This week's sure sign of the pending apocalypse? Next month MTV is unveiling a new reality-based sitcom, The Osbournes, which will follow the day-to-day life of rocker Ozzy Osbourne and his family. The program has a chance to be educational if the producers zero in on the botched business decisions and poor investments that almost ruined the Oz earlier in his career... Unfortunately, we doubt that's the direction they'll go. Where are the Huxtables when you need them?
There were big headlines on other financial sites today about the Nasdaq getting "shellacked." The index did drop 3%, falling to its lowest point since Nov. 2. Some posited that IBM's (NYSE: IBM) fuzzy math sent tech stocks reeling, but IBM isn't even on the Nasdaq, and the Dow dropped only 1.5%.
Investors are skittish over all the accounting shenanigans that have been exposed since Enron fell on its face, but better corporate governance and financial statements that make more sense are the positive byproducts of all this. So, before you join the pack and sell, just ask yourself one question, Fool: What would Ozzy do? (And then do the opposite.)
The Motley Fool 50 prefers the original members of Black Sabbath to any line-up Ozzy put together during his solo career. The index fell 2% today.
In today's Motley Fool Take:
Enron Flushes Out IBM
As painful as it's been, the Enron scandal is proving to be a cleansing enema for the markets as companies that once hid certain financial issues have been forced out into the open. Last week alone Global Crossing (OTC BB: GBLXQ), Qwest Communications (NYSE: Q), Krispy Kreme Doughnuts (NYSE: KKD), IBM (NYSE: IBM), and others lost ground on various accounting issues.
In IBM's case, a New York Times article suggested the company only beat fourth-quarter earnings estimates because it recorded a $300 million gain for the sale of a business to JDS Uniphase (Nasdaq: JDSU) as an offset to SG&A expenses rather than as a one-time gain (and did a good job of hiding the sale, at that). Although it defended that practice as "routine," Big Blue has relented today and is agreeing to provide much more detail about various financial issues. According to today's Wall Street Journal, IBM will "expand the information it provides" about:
- Intellectual property income
- Gains and losses from investments in other companies
- Amortization of goodwill from acquisitions
- Gains on sales of real estate
- Income from its pension plan
IBM's promised changes will not move such things as the JDSU sale into the "one-time gain" category as some had hoped, but at least it will more clearly disclose these activities so investors will have a better chance of deciphering SG&A expenses and deciding for themselves whether such income artificially boosts pro-forma earnings.
Things are snowballing now, and much for the better for individual investors. Thank you, IBM, for making some changes that will help us make more sense of your financial statements. Now, who's next?
Pictures may be worth 1,000 words. But the following numbers paint a pretty unsightly portrait of credit card use in the U.S. Here's a Fool's Index look at some plastic stats, courtesy of Cardweb.com:
And now, a prettier picture:
-
9 -- The number of Happy Dances (the official victory dance over debt) celebrated on the
Credit Card discussion board since Feb. 10.
Join the following toe-tappin' Fools to celebrate their victories:
Muster1
Wildgirl
Commodore64
Wolfshead56
Jhereg
mrsplumbob
mlk58
PosNetWorth
Foolishintx
See how these Fools scored triumphant interest rate reductions:
chainsaw10
Kekokko
pacman1062
And finally, our jester caps go off to trenchcoatmike who scored "The Biggest Happy Dance of All Time" when his significant other said, "Yes!"
Online travel agency Travelocity.com (Nasdaq: TVLY) vaulted as much as 30% today on news that Sabre Holdings (NYSE: TSG) will make an unsolicited tender offer at $23.00 a share, about 20% over Travelocity's Friday close of $19.20.
Sabre currently owns a 70% beneficial interest in Travelocity, and will try to snare the remaining 15 million shares it doesn't own starting on March 5, 2002. Its goal is 90% ownership, which allows the suitor to buy all the non-tendered shares at the same price. With $830.5 million in cash and equivalents as of Sept. 30, 2001 and a bid to pay $345 million, Sabre says the offer is not conditioned on obtaining financing. If successful, it "does not plan to change Travelocity's executive team, strategic direction, or brand."
Travelocity and Expedia (Nasdaq: EXPE) are the two premier online travel sites, specializing in airline, hotel, and car rental reservations. Expedia turned profitable last quarter, but Travelocity still bleeds red. The company has cut its cash burn considerably and brags a $107 million cash and equivalents cushion and no debt as of Sept. 30, 2001. While Sabre is profitable, earnings have declined for two consecutive years from a 1999 high.
Originally the reservations system for AMR's (NYSE: ARM) American Airlines' unit, Sabre today offers that service to the entire travel industry along with travel outsourcing and software. The deal would create synergies for Sabre but doesn't look great for Travelocity shareholders. They faced more risk with Travelocity as a stand-alone company, but also potential rewards greater than 20%.
Travelocity has appointed a special committee to study and respond to the offer.
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It's more than pins dropping at Sprint (NYSE: FON). The struggling long distance specialist will be shuttering five call centers and cutting off 3,000 employees at its wireless PCS (NYSE: PCS) subsidiary. Slowing cell phone subscriber growth has hamstrung the industry. Market leader Verizon (NYSE: VZ) announced job cuts as well last week.
While the jury is still out as to whether or not General Electric's (NYSE: GE) NBC unit will recoup its investment in the 2002 Winter Olympics despite strong early returns, one definite winner has been Vail Resorts (NYSE: MTN). With vacationers skiing, snowboarding, tubing, or just keeping warm by the fire, the company's Rocky Mountain ski resorts are packed. Vail is now looking for growth in its fiscal second quarter and will be thawing out resort-wide wage freezes that were put into effect when the travel climate looked bleak.
We like to point out now and then how it's much easier for small companies to rapidly increase their revenues than for large companies to do so. But darn that Wal-Mart (NYSE: WMT) -- it's mocking us! The discount retailing giant just reported fourth-quarter earnings and its revenues for fiscal 2002 rang in at a whopping $218 billion, up nearly 14% from the year before. The company is now the world's largest company, in terms of revenues. Net income for the year came in at $6.7 billion, up just 6%.
While mortgage rates may have bottomed out late last year, home hunters fearing the end of the gold rush were quick to snap up new homesteads last month. Housing starts surged 6.3% higher. That's good news for builders like Lennar (NYSE: LEN) and home improvement superstores like Home Depot (NYSE: HD).
Showing that it truly does care for its one and ONI (Nasdaq: ONIS), fiber optics fallen star Ciena (Nasdaq: CIEN) announced that it would be buying out ONI Systems. The all-stock deal was originally valued at $866 million before Ciena shares dipped on the news. ONI shareholders will receive 0.7104 shares in Ciena for every stub outstanding.
Avoiding near-term turbulence, United Airlines parent UAL (NYSE: UAL) averted a strike at the country's largest air carrier by making nice with its mechanics union. But will giving its 12,800 mechanics and airline cleaners its first pay raise since 1994 at a time when the airline is hard-pressed to turn a profit be good for morale or bad for its income statement?
Free the Internet! The Supreme Court agreed today to decide whether Congress acted constitutionally when it passed the 1998 Sonny Bono Copyright Term Extension Act that extended copyrights for 20 years. Only 14 years long in 1790, copyrights today extend 70 years after the life of the inventor. Beneficiaries include Disney (NYSE: DIS), which got another 20 years of rights to Mickey and friends, but losers include those wanting to disseminate books, songs, and other music freely on the Internet.
As Enron Turns: In today's episode, The New York Times reports that former chairman Ken Lay sold $100 million in company stock after Sherron Watkins warned him the firm might get hit with "a wave of accounting scandals.".... Army Secretary Thomas White re-writes his online biography to include just a passing mention of his 11 years with the company.... On a lighter note, asked what their favorite Beethoven concerto was, most Enron executives pleaded the fifth.
And Finally...
Today on Fool.com: Tom Jacobs says if history teaches us anything, it's that the "Enron Era" we're in right now really isn't anything novel.... You could win a free subscription to TMF Money Advisor in our latest contest on financial questions.... Bill Mann wonders why some of Berkshire Hathaway's investments don't practice what Buffett teaches.... What's the best way to buy insurance?
Contributors:
Brian Bauer, Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Dayana Yochim
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