In Dueling Fools today, it's the Battle of the Builders: Home Depot vs. Lowe's. Jeff Fischer and Rick Munarriz hammer away at each other over which company will enjoy the most long-term success.

What about you... do you bleed orange or blue? Read the Duel, then head to our home page to cast your vote.

Enjoy the weekend, Fools!

In today's Motley Fool Take:

All's Well That's Dell

You might need to read the opening sentence of Dell's(Nasdaq: DELL) first-quarter press release twice. It says, "Dell reported its best-ever fiscal first-quarter operating results...." Yes, that's right: best ever. And you thought the computer industry was in the dumper. Well...

Being leagues ahead, Dell is not an accurate barometer for the computer industry anymore, if it ever was. Its shipment volume rose 29% in the quarter ended May 2, while shipments for the rest of the industry declined an average of 1%.

The company continues to grab market share in the server business, where its shipments soared 40% -- more than four times the average vendor's gain -- and Dell now accounts for nearly one-third of server shipments in the country.

Its total revenue spiked 18% to $9.5 billion, while operating income jumped 37% to $811 million. (Take that, Michael Dell, for dropping out of college.) Diluted earnings per share rose 35% year over year to $0.23.

The business appears to be humming with a capital "h" both around the globe sales-wise and on the factory floors operationally. Costs are contained and efficiency is up. Inventory levels are down, even while shipments have soared. Its cash conversion cycle is four days stronger than a year ago, at an excellent negative 38 days. Finally, volume grew at least 30% in 10 major world markets outside the United States.

And Dell doesn't see its growth slowing down. To the contrary. It projects 25% volume gains year over year in quarter two (compared to 3% for the industry excluding Dell), 15% revenue growth, and 26% earnings-per-share growth, to $0.24.

If only the stock were cheaper. At $32, Dell's touching a high not seen since November 2000, and trades at a pricey-looking 32 times fiscal 2003 earnings estimates. Its $76 billion enterprise value is a more modest 23 times recent 12-month free cash flow, but the stock still doesn't qualify for the "bargain bin."

You're shopping at Tiffany's if you're buying Dell stock today, but at least you'd be buying the best in the biz.

Quote of Note

"I think there is a world market for maybe five computers." -- Thomas Watson (1874-1956), chairman of IBM, 1943

Senate Secures Tax Cut

It came down to a late-night tie-breaking vote from Vice President Dick Cheney, but in the end the Senate passed an economic stimulus proposal that preserves some dividend tax cuts -- at least temporarily.

The $350 billion Jobs and Economic Growth Bill calls for a 50% reduction in dividend taxes for one year, then the total elimination of such taxes until 2007, when they would be fully reinstated. The reinstatement clause was added to keep the total package within budget, but supporters are hoping the taxes will never return.

Though it doesn't include everything he wanted, President Bush appears happy with the bill. However, it must now be reconciled with the House version passed earlier, which reduces the dividend tax rate to 15% through 2013.

And now for your two obligatory, clashing sound bites: Sen. Jon Kyl (R-Ariz.) called the passage a victory "for the American people," while Minority Leader Tom Daschle (D-S.D.) dubbed it "a starkly elitist tax break."

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Yahoo! Needs Overture

If there's one thing Yahoo!'s(Nasdaq: YHOO) just-released 10-Q makes clear, it's that Overture Services(Nasdaq: OVER) is very, very important to its well-being. At the same time, Overture's success could be harmful to its own health.

When someone runs a search on Yahoo!, a certain number of "sponsor results" will appear along with the regular listings. Those sponsored links are provided by Overture, which collects a fee from the advertisers each time their link is clicked. Overture then shares that revenue with Yahoo! (or any other partner site that uses its listings, including The Motley Fool).

For the three months ended March 31, Overture paid $53.7 million to Yahoo!, which accounted for 19% of the portal's total revenue. So why should Overture be wary of its own success?

It's likely Yahoo! is not fond of being so dependent on an outside company for nearly one-fifth of its revenues. As a result, it might be looking to develop its own pay-per-click model. This would not only bring the process in-house, but would also allow it to keep the entire payment from sponsors instead of sharing it with a partner.

The language in Yahoo!'s 10-Q cannot be overly comforting to Overture. Its sponsor listings are "currently" provided by Overture, for example, with the initial agreement extending for another two years. Also, as it warns of its dependence on such revenue, it states: "If we are unable... to continue to secure an arrangement with a third party provider such as Overture on terms which are acceptable to us, or we are unable to develop our own ability to provide this service, our revenue could significantly decline."

Might one solution to the issue be a Yahoo! buyout of Overture? With more than $800 million in cash and equivalents in the portal's coffers, it's certainly a possibility. And if the price is right, it would also make more sense to buy a company that already knows what it's doing, and is very profitable to boot.

Discussion Board of the Day: Yahoo!

Should Yahoo! develop its own pay-per-click model, or swallow up Overture? Or should it stay out of the business entirely and keep the Overture partnership? Let us know your thoughts on the Yahoo! discussion board. Only on Fool.com.

Quick Takes

As expected, there were some fireworks at today's AOL Time Warner(NYSE: AOL) shareholder meeting. Though all sitting board members were re-elected, angry stockholders questioned management about everything from minority representation to outgoing Vice Chairman Ted Turner's criticism of the company. Most of the remarks, however, centered around the sharp decline in the stock price over the past year.

First, the good news: Bankrupt United Airlines says it will reinstate 162 flights and recall some 1,500 flight attendants because of an increase in business. The bad news: American Airlines(NYSE: AMR) will soon be laying off more than 3,000 flight attendants as part of recently approved labor concessions.

In August, Disney(NYSE: DIS) plans to start renting DVDs that do not have to be returned. Once taken out of the package, the discs will become unusable after a couple days and can be thrown away. Reuters says the technology involves a process similar to rusting; a black coating will develop after exposure to oxygen -- rendering the discs unreadable.

In local news, Cleetus Gabrial continues to marvel at the beauty of 8-Track technology.

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And Finally...

Today on Fool.com:

  • For updated stories throughout the day, bookmark our ever-changing News section.
  • Investing In a Horse: Want to participate in the Sport of Kings? Rex Moore looks at the moneymaking possibilities.
  • Which celebrities have the power to move the market? Read on.
  • In Fool's School, if your stock drops $100, does someone else get that money?
  • In our Tax Center, keep tax paperwork forever!

Contributors:
Bob Bobala, Robert Brokamp, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Dayana Yochim