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FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump

A Roundtrip For Manugistics

Supply chain software maker Manugistics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MANU)") else Response.Write("(Nasdaq: MANU)") end if %> stumbled $15/16 to $12 1/8 this morning after releasing earnings that once again fell short of expectations. Softening the blow to the stock today is the fact that the stock already has fallen over 80% from its April peak and the news that the company is in preliminary discussions regarding potential business combinations. For the record, the company posted a quarterly loss of $0.39 per share, including a $0.02 restructuring charge, well below the $0.06 per share First Call consensus estimate. Overall revenue rose only 2%, as a 33% plunge in licensing revenue was offset by a jump in consulting revenue. The very slim revenue increase combined with declining gross margins and soaring sales and marketing expenditures caused this quarter's loss.

Let's backtrack to earlier this year. On March 26, Manugistics announced that it's fourth quarter revenue doubled and EPS came in at $0.25 compared to First Call estimates of $0.23. This was the eighth quarter in a row that earnings met or exceeded expectations and investors went into a hysteria. After closing at $38 before the earnings news, the stock gapped open to $43 3/4 before closing the day at $53 3/16, a gain of 40%. The stock continued increasing for the next few weeks, reaching a high of $66 3/8 on April 14. After drifting slightly downward, the company began a precipitous three-day drop on May 20, falling from $59 to $29 on news that Q1 earnings were not going to meet expectations. The company stated that it was having problems managing the growth of its sales force. Given today's news, it is obvious that those problems, as well as competitive threats and other issues, have continued.

Earlier this year, as Manugistics growth was peaking, investors (and analysts) were plunging into the shares. The stock rose over 70% in about three weeks. Since that time, however, we have learned that analysts' extrapolation of trends early in the year were erroneous. Not only would sales growth slow down rather than accelerate, but also the dynamic nature of competition and market forces would adversely affect results. There could be a lesson here for investors: Be prepared for the unexpected. When everyone is euphoric and sees the glass as half full, look for risks. On the other hand, when investors are depressed and view a half-empty glass, it might be time to look for positive surprises. While operating results for Manugistics are horrible, an acquirer might find significant value in the company's well-established products. Stay tuned, the company expects to announce its decision regarding a business combination in January.

UPS

Online data broadcasting firm WavePhore Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WAVO)") else Response.Write("(Nasdaq: WAVO)") end if %> surfed $1 7/8 higher to $10 after announcing it has launched a "virtual movie theater" in conjunction with Time Warner <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TWX)") else Response.Write("(NYSE: TWX)") end if %>, which offers clips from selected Warner Bros. features on WavePhore's WaveTop PC data broadcast service. Also, the company said News America Digital Publishing has agreed to provide video and news from Fox News Online and Fox Sports Online to WaveTop.

Specialty retailer Sharper Image Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHRP)") else Response.Write("(Nasdaq: SHRP)") end if %> moved up $2 3/4 to $15 5/8 after saying sales from its sharperimage.com website are up 492% month-to-date in December, following a 436% sales jump in November. Meanwhile, the company's same-store sales are up 9% so far in December and catalog sales are up 27%.

Online entertainment-related products retailer Big Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIGE)") else Response.Write("(Nasdaq: BIGE)") end if %> gained $1 7/8 to $13 5/8 on the news its online movie merchandise store will be promoted by streaming media aggregator Broadcast.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BCST)") else Response.Write("(Nasdaq: BCST)") end if %> through banner ads and buttons on Broadcast's website.

Respiratory pharmaceutical products developer Dura Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DURA)") else Response.Write("(Nasdaq: DURA)") end if %> rose $1 7/16 to $12 15/16 after saying it has obtained the exclusive U.S. distribution rights to the intravenous antibiotics Maxipime and Azactam from Bristol-Myers Squibb <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMY)") else Response.Write("(NYSE: BMY)") end if %> for an initial payment of $60 million, a $70 million payment four years from now, and additional unspecified contingent payments. Dura expects the two drugs to produce $60-$65 million in sales in 1999.

Swedish automaker Volvo AB <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VOLVY)") else Response.Write("(Nasdaq: VOLVY)") end if %> motored $3 1/16 higher to $24 3/4 on reports that an executive from Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> has met several times lately with the company about a possible business combination. Neither company is confirming that any talks have taken place. Ford rose $1 5/16 to $57 3/16 this morning.

Chip giant Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> gained $4 13/16 to $123 7/8 after Merrill Lynch analyst Tom Kurlak raised his intermediate and long-term opinions on the company to "accumulate" from "neutral" and raised the company's fiscal 1999 EPS estimate to $4.25 from $3.60. Kurlak is forecasting 1999 revenues of $30.35 billion, adding that recent cost reduction efforts by Intel and signs of "renewed vigorous" PC sales growth have eased his fears somewhat about the company's average pricing, unit volume growth, and gross margins.

Internet-related publisher and trade show operator Ziff-Davis Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %> zipped $2 1/4 higher to $15 1/2 after announcing late yesterday that it has filed a registration statement with the Securities and Exchange Commission to issue tracking shares for its ZDNet Internet unit in an initial public offering.

Auto parts retailer Pep Boys-Manny, Moe & Jack <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PBY)") else Response.Write("(NYSE: PBY)") end if %> picked up $1 11/16 to $15 3/16 after announcing a Dutch Auction to repurchase up to 10 million of its outstanding shares at a price ranging from $13.50 to $16 per share.

Facility and janitorial services roll-up firm Building One Services Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOSS)") else Response.Write("(Nasdaq: BOSS)") end if %> rose $4 3/4 to $21 1/4 after agreeing to merge with an affiliate of privately held investment firm Apollo Management L.P., whereby 34.5 million of Building One's 44.2 million outstanding shares will be purchased at a price of $25 per share in cash. The purchase price represents a 51.5% premium to Building One's closing price of $16 1/2 per share last night.

Several companies rose today on word that they will be added to the Standard & Poor's MidCap 400 index. Concord EFS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CEFT)") else Response.Write("(Nasdaq: CEFT)") end if %> gained $1 3/8 to $38 13/16, Legato Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LGTO)") else Response.Write("(Nasdaq: LGTO)") end if %> added $2 1/2 to $58 5/8, Apollo Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APOL)") else Response.Write("(Nasdaq: APOL)") end if %> climbed $1 15/16 to $25 3/8, Gulfstream Aerospace <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GAC)") else Response.Write("(NYSE: GAC)") end if %> advanced $1 3/4 to $51 3/4, Convergys <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVG)") else Response.Write("(NYSE: CVG)") end if %> moved up $13/16 to $20 11/16, and Everest Reinsurance Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RE)") else Response.Write("(NYSE: RE)") end if %> rose $1 5/16 to $35 15/16.

DOWNS

Onetime Dow Jones Industrial Average component and Foot Locker parent Venator Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: Z)") else Response.Write("(NYSE: Z)") end if %> was dunked for a $9/16 loss to $6 1/4 as the company formerly known as Woolworth will be replaced on the S&P 500 Index by America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>. AOL added $5/16 to $138 5/16 after posting big gains in after-hours trading last night. Browser maker Netscape Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %>, in a pact to merge with AOL, won $7 5/8 to $58 3/4.

Credit reporting firm Equifax Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EFX)") else Response.Write("(NYSE: EFX)") end if %> lost $10 3/16 to $33 13/16 after it said incorrectly projected revenues from long-term marketing contracts in Europe, among other factors, will pull Q4 EPS to about $0.31 when the company reports results Jan. 21, $0.04 below Street estimate.

Point-of-sale processing service provider Transaction Network Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TNSI)") else Response.Write("(Nasdaq: TNSI)") end if %> fell $2 5/8 to $15 3/4 after it said the transition of customers to the transaction access service system acquired from AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> in September, among other factors, will hurt earnings. The company doesn't expect to report EPS of more than $0.10 in Q4, well off First Call's four-analyst estimate of $0.31 a share.

The world's largest PC distributor, Ingram Micro <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IM)") else Response.Write("(NYSE: IM)") end if %> crumbled $2 1/2 to $34 1/2 following last night's after-the-bell warning that it expects Q4 EPS of $0.48 to $0.50, short of analysts' expectations of $0.56, due to lower-than-expected computer sales. The company lost $9 1/4 yesterday in anticipation of the warning.

Technology management services company InaCom Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICO)") else Response.Write("(NYSE: ICO)") end if %> slid $4 7/8 to $14 1/4 on last night's news that a decline in vendor incentives is expected to hurt Q4 EPS, dragging it to between $0.50 and $0.55, well off the market's current $0.71 consensus estimate.

Aerospace and defense contractor Lockheed Martin <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LMT)") else Response.Write("(NYSE: LMT)") end if %> dove $8 7/8 to $86 1/8 after it said Q4 EPS is expected to come in about 10% below the year-ago $1.79 figure. The projected $1.61 a share mark would be significantly below Wall Street's current expectation of $2.06. Sales declines in commercial space activities and delayed space launches were among the culprits of the Q4 shortfall.

Tape storage systems provider Exabyte <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EXBT)") else Response.Write("(Nasdaq: EXBT)") end if %> fell $1 5/16 to $5 3/16 after it forecast a Q4 loss of between $0.18 and $0.24 per share, well off the three-analyst estimate from First Call of an $0.04 per share profit. Slow sales of several high-margin products hurt results.

Commercial metalworking heat treating firm Lindberg Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LIND)") else Response.Write("(Nasdaq: LIND)") end if %> melted $1 5/8 to $8 5/8 after it said slowing sales are expected to pull Q4 EPS between 20% and 25% below the third quarter's $0.41 figure. Two analysts polled by First Call currently have an $0.44 a share estimate; the company's guidance points toward something in the $0.33 to $0.35 range.

Mutual fund company Franklin Resources <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEN)") else Response.Write("(NYSE: BEN)") end if %> was shocked for a $3 5/16 loss to $39 5/8 after the company said it anticipates fiscal Q1 net earnings to come in below analysts' $0.44 per share consensus expectation because of "a variety of factors" including increased expenses and a shift in the asset mix towards lower-margin fixed-income products.

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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 Editing Brian Bauer (TMF Hoops), another Fool Bob Bobala (TMF Bobala), a Fool's Fool Jennifer Silber (TMF Amused), Fool at last