It was a black and blue day for Big Blue as IBM (NYSE: IBM) shares were crunched 10% after the technology giant warned of a first-quarter profit and revenue shortfall tied due to a drop in consumer spending. The company said it now expects to report earnings of $0.66 to $0.70 per share on revenue of $18.4 billion to $18.6 billion. At about $87.40 per share, IBM's stock now sits at a 17-month low, dating back to December 2000. Do you see more trouble ahead for IBM or a buying opportunity? You tell us on the IBM discussion board.
IBM is a member of The Motley Fool 50 index, which remained just about even on the day despite Big Blue.
In today's Motley Fool Take:
In the trade trade, there are few signs as industry-affirming as timely nuptials. With today's announcement that Ameritrade (Nasdaq: AMTD) will buy out fellow discount broker Datek, one begins to wonder if the brokerage sector is ready to bounce back. After all, if you thought being in the market was rough lately, imagine it serving as your livelihood.
Lacking direction and the volatility that fires investors and speculators into the action of buying or selling stocks, the equity market hasn't been booming business to its facilitators. Before winning the Datek bidding war, Ameritrade had little to show despite its continued growth in new customer accounts. On Friday the company had warned that it would miss profit forecasts as the average number of daily trades in March had slipped to 86,000 from 88,000 back in February.
Consolidation accomplishes plenty. Beyond the cost-cutting and synergy, it removes an independent rival and tightens commission prices. Datek isn't coming cheap. The $1.3 billion stock deal doubles Ameritrade's shares outstanding while Datek's tally of 840,000 accounts is a fraction of its acquirer's 2.7 million customer accounts. However, Datek customers are more apt to trade on any given market day than Ameritrade. Our comparison table reveals that the two parties aren't that far apart in terms of their commission schedules. Datek tends to favor fixed prices while Ameritrade's rates often depend on whether the transaction is a limit order or priced at the market.
Either way, Ameritrade's going long on Datek now. Did it buy low or high?
After comparing online discount brokers are you satisfied with your current arrangement? Will the Ameritrade-Datek merger have an impact you? All this and more -- in the Discount Broker discussion board. Only on Fool.com.
Gas-Saving Tips to Drive Saddam Nuts
Iraqi scalawag Saddam Hussein managed to get himself some attention today by announcing a 30-day halt in oil exports to protest the Israeli incursion into Palestinian territory. (You can just imagine Saddam, sitting at his Dell-knockoff computer, using a bootleg version of Microsoft Windows, surfing the American-made Net, pointing at the monitor and saying, "Look! My picture is on websites throughout the world! I must send these links to all the friends and family I have not yet executed!")
This is just the latest reason for oil prices to continue their steady climb. According to Bloomberg, crude oil prices have risen 36% this year. But you don't need us (or Bloomberg) to tell you that; a visit to the local gas station is evidence enough.
So, with some help from the Living Below Your Means discussion board and the very useful Dollar Stretcher website, here are seven ways to counteract the pumped-up price of gas:
- Know where your cheap gasoline is.
- Plan your trips to save gas. Use shorter and straighter routes when possible. Consider carpooling.
- Inflate all tires to the proper limit. Under-inflated tires use up to 4% extra fuel for every five pounds of under-inflation. Plus, under- and over-inflated tires have shorter lifespans.
- Air conditioners can reduce fuel economy by 10% to 20%. However, if you're driving at highway speeds, keep the windows and sunroof closed. Use the vent, and AC if you must.
- Driving 70 mph instead of 55 mph requires 20% more fuel. Also, you'll get more of the green lights if you drive the speed limit since traffic lights are usually timed to keep traffic flowing.
- Drive at a steady pace. Quick acceleration or slamming on the brakes wastes gas. Use cruise control whenever you can to keep your speed steady.
- Regularly tune up your car. Dirty air filters alone can increase fuel consumption by 10%. Change your oil every 3,000 miles. A well-lubed engine requires less energy.
Tax Countdown: 7 Days
Your Friend, the W-4
If, when you filed your taxes, you ended up getting too much back (more than $300) or you paid too little (and you had to pay penalties), then you should fill out another W-4. The W-4 is the form employers use to determine how much in taxes should be withheld from your paychecks. On the form, you claim exemptions for yourself, your spouse, and any dependents. (The more you claim, the less is withheld.) You can also claim allowances for certain deductions or credits, such as earned income credit, IRA contribution deductions, alimony deductions, the dependent care credit, and the credit for the elderly or totally disabled.
Use the W-4 as a tool. For example, if you expect to sell some significantly appreciated stock during the year and think your total tax due this year will be substantial, consider having more money withheld from your paychecks. This can help you avoid having to pay estimated taxes throughout the year.
For more on the W-4 form, read its instructions. For additional information, read IRS Publication 505. For help adjusting your W-4 form, check out the EDCO website.
Wall Street Giants Implicated in Enron
The Enron situation, once contained to a few company insiders and the Arthur Andersen accounting firm, now appears to be considerably more far-reaching -- and the potential effects are frightening. A lawsuit filed today accuses several investment banks and the law firm of Vinson & Elkins of being "active and critical participants in a far-ranging, multilayered scheme designed to conceal Enron's financial condition, while they and the Enron insiders were able to continue the illusion of profitability."
Among those named in the suit are investment banking stalwarts J.P. Morgan Chase, Citigroup's Citibank, Credit Suisse First Boston, Merrill Lynch, Bank of America, and Lehman Brothers, Canadian Imperial Bank of Commerce, Barclays Bank, and Deutsche Bank.
The lawsuit, USA Today notes, alleges that J.P. Morgan Chase and Citigroup disguised over $5 billion in loans to Enron "as commodities transactions and derivative swaps," when in reality the company badly needed the money to keep operating, and this was one way to supply the cash while keeping quiet about Enron's poor financial heath.
In addition, some bank executives were guaranteed large returns in exchange for investing in one of Enron's financing vehicles, LJM2. The suit also says former Enron execs gained more than the previously disclosed $1.2 billion from insider trading.
Unfortunately, this story refuses to die and is instead growing to encompass more and more reputable Wall Street names. Because of its role in the affair, Arthur Andersen has been devastated and is near collapse. What will happen to these other giants?
Shameless Plug Dept: Love the Ones You're With
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Software heavy Computer Associates (NYSE: CA) revealed that its fiscal fourth-quarter loss will be narrower than the $0.04 to $0.05 a share the company had initially expected. While not at the top of its e-business game right now, it will mark the fifth consecutive year in which Computer Associates will top the billion-dollar mark in operating cash flow.
If analysts become athletic supporters, does that make them jocks? The Sports Authority (NYSE: TSA) is winning over the home team crowd by announcing that it will be posting a first-quarter profit. While Wall Street was looking for the sporting goods retailer to foul out with a loss, it turns out it will be hitting nothing but net. The chain is now aiming for earnings as high as $0.65 a share for the entire year. The stock has already fared well, having risen six-fold over the past year.
Just as computer makers have been marginally marking up personal computer systems due to higher component costs in memory chips and flat panel display monitors, servers are still getting cheaper. Sun Microsystems (Nasdaq: SUNW) is cutting prices on its high-end servers by as much as 41%. With corporate spending still tight-fisted, it's not as if the company expects to make it up in volume. However, it should help move more servers now that businesses will find it easier to budget for the infrastructure expenditures.
Bookkeeping concerns at energy specialist Reliant Resources (NYSE: RRI) has the Securities and Exchange Commission launching a probe into last year's restated results. The Reliant Energy (NYSE: REI) spin-off is standing by its treatment of numbers, but, of course, said that it would cooperate with the SEC inquiry.
Country roads won't take you to AT&T (NYSE: T) Broadband's homepage. The company is selling cable television assets in Colorado, Wyoming, and Montana. The transaction will raise $750 million for the troubled telco giant, while at the same time allowing it to back out of rural areas to focus on metropolitan strongholds. In short, while AT&T still wants to "reach out and touch someone," it would prefer to do so in a crowd.
And Finally...
Today on Fool.com: Rick Munarriz is back with another 10 stocks under $10 he's watching.... Which service should you use when opening a Drip account?.... Do you have enough life insurance?... What's your broker's record? Check it out.
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