P&G's T.P. Profits Flushed?

If you've ever had doubts that there are big profits to be soaked up in the toilet paper business, consider the fact that Procter & Gamble(NYSE: PG) is suing Georgia-Pacific(NYSE: GP) in order to protect t.p. trade secrets.

The lawsuit says Georgia-Pacific hired an employee from P&G who possessed "confidential information" regarding "Through-Air-Drying (TAD) paper-making technology and processes." When P&G discovered the employee was assigned to a job where that knowledge would directly benefit Georgia-Pacific, it saw profits being flushed down the toilet. "We can't sit by," said chief legal officer Jim Johnson, "and watch years of hard work and creative thinking go to benefit a direct competitor."

Georgia-Pacific pooh-poohs the idea it's breaking any non-disclosure agreements, saying it has "taken all appropriate steps to ensure this employee does not reveal any Procter & Gamble trade secrets, regardless of the duties he has." The company may feel it's the butt of a joke but it's not cracking, saying the lawsuit has "no basis in fact."

There's really no telling how it will all come out in the end, but we have some advice: Wipe the slate clean and shake hands. After washing first, of course.

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Quote of Note

"Only the curious will learn, and only the resolute overcome the obstacles to learning. The quest quotient has always excited me more than the intelligence quotient." -- Eugene S. Wilson, former dean of admissions, Amherst College

Siebel Suggests Reforms

Worst stock options offender and customer relations management software maker Siebel Systems(Nasdaq: SEBL) may be taking baby steps to mend its ways. First there was August's announcement of paying cash and stock for high strike-price options, and now the CFO suggests more reforms to come.

Speaking yesterday at a Banc of America investor conference, CFO Ken Goldman reportedly said Siebel is considering canceling some existing employee stock options and would issue fewer options in the future. It's about time. According to one observer, Siebel has issued more stock options as a percentage of shares outstanding -- 50% -- than any other company in the S&P 500.

Step one came in late August. The company announced in an SEC filing that it would offer employees $1.85 per share in cash and stock for options with a strike price over $40, and it would take a $64 million charge to pay for it.

We are hopping mad about stock options abuse, so we think this is positive. The best corporate governance prefers stock grants to options, not the least because they're expensed. Also, when employees know that underwater (below strike price ) stock options will be repriced or exchanged for those with lower strike prices anyway, it's hardly an incentive to align their interests with the performance of the company.

In another refreshing dash of reality, CFO Goldman reportedly said Siebel "is managing itself on the basis of a not-improving economy." With the company's beleaguered stock hitting a closing high of $37.20 in March, and closing at $6.50 yesterday, perhaps managers are turning their eyes from the ticker to the business.

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Palm Needs a Hand

Is there a little less hand-holding in store for the handheld sector? While industry pioneer and fledgling penny stock Palm(Nasdaq: PALM) posted another dud of a quarter, the company is upbeat about the future. Shaking off a wider loss that came in ahead of Wall Street's estimates on a pro forma basis, Palm sees double-digit growth for the industry in 2003.

Fighting two years of unfulfilled hype, botched rollouts, and inventory overloads, Palm and rival Handspring(Nasdaq: HAND) are now duking it out in the equity buck bin. While Palm still commands 59% of the market share, keeping that lead has involved far more discounting than the investing public would like to see.

Even Research in Motion(Nasdaq: RIMM), which at first resisted the weakness of its petite peers due to the strength of its BlackBerry wireless email product, has caved in. Its shares have surrendered more than two-thirds of their value, hitting $30 in March.

On the Palm front, new products and an enhanced operating system are on the way. And while sales fell short in the company's first fiscal quarter, Palm was able to grow its top line back in August. Sure, most of that came courtesy of dramatic markdowns, as the company continued to shovel out its dated inventory, but at least the units are moving and penetrating the marketplace.

The risks here are as huge as the handhelds are small. Until the sector gets back into the black, it's a gamble. Still, keep an eye on how holiday sales shape up. A lot is riding on Palm's newest wares, and the company is expecting to break even this quarter. It's do or die time for the fallen darling.

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Quick Takes

Dude, you're printing on a Dell(Nasdaq: DELL). The leading computer maker is teaming up with Lexmark(NYSE: LXK) to produce a line of Dell-branded printers and ink cartridges. Similar to a razor-and-blades business, imaging specialists don't mind selling printers on the cheap and making it up in higher-margin ink sales.

Apparently you can trade hotels, even when you're off the Monopoly playing board. Wyndham(NYSE: WYN) will be selling off 13 hotels to Westbrook Hotel Partners. The $447 million price tag will come in handy as Wyndham tries to pay down its debt. While hotel chains in general have fared better than airlines and car rental agencies, as folks have taken to the road to travel, the same can't be said of the higher-end hoteliers. Catering to a corporate travel crowd that has fallen precipitously, Wyndham has moved to sell off some of its non-strategic properties. In short, Wyndham is checking out of a baker's dozen.

The back-to-school season was a bit of a heel for Stride Rite(NYSE: SRR). Its $0.17-a-share bottom line showing was even with last year's, as sales growth also came in as flat as a worn-out shoe sole. Despite the challenging market conditions, the shoe retailer is now looking to earn between $0.55 and $0.58 for the full fiscal year. That's on the high end of Wall Street's expectations.

There's a divergence in the home appliances sector. While Maytag(NYSE: MYG) is warning it will miss third-quarter income targets, Whirlpool(NYSE: WHR) is announcing that it's on track to exceed fiscal third-quarter projections on a pro forma basis. However, both companies are optimistic that 2003 will be a year of growth. Whirlpool sees industry shipments climbing 5% higher in the year ahead, while Maytag credits the bulk of its slide on a washing machine delay that shouldn't have an impact in 2003. So, does that make 2002 a wash?

And Finally...

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P&G's T.P. Profits Flushed?