STOCKS TO WATCH: Clarify, Compuware, Dell, Lattice Semi, Microsoft and Phone.com

Clarify shares will soar Tuesday after Nortel Networks (NYSE: NT) said it will pay $2.1 billion in stock for the maker of front office business software.

Nortel will exchange 1.3 shares of its common stock, which closed at 52 3/8 Monday, for all outstanding shares of Clarify.

Executives expect the transaction to close in the first quarter of next year. The companies expect the acquisition won't affect Nortel's earnings per share in 2000, and will add to them in 2001.

Clarify stockholders must approve the agreement. Nortel has an option to immediately purchase up to 19.9 percent of Clarify's shares outstanding.

Also Monday, Clarify said it expects to report third quarter revenue of up to $63 million and beat Wall Street's consensus earnings estimates. First Call's survey of six analysts predicts a third-quarter profit of 19 cents per share.

Clarify shares closed up 1 31/32 to 45 5/16 ahead of the announcements.

Compuware rolled past analysts' estimates in its second quarter Monday, earning $108.8 million, or 28 cents a share, on sales of $568.1 million.

Its shares closed off 3 1/8, or 11 percent, to 24 1/2 ahead of the earnings report after Soundview Technology Group analyst Jim Mendelson cut the stock from a "buy" recommendation to a "hold."

First Call consensus pegged the software developer for a profit of 25 cents a share in the quarter.

The $568.1 million in sales represents a 55 percent improvement compared to the year-ago quarter when it earned 18 cents a share on sales of $366.6 million.

Mendelson, who was unavailable for comment, went out on a limb by cutting the stock just hours before its quarterly earnings report.

Last quarter, Compuware beat Street estimates by 3 cents a share, earning $90.7 million, or 24 cents a share, on sales of $443 million.

Just when you thought it couldn't get any worse for the technology stock sector, Dell comes out Monday with a warning that rising memory-chip prices will result in lower profit margins in its third quarter.

Company officials said memory prices jumped as much as 25 percent in the quarter, resulting in lower gross profit margins.

First Call consensus was expecting a profit of 20 cents a share in the third quarter.

"We are managing the memory situation carefully and are working to offset the cost increases with efficiencies in other parts of our business," said CEO Thomas Meredith in a prepared release. "We are also taking actions to reduce overall memory consumption, including advertising system configurations with lower amounts of base memory."

Dell shares closed of 1 1/2 to 41 5/16 ahead of the announcement and quickly fell more than $3 a share in after-hours trading.

Dell said the memory-cost problem is a short-term issue that would only affect its third-quarter results. Company officials did not specify how much an impact higher memory chip prices would have on the third-quarter results.

Last quarter, Dell surged past analysts' estimates, earning $507 million, or 19 cents a share, on sales of $6.14 billion.

First Call consensus was expecting Dell to return a profit of 76 cents a share in the fiscal year, but expect those estimates to be trimmed in the days and weeks to follow.

Lattice raced past analysts' estimates in its second quarter Monday, earning $11.6 million, or 23 cents a share, on sales of $95 million.

Its shares closed off 1 3/32 to 28 3/4 ahead of the earnings report.

First Call consensus expected the maker of programmable logic devices to earn 19 cents a share in the quarter.

The $95 million in sales marks a 98 percent jump versus the year-ago quarter when it earned $9.9 million, or 21 cents a share, on sales of $48.1 million.

Last quarter, Lattice hurdled Street estimates, earning $12.8 million, or 53 cents a share, on sales of $59.7 million.

Its shares soared to a 52-week high of 34 5/8 in September ahead of its 2-for-1 split. The stock bottomed out at 13 5/8 in October.

Fifteen of the 21 analysts following the stock maintain either a "buy" or "strong buy" recommendation.

The software giant will report it first-quarter earnings Tuesday with First Call consensus expecting a profit of 34 cents a share.

Last quarter, Microsoft earned $2.2 billion, or 40 cents a share, on sales of $5.76 billion. That was up 39 percent from the fourth quarter of 1998.

In its predictably cautious tone, Microsoft officials implied that to expect similar growth through fiscal 2000 would be foolhardy. Then again, Microsoft never seems to disappoint.

Its shares closed off 17/64 to 87 51/64 Monday.

Phone.com gave its investors a reason to cheer Monday by declaring a 2-for-1 stocks split. The maker of wireless communications software closed up 18 1/4 to 218 ahead of the announcement.

Its board of directors said the split will take effect on Nov. 12 to shareholders of record on Oct. 29.

The company said last week it would acquire the wireless business of Apion Ltd., which operates in Europe, for 1.3 million Phone.com shares.

After its spectacular initial public offering in June, Phone.com shares have made a terrific ascent.

The stock peaked at 228 7/8 earlier this month.

All five analysts following the stock maintain either a "buy" or "strong buy" recommendation.