One of the most colorful figures from the war resurfaced yesterday when former Iraqi Information Minister Mohammed Saeed al-Sahhaf turned himself in to U.S. forces. After being interrogated, he was released and appeared on an Arab television station.

Mr. al-Sahhaf is the fellow who faced reporters every day and emphatically explained how well things were going for Iraq. "I triple guarantee you, there are no American soldiers in Baghdad," and "We have placed them in a quagmire from which they can never emerge except dead," for example. Such phrases earned him the nickname "Comical Ali" and inspired a loyal following in the U.S.

We think he may have a future as a late-night television host.

In today's Motley Fool Take:

Turnaround at 3Com?

Turnarounds can be incredibly lucrative for investors who spot the turn before the rest of the market. But that's the rub -- you have to act before the turn is fully visible. With this in mind, Fools interested in a potential turnaround story should keep an eye on 3Com(Nasdaq: COMS).

After years of dwindling sales, the former networking star turned networking dud is finally getting its act together. Last night's quarterly earnings report marked the fifth straight quarter that 3Com has increased its cash balance, which now stands at $1.48 billion (net of all debt).

3Com's current sales and profits paint a bleak picture, but the company has a promising joint venture (JV) underway with Huawei Technologies, one of China's major communications equipment providers. The JV, announced earlier this year, will significantly expand 3Com's line of switches and routers, allowing it to compete more favorably with Cisco(Nasdaq: CSCO). Also, the JV will help 3Com gain entry into markets in China and Japan.

On last night's earnings conference call (which the company was kind enough to include as part of its earnings press release), CEO Bruce Claflin provided an update on the JV's progress to date. Here are some of the highlights:

  • On June 6, Huawei won an important legal victory against Cisco. The court denied Cisco's request for an injunction that would have prevented Huawei from shipping its Virtual Routing Protocol (VRP) network operating system. The court's ruling only required Huawei to remove one module, an apparently non-essential feature that utilized less than 1% of the VRP source code.

  • On June 18, Huawei unveiled its new Switch 7700, the first of several modular switches and routers that will be sourced from the JV over the next several months. The 7700 targets the mid-level market, where it will compete with Cisco's Catalyst 4500 series. Compared to Cisco's product, Claflin claims that the 3Com-Huawei product "will offer competitive features and performance at a better value to customers." Also, 3Com intends to offer its channel partners (i.e., resellers) the opportunity to earn higher margins by selling 3Com-Huawei products vs. comparable Cisco products.

  • The JV is now expected to launch towards the end of 2003, in 3Com's second fiscal quarter. 3Com and Huawei are still awaiting Chinese government approval, but government feedback so far has been "favorable." Claflin expressed confidence that the approval will be granted, but that the timing remained a bit uncertain.

Turning back to 3Com's cash situation, the company expects to only burn modest amounts over the next two quarters while the JV is being finalized. Once the JV is formally approved, 3Com will also be responsible for contributing $160 million in cash to the venture. At that point, 3Com will then own 49% of the JV.

If we back out $20 million in cash burn over each of the next two quarters, plus the $160 million investment, 3Com will likely end the year with something around $1.28 billion in cash. Backing that projected cash balance out of the company's current market cap of $1.74 billion reveals an enterprise value (EV) of only $460 million. That's an EV-to-sales ratio of only 0.5 on 3Com's current base of very depressed sales.

Beyond strict valuation measures, Fools may also want to keep an eye on any insider buying by 3Com execs as a sign that the stock is compelling. While there's been no insider buying yet and while the JV's success is anything but certain, a successful JV would make 3Com's current valuation look awfully cheap.

Quote of Note

"Life has taught me that it is not for our faults that we are disliked and even hated but for our qualities." -- Bernard Berenson, The Passionate Sightseer, 1960

AIG Buys GE's Biz

Insurance mega-giant American International Group(NYSE: AIG) and General Electric(NYSE: GE) have announced that AIG will buy the GE Edison Life Insurance Company in Japan and GE's U.S.-based auto and home insurance business for between $2.1 billion and $2.2 billion, depending on the closing date. GE said it will take a pre-closing dividend of $440 million.

GE Edison joins AIG's existing Star Life and ALICO Japan businesses in Japan to strengthen AIG's hand in the world's No. 2 insurance market, where it will climb from eighth to sixth in annual life insurance premiums. Japanese insurers' financial woes have led to consolidation, and AIG obtained Star Life from belly-up Chiyoda Mutual Life Insurance Company in 2000. GE itself started GE Edison as a joint venture in 1998 with Toho Mutual Life, which failed a year later.

Last July, GE set up GE Insurance to include its Employers Re reinsurance business and other insurance operations, and has been reorganizing with an eye to its golden rule: to compete only in businesses where it can be No. 1 or 2. According to reports, GE CEO Jeffrey Immelt told analysts last month that his company would look to divest a number of insurance units. GE Edison is not even in the top 10 in Japan, so the move is a natural part of GE's Darwinian culture.

AIG already has a leg up in China, the other key Asian market where, according to the Insurance Journal, the company began operations in 1975 and obtained its first license in 1992.

AIG and GE are two of the top 10 most widely held stocks in U.S. portfolios. But before buying, selling, or holding either AIG or GE, investors need to ask a few questions. Consider Bill Mann's skeptical look at AIG executive compensation and cozy board relationships and determine whether there has been improvement, and also examine his critical view of GE's pension liabilities.

Shiny, Happy People

Or dour, depressed people.... Hey, that's what it takes to make the world go 'round, no? Rest assured, The Motley Fool's Community is a microcosm of the world, except there seems to be a higher percentage of smarter folk. We're continually amazed at all we learn on our discussion boards -- almost every subject from stock investing to taxes to how to find a job to how to quit smoking is covered, every day, in every way. Check it out and take advantage of our free trial offer.

Playtex Plunges

Shares of Playtex(NYSE: PYX) plummeted about 18% today to a new 52-week low of around $6.20 after the personal-products company dramatically reduced earnings expectations for its second quarter and fiscal year.

Increased tampon competition from Procter & Gamble(NYSE: PG) and dreary sunless weather for much of the country hit Playtex where it hurts -- in its feminine hygiene products and Banana Boat sun care lines.

Playtex recently scored a legal win against Procter & Gamble, obtaining a permanent injunction against its bigger rival. P&G had aggressively launched and marketed Tampax Pearl tampons about nine months ago, and advertised them as superior to Playtex's Gentle Glide line. A court ruled that a no-no and also ordered P&G to pay Playtex $2.96 million to remedy the situation. Still, the heated competition is sapping sales for the latter.

The company now expects to earn between $0.08-$0.10 a share for the second quarter. Analysts were anticipating $0.23 a share based on Playtex's April guidance. It earned $0.32 a diluted share in last year's Q2, excluding a $0.06-per-share extraordinary loss. For the full year, it is hoping for $0.42-$0.45, well below the expected $0.74. The second-quarter shortfall, and anticipated continued business weakness across product lines, contributed to the lowered outlook.

Playtex expects revenues for its second quarter to be 10% below the $201.6 million in sales from the prior Q2. Analysts hadn't projected such a steep drop, and were looking for $199.7 million. For 2003, Playtex thinks revenues will be 5% to 6% lower than in 2002.

Today's sell-off, combined with the company's reduced outlook, puts Playtex trading at a forward P/E of around 14 to 15. Despite the discounted shares, its competitive problems and messy outlook don't make this one a bargain.

Discussion Board of the Day: Palms, PDAs & Handheld Computing

How much technology can you pack in your hand? What's up with the latest models? Have some tips to share? All this and more -- in the Palms, PDAs & Handheld Computing discussion board. Only on

Quick Takes

A majority of eBay(Nasdaq: EBAY) stockowners evidently don't care about their piece of the shareholder pie potentially shrinking. At the company's annual meeting today, a proposal backed by eBay management to boost the number of shares available for option grants passed, despite vocal opposition from the California Public Employees' Retirement System. The option pool can now be expanded from 25 million to 39 million shares, a 56% increase. For more opinions on this matter, see this column by Rex Moore and this one by Jeff Fischer.

In its first significant move to grow Martha Stewart Living Omnimedia(NYSE: MSO) beyond just its infamous namesake, the company launched its newest magazine today. Titled Everyday Food, it features lots of quick and easy recipes, with one particular visage notably lacking from its front cover. The magazine has been in the planning stages for more than two years, and will be published 10 times a year. So far, a test run for the new rag has been successful, and it has garnered 20% more subscriptions than expected. Issues will cost $2.95 apiece, or $18 for an annual subscription. (Martha Stewart Living Omnimedia has been featured by David Gardner in the Motley Fool Stock Advisor.)

The Supreme Court dismissed an appeal by Nike(NYSE: NKE) today on technical grounds. Nike had argued that free speech protection should extend to corporate marketing and advertising, but the court said it never should have looked at the issue in the first place. While Nike's position isn't discredited with this move, it does mean that anti-globalization activist Marc Kasky can carry on with his lawsuit against the sneaker giant.

Shares of Irish drug maker Elan(NYSE: ELN) fell 30% today as the firm disclosed that it missed an initial deadline to file its 2002 annual report with the SEC. The larger implication of that, however, is that Elan could be in "technical default" with some of its creditors, leaving it at risk for accelerated debt demands and possible insolvency.

And Finally...

Today on

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