Today, Hewlett-Packard (NYSE: HWP) said its merger with Compaq (NYSE: CPQ) will be completed Friday, ending what has been a long, ugly soap opera for the companies. Also ending will be the HWP ticker symbol. Beginning on Monday, Hewlett-Packard will trade on the New York Stock Exchange as HPQ. Chairwoman Carly Fiorina said the new symbol is "a tribute to the contribution of both companies as we come together to build the new H-P." While we imagine you Compaq shareholders would have preferred the company be renamed Hewlett-Paqard, you'll just have to take the bone they're throwing you.
Check out Part 2 of our Motley Fool Manifesto for market reform. Today we zero in on analysts.
The Motley Fool 50 index fell about 1% today.
In today's Motley Fool Take:
Is the Priceline Right?
Investing in Priceline.com (Nasdaq: PCLN) has always been like bidding on travel with the fledgling online service. You eventually have to throw caution to the wind, cope with the unknown, and hope the journey is worth the bargain-priced mystery.
The "name your own price" specialist reported a first-quarter profit of $0.02 a share on a slight dip in revenue. While Priceline struggled in its original airfare stronghold, hotel bookings more than doubled. As a matter of fact, lodging and car rentals accounted for two-thirds of the company's unit sales for the period.
With airlines cutting back on unpopular flights that used to feed the site's bargain basement pipeline -- and fare wars swaying prospective travelers to go ahead and book directly with the air carriers -- the forced transformation into a full-fledged travel provider is probably a blessing in disguise.
Logical diversity is a good thing here. While the company has been able to grow its registered member base to 13.5 million users, it's also having to cope with less mysterious bargain sites like Hotwire and travel providers that have taken to discounting on direct bookings. So, the company now finds itself offering full vacation packages as well as teaming up with other popular online sites like eBay (Nasdaq: EBAY) and America Online (NYSE: AOL) to remain competitive.
Like Travelocity (Nasdaq: TVLY) and Expedia (Nasdaq: EXPE), Priceline is now profitable -- even if its full-year forecast calling for net income of $0.12 a share is on a pro-forma basis (that sidesteps the company's equity-based compensation packages). The fact that it is relying more on hotel rooms and home mortgages now than its original airfare game plan is intriguing. Then again, do the connections matter as long as you arrive at the desired final destination?
Where are you going this summer? Have some travel tips to share with your fellow Fools? All this and more -- in the Best Travel Spots/Tips Discussion Board. Only on Fool.com.
Xerox (NYSE: XRX) is under duress again, this time because of a cut in its debt ratings by Moody's Investors Service. What follows is an imaginary conversation between Moody's and Xerox CEO Anne Mulcahy, drawn on information from actual press releases.
Moody's: Hi, Anne!
Anne: What do you want?
M: Well, we're afraid we've got some bad news. We're cutting some of your debt ratings by up to four notches.
A: What?! Why? You'll cause our stock price to tumble even farther!
M: Several reasons, to be honest. We're really concerned about the level of free cash flow that your core, non-finance business generates relative to your debt level. Also, you have large debt maturities over the next few years, a dependence on capital market access to refinance debt obligations, and the need for continued cost reductions in the face of modest revenue growth prospects. In short, your business is such that no one would want to copy it. Get it... "Copy" it?
A: Oh, very funny. Like we haven't heard that one in the past couple of years. Look, your silly decisions are inconsistent with our progress and momentum. We've significantly improved our operations and strengthened our liquidity. We've consistently and effectively executed on every element of our turnaround plan and have clearly set the stage for a return to full-year operational profitability.
M: Who wrote that for you? Sorry, we don't see it. You want some specifics? Your core non-finance operations generated about $374 million compared to nearly $700 million in 2000. Cash flow leverage remains extremely high.
A: Look, you moody people, our worldwide cash balance increased to $4.7 billion at the end of the first quarter. Since announcing our turnaround plan in October 2000, we've reduced debt net of cash by 28% to $12.3 billion.
M: Anne, we're not arguing the fact that your company has made very good progress in reducing debt through asset sales and lowering its overhead through cost containment initiatives, but your ability to generate meaningful cash flow going forward is in good part dependent on revenue growth. Frankly, we see resumed revenue growth for you to be quite a challenge considering the stiff competition and the depressed corporate IT spending levels.
A: Pffft.... Jerks! We'll continue improving the efficiencies of our operations and we will achieve sustainable revenue growth.
M: Well, good luck. But our ratings outlook for you is negative. Umm, would you mind validating our parking?
When No Means No Way
As if rejection isn't bad enough, a Tennessee man had to endure 2,986 denials from AT&T Universal Card Services telling him he wasn't worthy of their credit card.
According to an article in the Johnson City Press, when Dallas Hill Jr. opened two of the mailings, they contained identical rejection letters from the lender. "We regret we are unable to approve your application," AT&T's approval department wrote in unwavering terms. "We can accept only one application for the same solicitation, and you have already responded to our offer."
Confused, but not completely destroyed by the rejection overkill, Dallas investigated. Apparently, Hill's father, Dallas Hill Sr., had also applied to receive an AT&T Universal card, and the company assumed that Jr. and Sr. were the same person. (We're wondering if George Foreman's progeny have encountered the same glitch.)
When it comes to credit card solicitation, it pays to evaluate the offers very closely. And if you find yourself receiving offers in droves, you can stop the onslaught of solicitations with a few easy steps.
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Ripening yet not quite ready for the picking, Del Monte Foods (NYSE: DLM) narrowly missed first-quarter profit targets on sales of $343.9 million. However, the fruit and vegetable specialist is still on pace to hit Wall Street's bottom line estimates calling for $0.85 a share for the year. So, the quartered fruit may not appear tasty but the whole fruit looks fine.
Investors are getting pumped over earnings at Bally Total Fitness (NYSE: BFT). The company earned $0.59 a share, two cents ahead of analyst projections. Cash flows from operation chugged down a protein shake or two, soaring 84% on a comparable basis. With new memberships climbing by 7%, the gym chain's fundamentals have been working out nicely.
Ka-ching, dot-com. NetBank (Nasdaq: NTBK), operator of the country's largest independent Internet bank, reported strong results on the heels of cheap borrowing costs spurring refinancing demand. First-quarter earnings before one-time charges amounted to $0.11 a share, nearly triple Wall Street's consensus forecasts. The company also increased its net deposits to $1.7 billion as the number of accounts topped the 250,000 mark. That's nice. You can bank on it.
Level 3 (Nasdaq: LVLT) is looking to turn things up a notch. The company will be buying Software Spectrum (Nasdaq: SSPE) for $37 a share in an all-cash transaction. What's notable here isn't so much that the buyout price is a whopping 123% over the enterprise software company's close yesterday. No, what's intriguing here is that Level 3 is a penny stock, fetching a little more than $3 a stub. Level 3, whose odd collection of business activities includes everything from information services to coal mining, also rose on the buyout news.
Even with less planes in the air, the skies could be friendlier. Load factors for April -- in essence, how close to capacity the flights are running at -- fell for both the mighty like American Airlines' parent AMR (NYSE: AMR) and the nimble like Southwest (NYSE: LUV). Because the spring break holiday came early this year, the lull in family travel in recent weeks shouldn't be much of a surprise. Corporate travel is still showing little signs of bouncing back any time soon.
And Finally...
Today on Fool.com: The Motley Fool rolls out Declaration #2 of its Manifesto.... Don't underestimate your retirement needs. Here's three steps you can take to keep your plan on track. Rick Munarriz writes about how DVDs are raking in the dough for studios.... Selena Maranjian updates a classic piece on investing small and reaping big rewards…. A Fool Community member wants to know about intrinsic value and free cash flow. Can you contribute to the discussion?
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Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Reggie Santiago, Dayana Yochim
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