"I hate quotations." -- Ralph Waldo Emerson

BREAKFAST WITH THE FOOL
Ford Turns on a Dime

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By Rick Aristotle Munarriz (TMF Edible)
December 22, 2000

The automotive test track is not for the white-knuckle timid. From quick bursts of acceleration to screeching halts on a dime, momentum shifts quickly. The same can be said for Big Three carsmith Ford (NYSE: F). The automaker's stock revved up gains of better than $2 a share yesterday after the company announced that it would achieve record sales this year. Then it gave it all back in after-hours trading when the company said it would miss fourth-quarter estimates of $0.74 a share by about $0.10.

So let's say this test track is really the stock market. The vehicle is an investment vehicle. And, that's right, the shareholders are the crash test dummies.

Ford? Tough. The wheels of the automotive industry spin both ways. From General Motor's (NYSE: GM) decision to kill off its Oldsmobile line last week (yep, another William Shatner sponsorship gone bust) to Chrysler executive defections and sackings at DaimlerChrysler (NYSE: DCX), these haven't been the most promising of times for the country's three leading car manufacturers.

A slowing economy wary of big-ticket purchases now finds the companies holding back the assembly lines. Ford production will be scaled back by 9% next quarter. With less "new car smell" to go around, the hope is that the company won't have to dole out drastic rebates and incentives to clear out showroom inventory.

However, this is the second time this month that Ford has had to temper bottom line expectations. Projections were guided a dime lower the first time around, too. This time, the company is citing lousy weather and a shortage of parts -- but investors know better. They misread a Stop sign for a Yield once. Not twice.

From industry specific woes to the company specific stigma stemming from Ford Explorer tire blowouts, even the brightest of high beams won't cut it through the hazy road that lies ahead. Analysts had already expected earnings to fall next year. Now it's just a matter of how low they will go. Yes, 2000 will prove to be a record year for Ford, but rearview mirrors are often worthless when driving down Wall Street.

News to Go

Out to spread some holiday cheer, computer networking equipment maker 3Com (Nasdaq: COMS) reported a smaller loss than had been expected. Granted, it lowered the bar itself earlier this month when it projected a loss of $0.19 to $0.23 a share on revenues of $765 to $780 million. Before charges, the company ultimately lost just $0.15 a share on nearly $790 million in sales.

Let's make a deal. Today's Wall Street Journal is reporting that AT&T (NYSE: T) is looking to put up its cable television operations to pay off Cox (NYSE: COX) and Comcast (Nasdaq: CMCSA) next month. The three companies had cut a deal when AT&T sought to increase its stake in Excite@Home (Nasdaq: ATHM). Come 2001, Cox and Comcast can exercise put options that would force the issue. AT&T will owe each company about $1.6 billion and was originally set to pay in either cash or stock. Given AT&T's sinking share price and its desire to hold on to greenbacks, the move makes sense. But will Cox and Comcast be willing to trade in AT&T's remote control for poker chips? That remains to be seen.

Analyze this? Analytical enterprise software specialist Cognos (Nasdaq: COGN) reports record results and gets downgraded this morning. Why? Despite solid quarterly results, the company warned that revenue growth would be slowing. Bummer. A Merrill Lynch (NYSE: MER) downgrade also noted problems in the company's sales force execution.

Check out yesterday's Foolish market wrap-up with just one click.

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