The San Francisco Examiner from San Francisco, California • 35

ySDlnld $an SWincCoro tixuminrr June 14, 1984 section J.1;;." 'gfSy'H. 00 a vera ge fa ow 1,1 JUToday's stocks NEW YORK (AP) The stock market declined broadly today in a slump that carried the Dow Jones industrial average below 1,100 at the close for the first time in more than 15 months. Computer and technology Issues suffered some of the biggest losses in a session of relatively subdued trading volume. The Dow Jones average of 30 industrials tumbled 12.92 to 1,097.61, for its first close below 1,100 since it stood at 1,096.94 on Feb. 23 of last year.

Turnover on the New York Stock Exchange came to 79.12 million shares, up from 67.51 million yesterday. Wall Streeters have seen some evidence lately that the economy is slowing a development widely perceived as necessary to permit any meaningful decline in interest rates. tory levels can prompt cutbacks In orders and production. In a prominent spot at the top of the active list was International Business Machines, down 3 at 100V4 and trading at new 52-week lows. With its standing as the No.

1 holding of investing institutions, IBM is regarded as a bellwether stock that often influences the direction of the general market. Among other computer and technology stocks, National Semiconductor lost 1 to lift; Motorola 2' to 29; Texas Instruments 3Vi to 125'A, and Digital Equipment to 85. Auto issues were also weak, with General Motors off Vt at 62; Ford Motor down l' at 35 V2, and Chrysler down lV4at23. Jewel Cos. gained 4 to 72 as the company agreed to be acquired by American Stores for $75 a share.

American Stores was down IV at 28. The bears chow on IBM IF THINGS weren't bad enough, here's a wicked The latest signals came yesterday in the form of relatively weak retail sales figures for May and domestic car sales reports for early June. But analysts said investors were still in no mood to buy stocks with attractive returns available in money-market vehicles such as Treasury bills. Brokers said traders also were unsettled by the government's report today that business inventories rose 1.5 percent in April, continuing their recent buildup. High inven forecast that spells more bad news for the nation's 42 million stock-market players.

The classiest name of them all IBM is on the verge of another significant break that could send the stock skidding to the $75 level. (IBM closed at $104 yesterday, down sharply from Its October 1983 high of 13414). This gloomy forecast was just fired off to clients by the two top fellas in technical research at Smith Barney. Harris Uoham Co. the well-regarded Clorox Co.

stock falls after delay I Alan Shaw and his savvy sidekick, Robert Colby. I i Since last week's announcement that IBM was J' cutting prices of its personal computers 18 to 23 percent, the shares of the kingpin of the computer game have been under unrelenting pressure. In fact, ti the stock fell to a new low for the year of 103. I The IBM bulls are quick to argue that investors I are overreacting to the price cuts, that personal 1 computers are still only a modest part of the busi-: ness. Moreover, they point to a superior growth record that's still intact, plus superb technological skills capable of bowling over a lot of the competi-! tion.

Maybe so, but Shaw and Colby are not looking at fundamentals such as earnings and growth pros-; pects.They track chart patterns in other words, a stock's momentum or lack of momentum to deter-S mine whether it's being accumulated (bought) or being distributed (sold). 'V TPhe grim conclusion: IBM looks awful! Our two I bears say IBM has hit a major top and its October 83 peak of 134Vi won't be seen for quite a while, Moreover, they say the stock is vulnerable to a stiff decline over the next few months to the low 80s and possibly to 75. ks r. A I ixH 'r 8t I i 1 Clearly the sellers are now in control, and supply not demand is now the dominant force, Colby ExminrKurl Rogers Osborne's bankruptcy auction drew such an enthusiastic crowd that prices went above bargain level Bargains are scarce at auction tells me. Here's how Shaw and Colby arrived at this After a two-year bullish move from 49 to jMMVi IBM broke a major uptrend line when it fell $.

from that 134 in October to 118 the first week of December. That shouldn't have happened if IBM was Examiner news services Clorox Co. stock fell sharply early today on reports the Oakland-based company is having difficulty moving some of its products into new distribution outlets. Following a delay in opening of its stock today due to an order imbalance, Clorox was down more than two points to $27 on the New York Stock Exchange. Clorox's Intergration of the Lucite paint business with its Olympic Stain operations is not going as well as Clorox had hoped, according to two analysts who spoke to Clorox yesterday.

Clorox bought the Lucite brand name and inventories from DuPont Co. for $55 million last July. Since then it has been trying to increase Olympic stain's largely independent distribution network as well as move Olympic into Lucite's mass merchandising market, according to Jay Freeman, analyst with Kidder, Peabody Co. Clorox indicated to the analysts that its sales force had been "challenged" by the attempt to move the products into new distribution outlets and also said poor weather conditions had hindered sales. "The key indiciation is that for the year ending June 30, both Olympic and Lucite will be down compared to last year and at the same time competitors are doing well," Freeman said.

Lucite, a medium priced product, competes in the paint market, which is about 50 percent larger than the entire market for premium-priced Olympic stains and paints. According to Value Line Investment Survey, Lucite has only about 5 percent of its market. "Persuading more retailers to sell Lucite rather than another brand will be a challenge, we think," Value Line reported. However, it added that Clorox's return on equity is higher than competitors and said the stock has a "good chance" to outperform the market this year. Freedman said he now estimates the company will earn about $3 a share fully diluted in fiscal 1984, which ends June 30, and $3.15 to $3.20 fully diluted in fiscal 1985.

He had been expecting fully diluted net of $3.05 to $3.10 in fiscal 1984. Similarly, Merrill Lynch analyst Brenda Gall dropped her estimate for fiscal 1984 to $3 a share fully diluted compared with an See Page C9, col. 1 a strong stock, as the two men see it. And that broke the stock's positive uptrend. IBM subsequently rallied to about 124 the next week and a half.

But it was a rally that failed when IBM stalled over the next three weeks while the market averages moved somewhat higher. Colby characterizes that lackluster performance as a "technical failure," clearly signaling a lack of demand and hinting of trouble ahead. And that trouble, he goes on, was undeniably confirmed when IBM shares recently hit a new low. This is a reference to the stock's recent decline to a new low after rebounding four times between February and April when it dropped to the lOGte-108 zone. That drop to a new low came May 26 when the stock hit 106.

It was another failure, as Colby explains it, reconfirming that the supply-demand balance had shifted in favor of the bears. In TECHNICAL terms, says Colby, the bigger the top, the bigger the drop. "And we have a whopper said Robert Dorenstrcich, a San Francisco electronics store employee who got a computer for $365. However, most participants agreed, the bidding was so enthusiastic that few "steals" were to be had. "1 think the people are a little overanxious," said LJ.

Migliore, who was daunted by high bidding on the computers and furniture he hoped to buy for his Redwood City training seminar company. "There have been a couple of good deals, though." "There is a certain dynamic at an auction that makes people pay a little more than they ever thought they would," Osborne controller Mike Anthofer said. "It's a lot of fun." He said few unreasonably low bids would win because many of the bidders were computer dealers or savvy amateurs. "There are a lot of astute people in the crowd that are buying things," he said. ByWaltGibbs Examiner correspondent HAYWARD First on the auction block was a 15drawer file, and it went for $325.

Also on the block were 350 used computers, 575 chairs, 200 rolling racks full of odd parts, oak desks, a refrigerator, pencil sharpeners and seven boxes of rubber bands. The items once filled the 112,000 square feet of office and manufacturing space that was Osborne Computer the pioneering portable computer company that file for bankruptcy last fall. Yesterday, the company began auctioning off its belongings to raise cash that will help pay off its creditors. There was all the spirit of a cattle auction as some 500 bidders crowded into what used to be Osborne's customer ser-' vice area here and tried to find bargains for their companies or their homes. "I love auctions.

They're fantastic," One was Michael Kneeland, who bought 10 Osborne 1 computers for $4000, which he plans to sell for a profit. (In 1982, the Osborne I was listed at $1,795.) Another was Steve Rose, who used to work in Osborne's customer service center and planned to buy 15 computers if the bidding were more subdued. Rose was somewhat cowed by returning to the plant he left in September and seeing his desk and chair stacked upsidedown as strangers casually appraised them. He said he felt "nostalgic pangs" upon entering a room left intact by the auctioneers, save for the marker tags on the furniture. "It was like you could walk in and just wait for the rest of the people to come and start the meeting," he said.

"It was very eerie." There used to be 1,000 workers in the building. Ronald Brown, who was vice president of the old Osborne and took over as president of the reorganized com- Sec Page C9, col. 1 NYSE is investigating trading in Disney stock of a top in IBM," he says. Accordingly, he and Shaw l'i recommend immediate sale of the stock. 'There's just no two ways about it," says Colby.

"IBM is clearly a wrong stock to own right now." He speculates IBM may have hit a top because everyone who potentially wanted to own it may i already do so. At present, IBM represents a hefty 1 1' chunk of the weighting over 5.8 percent of the Standard Poor's 500-stock index. I That means any money manager who sets up a portfolio to coincide with the index weighting has close to 6 percent of his holdings in IBM. Colby tells me the bleak outlook for IBM strongly suggests the entire technology group is now vulnera- ble and should be avoided. Further, given IBM's role as an important market leader, the two men see 1 rough sledding ahead for stock prices in general.

In s.fact, their analysis of the chart patterns of the 30 Dow stocks show only three holding up well lt General Foods, American Brands and Procter Gamble. jj Their forecast: a drop in the Dow to 1,050 maybe even 950. The six worst-looking stock groups I' in the market, according to their latest chart read-Jj. ings, are autos (even though they look dirt cheap), 11 tire and rubber, metals (such as copper and lead), electronics, banks and railroads. i The best all defensive and suggesting that big money has turned decidedly cautious are soft drinks (such as soap companies (namely Clorox) and food (likely Dart Kraft).

-At 'I i i 'P? til II I llllff' i Imports scare California's wine industry McClatchy News Service SACRAMENTO Grape growers and vintners are presenting a nearly united front in urging state support for a proposed marketing order to promote sales of California wines. The two groups have bickered in the past over how best to boost wine sales. But on the first day of statesponsored hearings on the proposed marketing order yesterday, few signs of discord were evident. "There is a unity here (among growers and vintners) that has never happened before," said Robert Young of Geyserville, chairman of the California Association of Winegrape Growers. Under the proposed order, growers and processors would be assessed a percentage, of their production to set up a California Grape and Wine Improvement Program for market research and generic advertising.

The program would be administered by a board of 37 appointed directors, including 18 growers, 18 vintners and one representative from the general public. Elements of the program, Young said, would include research into new uses for wine grapes, promotions to increase US. and foreign sales of California wine, funding for viticultural research at state universities, promotion of fair international trade, A spokesman for the SEC in Washington' said the agency does not discuss potential or ongoing investigations, but said, "We do have a market surveillance section that routinely (reviews unusual trading) Disney stock closed yesterday at $49,125 a share, down $1,625 on a volume of 875,200 shares. By yesterday Disney shares had lost nearly one-fourth of their value since Friday when Steinberg announced his plans to mount a bid for 49 percent of Disney stock. That bid was withdrawn after Disney directors agreed Monday to pay $70.83 for each of Steinberg's 4.2 million shares, plus $28 million for expenses.

Some analysts have criticized the payment as "greenmai!" management's payoff of a hostile shareholder at a premium. Several shareholder lawsuits were filed yesterday in Los Angeles Superior Court against Disney and Steinberg-controlled companies challenging the buyout In three separate lawsuits, the shareholders claimed Disney, its directors and Steinberg breached their fiduciary duty in making the deal. In addition to halting the buy-back, the suits seek unspecified punitive damages and a court order stopping Disney's purchase of a real estate firm, Arvida and the Gibson Greeting Card Company. Examiner news services LOS ANGELES The New York Stock Exchange is investigating trading in Walt Disney Productions shares before the company announced it was buying out a dissident shareholder for $325 million, an exchange official said. While the exchange is looking at trading in Disney for the past few weeks, the investigation is focusing on the pattern of trades made June 8, the day New York financier Saul P.

Steinberg announced a takeover bid for Disney, said Donald J. Solodar, NYSE senior vice president in charge of market surveillance services. Solodar's comments were published by the Los Angeles Times today. Solodar said the exchange is also focusing on June 11, when Disney's board approved the buy-out of Steinberg's 11.1 percent interest in the Burbank entertainment company. In a related development, a prominent entertainment securities analyst called for the Security and Exchange Commission to investigate possible insider trading of Disney shares hours before the buyout was announced.

"I think the SEC has to look into it," said Lee Isgur, an analyst with Paine Webber Mitchell Hutchins Inc. LT.GOV. LEO MCCARTHY Wine marketing order proposed and research on marketing and consumption trends. Only three years ago, a similar proposal was killed in the state Legislature after growers and vintners split bitterly over the direction of the program. But speakers hinted yesterday that a sense of unity has been fostered by the encroachment of foreign wines into the California market, and by the difficulties US.

vintners face in cracking trade barriers See Page C2, col. 2 Good newsbad news If- Corvus revises loss estimate upward 4 the next quarter and expects "to return to profitability very, very quickly." In early over the counter trading today, Corvus as quoted at 3 bid and 3 ask. Corvus reported net income of $4.4 million on sales of $47.7 million its previous fiscal year, an 85.6 percent Jump in earnings and a 77.6 percent increase in revenues. After a first quarter profit of $1.4 million, Corvus' financial crunch began in the period ending last Nov. 30 when it reported a $2.5 million loss on sales of $12.4 million.

The loss narrowed to $207,000 in the quarter ending Feb. 29 on sales of $12.6 million. Revenues for the nine months through that date were $39.9 million. By C.W. Miranker Examiner business writer Corvus Systems Inc.

warned today that it would post greater-than-expected losses for its fourth quarter and the year in part because sales had dried up in anticipation of a new product that was shipped three months late. Revenues from a contract to make workstations for Honeywell also failed to materialize as early as expected because the pact was not signed until March. As a result, the San Jose-based maker of local area networks, information storage devices, workstations and computers laid off 68 employees yesterday 13 percent of Corvus president Michael D'Addio said the quarterly and yearly loss would be "greater than anticipated by the financial community." Analysts had estimated a fourth-quarter loss of about $100,000 on revenues of about $13 million, according to Richard Brenner, chief financial officer. He said revenues likely would be "below that sales expectation," with sales for the year of about $50 million. He could not precisely estimate the size of the quarterly loss, except to say that it would be larger than the third-quarter loss of $207,000.

Brenner added that Corvus anticipates more than $14 million in sales in Its workforce from engineering, finance, manufacturing, marketing and sales. Only the customer service department escaped unscathed. Employment at the 5-yearold company now stands at 410 people. The shortfall in sales largely stemmed from development problems and delayed shipments of its OmniDrive, a disk drive 1th a built-in link to Corvus' OmniNet local area network. Sales of Corvus' older products fell off in anticipation of the new ones.

OmniNet is one of the most popular products for linking computers, and Info-Corp has estimated that 59 percent of all microcomputers attached to a local area network are attached to a Corvus network. C'1M Trlbuw Comwwy SrnOcit. tnc All RtpM fWMr4 "Well, then, is anyone here interested in a lateral move if we throw in a perk valued at $500?".