OUR TAKE
The Motley Fool Take on Friday, Feb. 15, 2002
Payday for PayPal

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Insomniacs, take heart. A new, controversial study says those who sleep less, live longer. Yippee! More time to spend on Fool.com! Twelve hours a day isn't enough!

Okay, the study does say people who sleep six to seven hours per night tend to live longer than people who sleep eight hours or more. So, maybe you shouldn't stay up until dawn posting on the Fool's discussion boards while playing the audio from The Motley Fool Radio Show over and over and over again. Then again, as Warren Zevon says, "I'll Sleep When I'm Dead." So, live it up.

The Motley Fool 50 is pretty happy the market's closed on Monday for Presidents' Day. It has some new roller blades it wants to try out and it's excited for some locomotion. The index treaded water all week, starting at 1,372 and finishing in the same place.

Have a great weekend. We'll see you on Tuesday.

In today's Motley Fool Take:

Payday for PayPal

While eBay (Nasdaq: EBAY) addicts and other netizens who use it for online purchases between individuals know PayPal (Nasdaq: PYPL) all too well, the financial services upstart is about to become a household word in investing circles as well.

With its initial public offering (IPO) priced at $13 a share this morning -- and opening at $15.41 before bolting close to $20 a few minutes later -- PayPal can now be bought and sold in the open market the way the company facilitates the transfer of money online. Setting aside the fact that the big pop in the stock means that underwriters got greedy in underpricing the offering for client bragging rights -- at the expense of PayPal leaving tens of millions on the table -- it is good to see the company's stock finally racing down the ticker.

The company was all set to go public earlier this month until a patent infringement lawsuit by a competitor forced it to refile its prospectus. On the surface, the numbers appear impressive. The company has lined up more than 12 million registered users and claims to be signing up an average of 18,000 new members every day. Last year alone the Palo Alto company facilitated about $3 billion in online transactions.

But while September quarter revenue climbed twelve-fold to $30.2 million, a lot of that heady growth is due to selling and merchant account fees that the company has implemented and/or hiked over the past year.

Still, the fact that PayPal has been able to beat eBay at its own game when the online auctioneer teamed up with Wells Fargo (NYSE: WFC) to introduce its own Billpoint payment service makes it a company worth watching. The one significant difference is that PayPal has to yet to report a profit while eBay has been in the black consistently for years now. Now, if only PayPal would begin selling Pez dispensers....      

Discussion Board of the Day: Financial Services

Is PayPal a prime time player? Is offline banking dead? If a check bounces in the woods, does it make a sound? All this and more -- on the Financial Services Discussion Board. Only on Fool.com.

Home Is Where the Heartache Is

A man's home used to offer refuge from life's less-than-pleasant realities. But a just-released Consumer's Union study shows that new home buyers in Texas would be more likely to find comfort in the arms of Big Bill Hamm at his Honkin' Big Used Car Lot.

"The manufactured home buying experience in Texas often resembles an old-fashioned high-pressure auto deal and may be tainted by allegations of dealer fraud and misrepresentation," according to the study. The less-than-up-front transactions include consumers entering the transaction with negative equity due to loans packed with insurance, financed "points" and other hidden charges.

The problem isn't prevalent just in the Lone Star state. With large lending losses in manufactured housing nationwide, repossessions are on the rise and will continue to strip families of equity if reforms aren't made, advises Consumer's Union.

"As lenders tighten credit, we are concerned that sales people will be under even more pressure to move inventory which will only exacerbate the current problems," said Kevin Jewell, policy associate with the Southwest Regional Office of Consumers Union. "The system is full of traps for the buyer and needs to be overhauled to create an even playing field for consumers."      

One of every four new housing units in Texas is manufactured housing. The report, based on more than 400 site-built home buyer complaints filed with the Texas Attorney General and the Office of Consumer Credit Commissioner found that:

  • Buyers were locked into a deal before they were given the true price of the home.

  • Shopping around was discouraged by dealers by charging $25 or more for a credit check -- or "application fee" -- and warning that getting credit checks at multiple dealerships would "damage their credit score."

  • Dealers unwilling to return the deposit after a consumer decided to walk away from a deal, even though dealers are required by law to refund a deposit within 15 days of a written request.

  • Dealers offering expensive extras like trips, rebates, and offers to pay off credit cards adding thousands of dollars to a consumer loan. The practice leaves some families moving into their new home owing more than it is worth.

  • A product that is not what was ordered or expected. In 29 cases analyzed by Consumers Union, customers said the dealer switched the house with a different make, model, year or size, or a completely different home.

Quote of Note

"I think it's important to realize that on any stock you buy, there is a negative case [to be made for it]. It usually pays to understand the negatives very well so you know that you really do disagree with them." -- Bill Nygren, manager of Oakmark mutual funds

Playing the Match Game

We thought we'd wrap up Valentine's week with an epilogue on the business of love on the 'Net. As Rick Munarriz pointed out on Wednesday, "With a few dot-com companies successfully launching subscriber programs, it's no longer a matter of whether or not it will work, but, rather, whom will it work out for and what will folks be willing to pay up for."

Apparently, people are willing to pay to find love on the Internet. Matchmaking websites are proliferating in ever-growing numbers. Just this week Romantic Planet debuted, joining the likes of Lavalife, which has had a huge television marketing campaign of late; Match.com, which ratcheted up its online presence to accommodate lovesick souls for Valentine's Day; and Yahoo! Personals' Club Connect, which is one of Yahoo!'s (Nasdaq: YHOO) efforts to expand its product offering. That just scratches the surface.

That folks are growing more comfortable trying to meet online makes sense. As we've seen here at The Motley Fool alone, people have developed social circles as well as deep, caring friendships in our discussion board community. Plus, for less than a print ad in a newspaper, on personals sites singles can post pictures and in-depth profiles about themselves that they can update at will.

As many dot-coms have learned the hard way, clicks and eyeballs alone do not make for a sustainable business model. Paying customers do. And that's what the online matchmaking sites are getting. Most charge $20 to $25 a month, with discounted rates for longer commitments. Usually one can post an ad for free, but there's a fee to contact other members.

While many of these companies are currently private, Match.com is owned by Ticketmaster Online-CitySearch (Nasdaq: TMCS). Established in 1995 with five people, the company now employs 150. Its number of paid subscribers has jumped 153% in the past year, including a post-Sept. 11 spike. Match.com's fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) were $7.6 million -- four times what they were in the year-ago quarter.

Those are numbers that most dot-coms can't boast, and, in the battle to become less dependent on advertising revenue, that's exactly why an Internet conglomerate like Yahoo! has set up its own personals site. Look for the trend to continue.

What about Fool Love? No plans here for personal ads yet, but hey, you have to give the customers what they want, right?

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Quick Takes

The dreaded "accounting issues" flu is spreading quickly, and now has infected the bluest of blue chips. Shares of IBM (NYSE: IBM) dropped today after a New York Times article suggested Big Blue only beat fourth-quarter earnings estimates through accounting sleight-of-hand. At issue is a $300 million gain for the sale of a business that the Times said should have been accounted for as a one-time gain rather than an offset of expenses, which boosted income. IBM officials countered by saying "This is not an unusual practice. Our auditors have reviewed it and approved it."

Also dropping today on accounting worries: NVidia (Nasdaq: NVDA). The graphics chipmaker said that at the request of the SEC it's "conducting an internal review of the recording of certain reserves and the timing of recording certain expenses" for four separate quarters.

It was a "good news-bad news" earnings report for Dell Computer (NYSE: DELL) after the bell yesterday. The good news: the company followed up on Hewlett-Packard's (NYSE: HWP) better-than-expected numbers the day before by topping its own raised guidance, and also said it expects to continue taking market share from Hewlett-Packard, Compaq (NYSE: CPQ), and Gateway (NYSE: GTW). The bad news: "It's probably too early" to say things are turning around for the industry, according to chief operating officer Kevin Rollins.

Shares of Halliburton (NYSE: HAL) shot up today after one of its former units filed for bankruptcy and was able to gain a temporary restraining order against more than 200,000 pending asbestos claims. The oilfield services firm recently hit a nine-year low after a jury in Baltimore found the company's Dresser Industries subsidiary liable for $30 million in asbestos-related damages. Most cases had been settled before that.

As Enron Turns: In today's episode, some skepticism arises about just how pure and innocent whistle-blower Sherron Watkins is. Forbes.com, commenting on how Watkins wowed some of the Representatives during yesterday's testimony, said, "In their desire to find at least one virgin in the whorehouse, the congressmen seemed to buy her story," and "At one point in the hearing, W.J. "Billy" Tauzin (R-La.), chairman of the House Commerce Committee, interrupted the hearing to wish Watkins a happy Valentine's Day."

And Finally...

Today on Fool.com: Bill Mann's had too much coffee today and he's all over the place, ranting on about Ken Lay, the Olympic figure skating scandal, Qwest, the Enron hearings, and "The Axis of Evil".... Fool Tax Man Roy Lewis zeros in on investment holding periods and what they mean to you.... And Selena Maranjian has tips for saving money on your car.

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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