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|D |5Ranndom Events |D
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^Cby
^CRichard and Lavona Rann

|CEYEWITNESS NEWS:

On January 29, John Sculley led the Apple delegation to The Seybold
Communications Conference for the introduction of five new Apple products.
What Apple presented was an entire communications package with the long awaited
AppleShare file server as its centerpiece.  In the process, Apple confirmed
their commitment to connectibility and the making of Apple computers acceptable
to large and medium size business.  They also kept the advantages of the user-
friendly, easy to use MAC interface.

|CTRUE TO THEIR WORD:

Apple proved just that in their promises about dealing with third-party
developers.  In the weeks after the Seybold conference, several vendors have
announced AppleShare products.  One of these is a foreground manager for
AppleShare by Kent Marsh Limited Inc.  It is designed to help locate and use
network foreground features such as the new spooler, E-mail, and several
diagnostic programs.

|CON THE LEGAL FRONT:

Another software liability suit was filed last month by Capital Planning
Service, a small financial planning company.  Capital Planning charges Zenith
Data Systems Corp. with fraud and misrepresentation and is seeking $621,000 in
damages.  Capital alleges that a Zenith dealer sold them HS-151 PCs and a LAN
software package, Etherseries LAN, that did not work and was responsible for
shutting down their business for five months.  In October, Capital purchased
IBM PC XTs and the 3Com Etherseries system worked perfectly.

Under old business, many voices have been raised both for and against the "Look
and Feel" action taken by Lotus and Apple.  The opinions pro and con seem to be
divided by how much easy money there is to lose if courts begin protecting the
look and feel of software and hardware.  These issues will be debated for a
long time.  If worry is any criterion, it has a number of people quaking in
fear that they and their copy machine might be put out of business.

On January 12, Apple named John P. Karalis vice president and general counsel.
The announcement was made by Albert A. Eisenstat, senior vice president,
secretary, and former general counsel.  Karalis, 48, will have overall
responsibility for Apple's legal affairs worldwide and will be responsible for
managing Apple's legal staff.  He comes from a similar position with Sperry
Corporation, and from 14 years at Honeywell Inc. before that, where he was vice
president and assistant general counsel.

|CON THE FINANCIAL FRONT:

IBM:  By now, everyone knows that IBM has been having difficulty, but analysts
were surprised by the extent of the problems.  IBM, the acknowledged industry
leader, has not participated in the high-tech turnaround over the past six
months.  Perhaps most disturbing to IBM is that their problems extend over
their entire range of products.  IBM mainframe, mini, and PC market shares have
each declined during the 1986 calendar year.  Fourth quarter earnings were off
48.3 percent over 1985.  Earnings were $1.39 billion or $1.39 a share compared
to 1985 fourth quarter totals of $2.68 billion or $4.36 a share.  IBM's figures
are somewhat distorted because of high levels of capital investment and several
one-time expenses.  One of these was the $250 million it cost to cover early-
retirement incentives for about 10,000 employees.  One fact to note is that
IBM's profits have been lower for two consecutive years over prior year
results.  This is the first time that has happened to IBM since the 1930s.

APPLE:  Apple's numbers for the first quarter, which includes the Christmas
season, show only a moderate increase in profit, but there were several good
reasons for lower than expected performance.  First quarter profits rose a mere
2.8 percent based mostly on very strong Macintosh sales.  For the first time,
the Macintosh outsold the II line.  Part of this was due to Apple's inability
to fill GS orders.  We know one dealer had a waiting list of some 40 plus names
and by mid-January had received a total of seven GSs.  Besides the problems
with deliveries which affected income, expenses were high because Apple
invested enormous sums of money in special product introduction activities,
including a project which sent technical people to hundreds of user groups
around the county.  The introductions of new products, advertising, and
development costs rose nearly $54 million for the quarter.

The numbers that follow are listed for 1986 first, then 1985:  Net Sales,
$662.3 million to $533.9; earnings $58.5 million, to $56.9 million, for a
matching $.91 per share earning in both years.

Apple added to owner's equity by more than $150 million this quarter, with
balance sheet increases in both receivables and cash.  There was one alarming
note, however.  The 2.8 percent increase in profit was quite small compared to
the 24 percent increase in sales.

Still, Apple remains financially strong.  Evidence of this appeared in Forbes
Survey of American Industry that appeared in their January 12th magazine.
Apple was listed as the tenth most profitable corporation in America, and the
only high-tech in the top ten.  John Sculley admits that Apple will have
trouble matching last year's performance over the first couple calendar
quarters of 1987 because of the expense of introducing new products.  He sees
profits rising sharply over the summer months of 1987.

Another factor worth watching is Apple's percent of the total industry retail
sales.  For the year, Apple was tied with Tandy at 25 percent of the retail
market.  IBM, formerly number one, has slipped to third with only 17 percent.
Apple must keep its retail share of the market to remain successful. During the
Christmas season, Apple remained steady at 24 percent, IBM dropped to 12
percent, and Tandy soared to 37 percent on the strength of saturation
advertising and drastically cut prices.  Apple's inability to ship sufficient
quantities of the GS certainly lowered their percent of sales.  Interestingly,
this year marks the first time that IBM has dropped to number three in retail
sales.  Part of their poor showing might be due to the sale of their money
losing retail outlets to NYNEX.

DIGITAL EQUIPMENT CORP:  Paul Kangus of PBS's Nightly Business News dubbed DEC
"New Blue" because of its sales, profit, and stock performance.  Like Apple,
DEC has never paid a dividend, but over the years it has been a good
investment.  The pattern has been a slow creep up in value and then a stock
split.  Long term investors have accumulated considerable equity after eight or
ten cycles.  For now, DEC looks as if it is truly becoming a blue chip, a feat
no other company, except IBM, has accomplished by making computers.  We can
find no reason why DEC will not maintain its strong position, especially since
it is a leader in networking and connectibility, and has been for the past
fifteen years.  The rest of the computer industry is now following DEC's lead
in these areas.

WANG:  One of DEC's major competitors in the mini-computer market posted a loss
for its second fiscal period of $78.6 million.  While Wang forecast a loss
during the quarter, the actual numbers were worse than expected.  For the first
six months of their fiscal year Wang has posted a $108.6 million loss compared
with a profit of $28.7 for the same period last year.  Wang is hopeful though,
as there has been a steady increase of orders over the period, which points to
better times in 1987.

CONTROL DATA:  Like Wang, Control Data has not taken part in the upswing of the
computer industry.  It posted a loss of $38.3 million on sales of $2.44 billion
for the first nine months of its fiscal year.  Analysts believe that it might
well have a $50 million loss by the end of the year.  Control Data is in the
process of refinancing its debt, but it must be remembered that it has not
shown a profit on operations for several years now.  Last year it lost $567.5
million, and its 1984 losses were offset by sale of its commercial credit unit.

COMMODORE:  Following five quarters of loss, Commodore has posted two
consecutive quarters of profit.  Much of Commodore's rebound came because of
cost cutting, including a one third reduction in payroll.  Its almost $20
million profit is the best showing since 1984, but may not be enough to satisfy
the demands of competition.  Like Apple, Commodore has a number of products
scheduled for release this year.  The question is whether it has the resources
to market them successfully and still service its debt which requires a $88.7
million payment in fiscal 1987.

|CINVESTMENT OPPORTUNITIES:

In this market, the best opportunities may be with IBM.  IBM still figures to
have a couple more poor quarters.  If there is a correction in the stock market
while IBM is still having problems, IBM may sell for under $120 a share (at
this writing it is in the mid $130s).  In that case, it would be a good
bargain.  Any company that is thought of as having poor results on a billion
plus dollars profit for a quarter is still a strong one; its stock will not be
likely to remain depressed.  In a post 2000 Dow, IBM should sell at better than
$140 in the long run.

Digital may be be a very good buy during the next few months.  If history
holds, it is likely to split and then the price would drops below a $100 a
share.  At a $70 to $90 a share it has a good track record and a history of
slow steady increases in value.

Apple on the other had, is a bit soft in the upper $50s.  With currently
expected profit levels, Apple should be priced in the $50s to $60s.  This means
that there would not be a great expectation of gain unless profits were to
soar.  With no dividends, and no history of splitting, it seems to be a time to
hold rather than buy more.  The best play on Apple may be to watch for a
general correction (dip) in the market that could pull Apple down into the $40s
or even below.  At that point it would become a real bargain.

|CMERGER MANIA CONFUSING:

Last month we reported the rumor that Apple might buy Sun Microsystems Inc.
That rumor is still circulating.  This month Sun Microsystems became more
inviting for an Apple takeover as it acquired Centram Systems West under a deal
where Sun would trade 685,000 of its shares for the privately held company.
Centram was among the first to market software that allowed the Macintosh to
share data files with IBM-compatible computers.  Last month Centram announced
that they had signed a letter of intent to merge with 3Com Corp., another
communication software maker with products for the Mac, in a stock swap deal.
While there are a number of legal problems to work out, Sun with its Apple
compatible work station and two communication company brides, might be an
attractive acquisition for Apple.
