Now here's the kind of news you'll want to take sitting down. It seems Microsoft
Under development by the MSN division in Britain, the "iLoo" will feature a height-adjustable, waterproof keyboard and plasma screen.
"People used to reach for a book or mag when they were on the loo," says MSN marketing manager Tracy Blacher, "but now they'll be logging on."
We'll let you come up with your own puns here.
In today's Motley Fool Take:
- Good Things Coming to Life?
- Quote of Note
- Playboy Shakes Its Stuff
- Fresh Ideas for Your Portfolio
- Electronic Arts Plays to Win
- Discussion Board of the Day: Video & PC
- Quick Takes: CEOs Gone Wild, J.D. Power, Halliburton, more
- And Finally...
Good Things Coming to Life?
Internet traffic director Cisco Systems reported its second-most profitable quarter ever last night, beating analyst estimates. But the firm ratcheted down current-quarter sales expectations to zero growth over last quarter. Perpetually optimistic CEO John Chambers has been more cautious in his statements over the past year, so some were pleased by a few veiled comments he made suggesting an improvement in overall corporate spending for the tech arena. Even so, the market yawned, sending the stock down a few pennies.
General Electric, the largest firm in the world in terms of market capitalization, said it would meet earnings targets for the second quarter and full year, with gains from the end of the Iraq war offsetting SARS-related weakness in the travel sector.
Coca-Cola and Pepsi have been quietly executing their business plans over the past year, and these two companies probably represent the best values among the stocks we've discussed here. Coke is seeing decent gains on an analyst upgrade. Morgan Stanley
Pepsi is seeing some modest gains on its reassurance that the company's long-term growth plan is intact, and its announcement that the firm is raising its dividend by 6.7% to $0.16 per share.
Does all that mean the economy is coming to life? Well, no one seems convinced one way or the other. There is, arguably, no company that is more representative of the overall economy than General Electric. So, its announcement could be taken as a good sign that the economy is beginning to stabilize, though it's likely we'll still be treading water for the remainder of the year. Whereas both Coke and Pepsi are fairly recession-proof businesses, it's difficult to assign much economic impact to their news.
What this does mean, however, is that there are pockets of good news for investors to take advantage of, even in this market. Some companies can apparently execute well in this and, perhaps, nearly any environment. Go figure.
As we've said before, it pays to buy the companies that can perform well in good times and bad, no matter the outlook for "the market" in general. But price matters, which could help explain why Coke and Pepsi, trading at about 26 and 22 times trailing free cash flow (FCF), respectively, are performing better than Cisco, at 36 times FCF.
Quote of Note
"All my good reading, you might say, was done in the toilet.... There are passages in Ulysses which can be read only in the toilet -- if one wants to extract the full flavor of their content." -- Henry Miller (1891–1980), U.S. author
Playboy Shakes Its Stuff
A weak advertising environment and competition from cheesy frat-boy rags such as Maxim and Stuff have pounded Playboy's publishing results recently. Today, though, the bunny showed signs of bouncing back.
Total revenues climbed 12% to $74.3 million. Playboy's bottom line was fattened by $632,000, turning around last year's first-quarter loss of $9.4 million. That loss included a $5.8 million goodwill accounting charge. Still, the company nailed the money shot here, with improvements in virtually all aspects of its business.
Publishing revenues were flat, but operating income for the unit was $507 million, reversing a loss of $368 million. Playboy recently replaced venerable Arthur Kretchmer as head editor, naming Maxim alum James Kaminsky as the new top dog for its flagship publication. He's revamping the 50-year-old magazine to better reflect today's styles and interests, while also keeping its literary and journalistic history intact.
The magazine's circulation has fallen to around 3 million subscribers, which is strong compared to its peers, but disappointing given that it used to attract double the number of readers.
Kaminsky promises to return Playboy to its former glory days, and when that happens, advertisers should follow. Its ad revenues dropped 2.7% this quarter, and the company sees the weakness continuing into the second quarter. But for the full year, it anticipates an upswing.
Another sweet spot for Playboy this quarter was its online operations. Subscription revenues doubled, and total revenues for the division grew 45% to $9.1 million. More importantly, the unit was profitable, producing $320,000 in operating income compared to an operating loss of $3.6 million in the previous quarter.
And here's something you don't see every day in corporate financial reporting: Playboy recorded the $1.9 million sale of a Salvador Dali painting as part of its licensing group's results. Unless Hef has a stack of 'em, this isn't an ongoing revenue or earnings stream, of course, but it's still interesting to note.
Looking forward, Playboy wears its 50 years well. Its brand and mystique communicate decadence, luxury, and sexiness as much as ever. Its online operations have swung to profitability, and should continue to grow. Its publication unit is also turning around and showing strength. In the quarters to come, these two divisions' results will be the featured centerfolds to gawk at.
Fresh Ideas for Your Portfolio
Don't forget that spring cleaning for your portfolio is as important as it is for your home. If you're looking for fresh ideas to spruce things up, be sure to check out The Motley Fool Select.
Electronic Arts Plays to Win
These aren't the best of times for the video game industry. The three console makers -- Nintendo, Sony
But here's the rub. Cash-strapped gamers aren't buying new games at the same pace they were hooking up last year. So, when industry leader Electronic Arts
On the surface, the report was grim. Revenue fell to $463 million while the company managed to produce a paltry $0.06 a share in earnings. But like any good game, there is more to this than a drab box cover. In fact, this was actually a pretty respectable showing for the video gaming bellwether.
The top line did fall, but it was just a 1% slide from last year's fiscal fourth-quarter showing. That's impressive when you consider that the company achieved these results in a quarter that featured just a dozen new releases. Last year, it pumped out 20 new titles during the March quarter. As a matter of fact, earlier this year it had projected a revenue range of $420 million to $460 million for the period.
The bottom line is also heartier than it seems at first glance. Absent restructuring charges related mostly to its EA.com online subsidiary, earnings would have come in at $0.40 a share. That was also well above the guidance it provided back in January.
In sum, fiscal 2003 was a success as Electronic Arts produced operating cash flow of $714 million and gross margins reached a record 57%. The EA moniker is significant for vowel watchers because the company has no IOU on its debt-free and $1.6 billion cash-rich balance sheet. But fiscal 2004 is going to be even better. It expects annual revenue of at least $2.8 billion and earnings to rise by 43%-50%, to come in between $3.10 and $3.25 per diluted share.
While the stock is trading essentially where it was two years ago, the fundamentals have improved along the way. When was the last time one could buy EA for roughly 20 times the current fiscal year's earnings guidance? Back out the company's heavy greenbacks, and the earnings multiple based on EA's enterprise value drops into the teens.
This doesn't mean that the video game industry is saved. Just as reading a favorable Dell
Discussion Board of the Day: Video & PC
Electronic Arts had its strongest sales growth overseas this past year. Can smaller software players build that kind of marketing muscle? Will The Sims 2outsell the classic EA original? How amazing is it that the company's Madden and FIFA sport titles are entering their 15th and 11th year, respectively? All this and more -- in the Video & PC discussion board. Only on Fool.com.
CEOs Gone Wild, Part XXII: On top of other controversy surrounding New York Stock Exchange Chairman Dick Grasso, it seems he received a $10 million pay package last year despite a slump in earnings for the exchange. The Wall Street Journal also reports that Grasso's retirement package is valued somewhere between $80 million and $100 million.
J.D. Power's annual quality survey of the auto industry included a twist this year -- the worst-performing brands. Trailing the pack: the 6,400-pound, $50,000 Hummer H2, made by General Motors
In local news, the county council has declared this "Sharon Fethhorn Month." Ms. Fethhorn, an eighth grader at County Middle, just returned from the National Spelling Bee Finals in Washington, D.C. Though she exited the competition in the first round (misspelling "bee"), she was the first from our area to ever qualify for the event.
Today on Fool.com:
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- TMF Interview: Prof. Burton Malkiel on mutual funds.
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