though it has nothing to do with CPUs or PCs. Commercial aerospace giant BOEING CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> lost $4 11/16 to $49 5/16 after announcing that production bottlenecks resulting from raw materials shortages, difficulty with suppliers ramping up production, and bringing new employees up to speed would result in pre-tax charges of $1.6 billion to implement plans to address these difficulties. The company added that it will take another $1 billion in charges through the coming quarter and into 1998 to further address these bottlenecks.
Part of the problem in running a gigantic aerospace company is the labor-intensive nature of production. New employees don't climb the learning curve immediately, so when they come on when Boeing is ramping up production, it takes a while for output to reach a high level of efficiency. That's one of the reasons FAA inspectors have been poking around Boeing's facilities lately. Another problem is that the company can't just push a button to increase the flow of specialty metals, fasteners, nacelles, landing gear components, and other specialty parts that go into Boeing planes. Such is the nature of a company with a high degree of operating leverage. Operating at peak production, profits can be huge, especially after development costs on an aircraft are completely amortized. When the company shifts to a higher production potential to satisfy its record backlog of $77.8 billion, the initial inefficiencies can hurt earnings. Once the company masters the cost and learning curves of a higher production potential, though, per-share earnings for 1998 and 1999 could surpass the current 1998 estimate of $3.24.
The danger for Boeing during this period is Airbus salespeople who will be saying that Boeing has got too much on its plate. At the same time, Europe's Joint Aviation Authorities (JAA) seem to be giving the slow walk on approving the 700 and 800 series of the 737. The 800 series has been stretched and will accommodate 162 passengers, which necessitates a re-working of the plane's emergency exits. These new emergency exits have drawn the concern of Europe's JAA. Perhaps more importantly, Airbus will be pushing the A-330/A-340 to airlines worried about the production capacity of the 777, Boeing's ultra long-range 368-seater. Boeing is nowhere near amortizing costs on the 777 and needs to be able to meet current demand to take orders for future aircraft in key markets such as China. Growth has its short-term dangers for all sorts of companies, and this is a dangerous time for Boeing, especially with Airbus planning a competitor to Boeing's monopoly in the super-jumbo 747-400 category. With the charges under its belt and getting production workers and suppliers up to speed, Boeing will be in a better and more profitable position to deal with these threats.
The world's largest distributor of electronic components, ARROW ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARW)") else Response.Write("(NYSE: ARW)") end if %>, shot $1 1/2 higher to $31 3/4 after receiving a Morgan Stanley upgrade to "outperform" from "neutral." This comes on the heels of Arrow's 3Q EPS of $0.09 (after a "strategic realignment and integration charge" of $0.41).
Undergoing a strategic re-evaluation of its business, NEXTLEVEL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NLV)") else Response.Write("(NYSE: NLV)") end if %> reported last night that it was "encouraged" by the growth in demand for its digital cable system, which helped shares rise $11/16 to $14 5/16 this morning.
Building products distributor SHELTER COMPONENTS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SST)") else Response.Write("(AMEX: SST)") end if %> rose $2 5/16 to $17 1/4 after it announced that it is being acquired by KEVCO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KVCO)") else Response.Write("(Nasdaq: KVCO)") end if %> for $17.50 per share in cash. Kevco was also up $1 3/8 to $13 7/8 on the news.
Soundcard and multimedia technology company CREATIVE TECHNOLOGY LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREAF)") else Response.Write("(Nasdaq: CREAF)") end if %> rose $4 7/8 to $25 5/8 in the wake of its 1Q EPS report of $0.55, well ahead of estimates of $0.45.
3DLABS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TDDDF)") else Response.Write("(Nasdaq: TDDDF)") end if %> climbed $2 3/4 to $27 1/8 after announcing that INTERNATIONAL BUSINESS MACHINES CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> had selected one of its graphic accelerator products for IBM's new Windows NT Workstation, the IntelliStation M Pro.
Radio frequency integrated circuit maker RF MICRO DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RFMD)") else Response.Write("(Nasdaq: RFMD)") end if %> transmitted a $1 gain to $16 3/4 after it reported 2Q EPS of $0.05 versus estimates of $0.04 (guided down earlier in the month by the company).
Maker of disposable medical and surgical gloves SAFESKIN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFSK)") else Response.Write("(Nasdaq: SFSK)") end if %> jumped $3 to $44 3/4 after reporting 3Q earnings of $0.39 a share, beating estimates of $0.32.
Gallium arsenide semiconductor maker VITESSE SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VTSS)") else Response.Write("(Nasdaq: VTSS)") end if %> gained $3 1/4 to $49 after reporting 4Q EPS of $0.26, slightly topping estimates of $0.25.
Metalworking tools company JLK DIRECT DISTRIBUTION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JLK)") else Response.Write("(NYSE: JLK)") end if %> rose $2 7/16 to $30 5/8 after reporting Q1 EPS of $0.27 versus estimates of $0.21.
Long-term healthcare provider VENCOR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VC)") else Response.Write("(NYSE: VC)") end if %> was cut $11 7/8 to $30 3/4 after the company said it expects Medicare changes and a drop in demand for ancillary services to hurt the company's upcoming earnings. Merrill Lynch cut its rating on shares to "near-term neutral" from "near-term accumulate."
Medical device maker BOSTON SCIENTIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSX)") else Response.Write("(NYSE: BSX)") end if %> lost $6 15/16 to $50 1/2 after posting 3Q EPS of $0.44. Deutsche Morgan Grenfell lowered its rating on the company to "accumulate" from "buy."
ALLIED SIGNAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %> fell $3 13/16 to $39 11/16 after the manufacturer of advanced technology products for the automotive and aerospace industries reported 3Q EPS of $0.52, which was $0.01 shy of estimates.
Impotency treatment company VIVUS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VVUS)") else Response.Write("(Nasdaq: VVUS)") end if %> dropped $3 3/4 to $28 3/4 after being downgraded by CS First Boston to "hold" from "buy."
Terminal block maker AXSYS TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AXYS)") else Response.Write("(Nasdaq: AXYS)") end if %> lost $2 1/2 to $26 3/4 after the company reported that it was issuing 1,528,550 shares of common stock in a public offering at $27.00.
Private mortgage insurance provider AMERIN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMRN)") else Response.Write("(Nasdaq: AMRN)") end if %> reported net income of $10.5 million, or $0.40 per share, which matched estimates. The stock is down $2 11/16 to $28 1/2.
CELL THERAPEUTICS (Nasdaq CTIC) fell $1 1/4 to $16 after the drug maker sold 2.3 million shares in a public offering at $16 a share, which was less than the company's previous closing price of $17 1/4.
SAFEGUARD SCIENTIFICS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFE)") else Response.Write("(NYSE: SFE)") end if %>
(800) 642-1687 (code: 634564) -- replay
AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>
Re: New CEO
(800) 475-6701 (code: 362163) -- replay through 10/22 @ 7:00 pm EDT
(320) 365-3844 (code: 362163) -- replay for international callers
BOEING BUSINESS JETS and EXECUTIVE JET
Re: Joint Venture
(800) 633-8284 (code: 3275333) -- replay through 10/22
MICROSOFT CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
(800) 456-5304 (code: 1017) -- replay through 10/22
360 COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay through 10/22
EMCO LTD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EMLTF)") else Response.Write("(Nasdaq: EMLTF)") end if %>
(416) 626-4100 (code: 628365) -- replay through 10/22
AVALON PROPERTIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVN)") else Response.Write("(NYSE: AVN)") end if %>
(800) 475-6701 (code: 359042) -- replay through 10/22
(320) 365-3844 (code: 359042) -- replay number for international callers
COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %>
(888) 243-0816 (code: 5276) -- replay through 10/23 @ 5:00 pm
MINNESOTA MINING AND MANUFACTURING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>
(888) 209-3817 -- replay through 10/23
INTERMET INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INMT)") else Response.Write("(Nasdaq: INMT)") end if %>
(800) 475-6701 (code: 360026) -- replay through 10/23
(320) 365-3844 (code: 360026) -- replay for international callers
COMPUTER HORIZONS CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHRZ)") else Response.Write("(Nasdaq: CHRZ)") end if %>
(800) 938-0928 -- replay through 10/24 at noon EST
ALLIEDSIGNAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %>
(800) 633-8284 (access code: 3232046) -- replay through 10/24 @ 5:00 pm ET
TRIBUNE COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRB)") else Response.Write("(NYSE: TRB)") end if %>
(800) 633-8284 (code: 3218583) -- replay through 10/24
RTW INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RTWI)") else Response.Write("(Nasdaq: RTWI)") end if %>
(800) 475-6701 (code: 359246) -- replay through 10/24
ARBOR SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARSW)") else Response.Write("(Nasdaq: ARSW)") end if %>
(800) 633-8284 (code: 3217382) -- replay through 10/25
RAPTOR SYSTEMS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAPT)") else Response.Write("(Nasdaq: RAPT)") end if %>
(402) 220-4216 -- replay through 10/27
FORTE SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRTE)") else Response.Write("(Nasdaq: FRTE)") end if %>
(402) 280-9000 -- replay through 10/27
SEAGRAM COMPANY and HSN, INC.
Regarding combination of television assets
(800) 558-5253 (password: 330 9589) -- replay through 10/28
(416) 626-4151 (password: 330 9589) -- replay for international callers
10/22/97 (Wednesday)
MURPHY OIL CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MUR)") else Response.Write("(NYSE: MUR)") end if %>
1:00 p.m. EDT
(800) 287-0835
(800) 633-8284 (code: 3190642) -- replay through 10/24 @ 1:00 pm EDT
10/22/97 (Wednesday)
READ-RITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDRT)") else Response.Write("(Nasdaq: RDRT)") end if %>
(800) 633-8284 (reservation # 3156600) -- replay through 10/23
(303) 248-1201 (reservation # 3156600) -- replay for international callers
10/22/97 (Wednesday)
AXENT TECHNOLOGIES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AXNT)") else Response.Write("(Nasdaq: AXNT)") end if %>
5:30 p.m. EDT
(612) 288-0340 -- live
10/23/97 (Thursday)
GENZYME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %> and GENZYME TRANSGENICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GZTC)") else Response.Write("(Nasdaq: GZTC)") end if %>
(800) 633-8284 (code: 3265950) -- replay through 10/30
(303) 248-1201 (code: 3265950) -- replay number for international callers
10/23/97 (Thursday)
ICT GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ICTG)") else Response.Write("(Nasdaq: ICTG)") end if %>
11:00 a.m. EDT
1-800-275-2442 -- replay through 10/24 @11:00 am EDT
10/23/97 (Thursday)
AVID TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVID)") else Response.Write("(Nasdaq: AVID)") end if %>
5:00 p.m. EDT
(913) 661-0896 -- live
(402) 220-0105 -- replay through 10/29
10/23/97 (Thursday)
NOVATEL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NGPSF)") else Response.Write("(Nasdaq: NGPSF)") end if %>
5:00 p.m. EDT
(800) 997-8544 -- live
(416) 620-9808 -- live for international callers
10/23/97 (Thursday)
PC DOCS GROUP INTL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DOCSF)") else Response.Write("(Nasdaq: DOCSF)") end if %>
(416) 695-5800 (code: 723627) -- replay
10/23/97 (Thursday)
MICROWARE SYSTEMS CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWAR)") else Response.Write("(Nasdaq: MWAR)") end if %>
(800) 633-8284 (code: 3118988) -- replay through 10/24
THIS WEEK'S CONFERENCE CALL SYNOPSES
GREEN TREE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GNT)") else Response.Write("(NYSE: GNT)") end if %> Call
CARLISLE COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSL)") else Response.Write("(NYSE: CSL)") end if %> Call
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Randy Befumo (TMF Templr), Fool One
Dale Wettlaufer (TMF Ralegh), Fool Two
Alex Schay (TMF Nexus6), Fool Three
Contributing WritersBrian Bauer (TMF Hoops), Fool Four
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