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FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump
Tellabs Rings Up Gains
Shares in video transport and network access system maker Tellabs <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %> rang up another $2 1/4 to $66 1/2 this morning as enthusiasm over a $100 million multi-year contract with Sprint <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %> continued. News of the contract actually hit the market on Monday when Sprint announced during a conference call that it was using Tellabs AN2100 Gateway Exchange System. The order was confirmed by Tellabs on Monday afternoon and a press release was issued last night. In mid-October, analysts had speculated that Sprint was looking at placing a $50-$100 million order for this product, which is a voice and data switch for high-speed data networks. Not only is this order at the high end of expectations, it also indicates that Tellabs research and development efforts are creating competitive products in the voice and data arena.
This past June, Tellabs announced the planned acquisition of Ciena <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %>, a maker of wave division multiplexing systems that allow fiber optic cables to carry more information. Analysts applauded this effort because it would give Tellabs a position in Ciena's robust market segment, while Tellabs dealt with older products that analysts feared would face slower growth. As the summer unfolded, Ciena warned that earnings would fall short of expectations and that it would not win a major contract from AT&T that was expected. Due to these problems, Tellabs first lowered the price it would pay for Ciena and then cancelled the deal outright. At the time of the cancellation in mid-September, Tellabs warned that its earnings would likely be $0.46 per share, a penny short of analyst estimates. Shortly thereafter, on October 8th, the stock hits its 52-week low of $31 3/8.
What a difference a little time makes. In mid-October, Tellabs reported Q3 earnings of $0.48 per share, two cents above the mid-September warnings and a penny above the published estimates at the time of the warning. CEO Michael Birck said that strong demand from new and existing customers would boost revenues and earnings for Q4 and 1999. He said he was "quite comfortable" with estimates of $0.58 for Q4 and indicated that the company should post significant growth in 1999 with earnings of about $2.40 and revenues in the $2.1-$2.2 billion range. (First Call estimates currently show expectations of $0.59 and $2.39 for Q4 and 1999, respectively.) As investors recognize that Tellabs has been developing a successful generation of new products, the stock has now more than doubled from its lows only two months ago.
Shares of online streaming media aggregator Broadcast.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BCST)") else Response.Write("(Nasdaq: BCST)") end if %> flew ahead $8 3/8 to $63 1/8 after the company announced a deal with The Nasdaq Stock Market, Inc. to broadcast quarterly earnings conference calls over the Internet in a pilot program for Nasdaq 100 companies. Hambrecht & Quist upgraded Broadcast.com to "buy" from "hold" today.
Electronic design automation tools maker Quickturn Design Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QKTN)") else Response.Write("(Nasdaq: QKTN)") end if %> shot up $1 1/2 to $13 11/16 after the company agreed to be acquired by Cadence Design Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDN)") else Response.Write("(NYSE: CDN)") end if %> in a $253 million stock deal. The $14 per share offer represents a nearly 15% premium over Monday's closing price for Quickturn, which spent much of this year fighting off an unsolicited offer from Mentor Graphics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MENT)") else Response.Write("(Nasdaq: MENT)") end if %>. Mentor slid $1 3/8 to $8 5/8 this morning.
Recently maligned aircraft maker Boeing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> rose $5/16 to $34 3/4 after it won a $1.4 billion order for 50 Boeing 717-200s, with rights to purchase 50 more, from Trans World Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %>. TWA also decided to buy 75 planes -- 50 A318s and 25 A320s -- with the option to buy an additional 75 aircraft from rival Airbus Industrie. Boeing also received an order worth $335 million for two 747-400 freighters from Luxembourg-based Cargolux Airlines.
Data networking company 3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> improved $1 1/16 to $44 7/16 on reports that it is forming a $100 million joint venture to develop products for computer-based office phones with Siemens AG, Germany's largest electronics and engineering firm. The partnership will allow 3Com to better compete with rival Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> in this growing area while still remaining independent.
Women's clothing designer and manufacturer St. John Knits <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SJK)") else Response.Write("(NYSE: SJK)") end if %> stitched up $5 1/4 to $27 3/16 after it said it received an offer from company founder, chairman, and CEO Bob Gray and his family to buy shares they don't already own for $28 a share in cash -- a 28% premium over the company's closing price yesterday of $21 15/16.
AT&T Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> rang up $1 15/16 to $68 15/16 after announcing a three-year deal to provide members of the Securities Industry Association and the New York Clearing House Association with local communications services, a pact worth at least $180 million.
Internet portal company Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> moved up $3 1/8 to $48 after it said COO Les Wright will take on the additional responsibilities of CFO, replacing Remo Canessa.
Grocer Great Atlantic & Pacific Tea Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GAP)") else Response.Write("(NYSE: GAP)") end if %>, which yesterday said it will close or sell 127 of its 907 stores and take a charge of up to $160 million, bagged $1 3/4 to $27 3/16 today after Morgan Stanley Dean Witter upgraded the company to "outperform" from "neutral."
Independent mortgage banking company Headlands Mortgage Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HDLD)") else Response.Write("(Nasdaq: HDLD)") end if %> shot up $4 1/2 to $21 1/2 on last night's news that GreenPoint Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPT)") else Response.Write("(NYSE: GPT)") end if %> agreed to buy the company in a $473 million stock deal. The deal vales Headlands at nearly $24 per share, more than a 40% premium over yesterday's closing price.
Four Media Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FOUR)") else Response.Write("(Nasdaq: FOUR)") end if %>, which provides technical and creative services to the entertainment industry, added $1 3/8 to $8 3/8 after CIBC Oppenheimer started coverage of the company with a "strong buy" rating.
Modeling and computer design products maker 3D Systems Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TDSC)") else Response.Write("(Nasdaq: TDSC)") end if %> moved ahead $1 3/4 to $8 1/4 after releasing Cibatool SL 5530HT, a new high-temperature resin to be used with its solid imaging systems.
"Generation Next" apparel retailer dELiA*s Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLIA)") else Response.Write("(Nasdaq: DLIA)") end if %> jumped ahead $1 5/16 to $12 9/16 after it said it was considering alternatives for its Internet unit, possibly to include an IPO. The company reported Q3 EPS of $0.05, below last year's $0.12 figure but in line with the market's consensus estimate.
Real estate investment trust (REIT) Tower Realty Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOW)") else Response.Write("(NYSE: TOW)") end if %> advanced $7/8 to $19 1/2 after it said Crescent Real Estate Equities Co. and Reckson Associates Realty Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RA)") else Response.Write("(NYSE: RA)") end if %> will acquire its common stock for $5.75 per share in cash and 0.6273 of a newly issued Reckson common share. Tower announced plans to sue the companies last month after it said they were backing out of a $24 per share buyout offer.
TV and radio station operator Emmis Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EMMS)") else Response.Write("(Nasdaq: EMMS)") end if %> tacked on $2 3/4 to $42 1/2 after it said it expects to beat Wall Street's EPS estimates for Q3 when it reports results Dec. 18. Five analysts surveyed by First Call currently have a mean estimate of $0.09 per share.
Trash services company Waste Management <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMI)") else Response.Write("(NYSE: WMI)") end if %> picked up $2 5/16 to $46 3/4 after it settled a class-action suit against its recently acquired Waste Management Holdings subsidiary yesterday. The company expects an after-tax charge of $70 million in Q4 in connection with the settlement
Food products and restaurant firm Fresh Foods <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FOOD)") else Response.Write("(Nasdaq: FOOD)") end if %> spoiled for a $1 7/16 loss to $6 1/16 after pre-announcing fiscal Q3 earnings between $0.19 and $0.23 per share, which is below the $0.46 to $0.53 per share the company said analysts had been expecting. The company blamed the shortfall on conversion problems and slow branded food sales at its restaurants, adding that the problems will likely persist and result in Q4 earnings "consistent" with the Q3 results.
Information technology education centers operator Computer Learning Centers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLCX)") else Response.Write("(Nasdaq: CLCX)") end if %> was flunked for a $15/16 loss to $5 15/16 after reporting fiscal Q3 EPS of $0.03, down from the $0.15 last year and below the First Call mean estimate of $0.13. The company blamed the shortfall on an 18% year-over-year decline in same center enrollments, which was felt mostly at centers in the Washington D.C., Chicago, and Los Angeles markets.
Consumer products giant Procter & Gamble Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %> was Hawaiian Punch-ed for a $3 11/16 loss to $83 1/16 following a downgrade to "neutral" from "attractive" from Bear Stearns on fears of slowing near-term global unit sales volume growth. Those same fears may also have carried over into the shares of soft drink company Coca-Cola Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %>, which lost $3 to $65 5/8 this morning.
Semiconductor automatic test equipment maker Credence Systems Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMOS)") else Response.Write("(Nasdaq: CMOS)") end if %> slid $1 5/16 to $18 1/2 after reporting a fiscal Q4 loss of $0.38 per share (excluding charges) compared to earnings of $0.32 per share a year ago, which was slightly worse than the loss of $0.37 per share expected by analysts surveyed by First Call. The company also said that chairman and CEO Wilmer Bottoms has resigned. William Howard will replace Bottoms as chairman, and the company has begun the search for a new CEO.
Tefron Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TFR)") else Response.Write("(NYSE: TFR)") end if %>, which makes branded intimate apparel for retailers such as Intimate Brands' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBI)") else Response.Write("(NYSE: IBI)") end if %> Victoria's Secret unit, was ripped for a $3 7/8 loss to $7 3/4 after saying "quality control issues" for some garments produced by subcontractors will result in sales and earnings figures "below plan" in Q4 and in the first half of fiscal 1999.
Utility holding company SCANA Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCG)") else Response.Write("(NYSE: SCG)") end if %> was zapped for a $1 3/16 loss to $31 13/16 after the South Carolina Public Utility Commission ordered the company's South Carolina Electric & Gas Co. unit to cut its electric rates by an annualized $22.7 million after the company reported higher than authorized return on equity figures due to abnormally hot summer weather.
Swedish drug developer Astra AB <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: A)") else Response.Write("(NYSE: A)") end if %> fell $1/2 to $21 3/8 after officially agreeing to merge with Britain's Zeneca Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZEN)") else Response.Write("(NYSE: ZEN)") end if %> in a stock swap valued at $34.6 billion. Combined, the companies had pro forma net earnings of $2.4 billion in fiscal 1997 on revenues of $15.9 billion. For more details on the deal, see this morning's Breakfast With the Fool.
Investment, healthcare, and disaster recovery computer systems developer SunGard Data Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SDS)") else Response.Write("(NYSE: SDS)") end if %> was burned $1 3/16 to $32 9/16 as its BancWare subsidiary agreed to acquire privately owned asset and liability management systems firm DollarMark Solutions Inc. for unspecified terms.
Hotel and casino operator Starwood Hotels & Resorts <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HOT)") else Response.Write("(NYSE: HOT)") end if %> lost another $1 3/8 to $24 15/16 after falling 11% yesterday on news that the delayed opening of its "Glory of Rome" riverboat casino will result in fiscal Q4 funds from operations a dime below the Street's estimate of $1.50 per share. This morning, Prudential Securities reduced its rating to "accumulate" from "strong buy" and Schroder & Co. cut its view to "outperform" from "outperform significantly."
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), another Fool David Marino-Nachison (TMF Braden), a new Fool
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