Judy,
FORE SYSTEMS (FORE) 15 5/16 +1 7/8 Stock up big on impressive jump in volume in reaction to comments made by Intel (INTC)
yesterday. Chip maker noted that it was looking to acquire more networking firms. FORE's modest size and its existing working relationship
with INTC have speculators drooling over the prospects of a deal. News of moderate insider buying adding to the speculative fervor. Of
course it should be noted that FORE has been a rumored target for the better part of two years, with Lucent (LU) considered the other most
likely suitor. However, company's strong presence in the fast-growing ATM market would seem to make it a better fit for INTC than LU.
FORE's large domestic presence, over 70% of sales, also makes it a decent target of foreign companies such as Alcatel, Nokia and Ericsson.
Briefing maintains that stock likely to fetch $20-$22 in any deal. But buying this stock in anticipation of a deal has been a loser for most
investors, as FORE has trended lower over better part of last two years. From its peak of 43 1/2 in late 1996, FORE is off 66%. Tough pricing
conditions and an inability to get products to market in a timely fashion, and accurately anticipate demand, have hampered the stock. Drop
in R&D spending as a percentage of revenues also a concern, especially in the fast changing networking industry. Nevertheless, we are
encouraged by the recent acquisition of Berkeley as it will enable company to offer a broader range of products. Stock also trading at
reasonable valuations relative to the industry. At today's price, FORE sports an estimated p/e of 31.4x, with an est. PEG of 1.02. Key
resistance is at 18, with near-term support at 13.
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