This week's sign of the pending apocalypse: The French government has banned the use of the word "e-mail" in its official documents, instead favoring "courriel," which is a fusion of "courrier electronique."
"Evocative, with a very French sound, the word 'courriel' is broadly used in the press and competes advantageously with the borrowed 'mail' in English," a ruling on the language change said.
Certainly this is in retaliation for "freedom fries."
In today's Motley Fool Take:
- Ericsson Erupts
- Quote of Note
- Microsoft's Blame Game
- Discussion Board of the Day: Microsoft
- Why Doubt WebEx?
- Cash In On Credit
- Quick Takes: PeopleSoft, AOL Time Warner, Mattel, more
- And Finally...
What we're seeing today is the market pricing Ericsson's stock accordingly as it becomes clear its "financial crisis" is now behind it. Although it lost $0.17 per share in the second quarter on a 28% drop in revenue, its cost-savings program -- which will more than halve the number of employees -- has stabilized the company. Indeed, CEO Carl-Henric Svanberg expects to reach profitability this year for the first time since the telecom slump began in 2001.
Ericsson also compares favorably to Nokia in the margin department. Ericsson is forecasting improvement, while Nokia sees its margins -- though higher -- being pressured downward.
"We can conclude that we have the financial crisis now behind us," said Svanberg. "We are on steady ground."
Still, investors should keep in mind that these companies are battling in a sector that's having a hard time shaking off weak demand and overcapacity. Ericsson says the global mobile-systems market could decline by more than 10% this year, as measured in U.S. dollars. Things will turn eventually, though, and Svanberg's recent efforts are getting it in a better position to take advantage when that time comes.
Quote of Note
"E.T. phone home." -- E.T., E.T. The Extra-Terrestrial, 1982
Microsoft's Blame Game
Last night's earnings report from Microsoft
That wasn't the case this time.
Microsoft's move to replace employee stock option grants with actual shares of restricted stock was applauded in Fooldom earlier this month, but it won't come cheap. The company is looking for the tab to run close to $4 billion this new fiscal year. That's steep even when one considers that it earned nearly $10 billion in fiscal 2003.
Operating margins fell this past year, too, as its 13% top-line growth outpaced its 11% spurt in operating profits. While this has happened because the company is successfully growing in lower margin areas like its Xbox video game business and MSN Internet, it just goes to prove that not all diversification, even if successful, is for the better.
Microsoft is still losing money on every Xbox console it sells. It's losing even more after May's $20 price cut. It was supposed to make up the difference -- and then some -- as diehard gamers would load up on software, but that hasn't happened. The average Xbox owner has picked up just five games. While developers aren't abandoning the system the way they have Nintendo's struggling GameCube, for a company used to being the top dog it will be years before Microsoft's Xbox even approaches the market dominance of Sony's
Sure, the company's got $49 billion in poker chip liquidity; it can sit and play in the high-stakes table for as long as it wants. Patience pays as Nintendo looks like it's about ready to fold soon, too. But Microsoft investors have been spoiled by decades of fat margins. How long they would be willing to stand by the company as it plays the game remains to be seen.
Discussion Board of the Day: Microsoft
Should Microsoft ditch the Xbox? Is a penny missed really a penny unearned? What will the company do with nearly $50 billion sitting in cash? All this and more -- in the Microsoft discussion board. Only on Fool.com.
Why Doubt WebEx?
If you see a strong-performing company hounded by naysayers and short-sellers, pay attention. You may be on to an ideal investment. If the company truly is a success, all that negativism eventually translates into buying interest for the stock.
Enter WebEx Communications
This made for quite a setup for last night's blowout earnings report. WebEx grew its quarterly sales by 35% and trounced the consensus analyst estimates for both revenue and earnings. The stock responded enthusiastically, rising more than 8% in early trading.
Performance was strong across the board. Gross margins climbed to 83.4% from 82.2% in the year-ago quarter. Moreover, leverage on an expanding sales base provided a record net margin of 17.5%, up from 9.9%. The company also generated $12.9 million in cash, well ahead of reported net income of $7.9 million. This puts WebEx's free cash flow margin in excess of 25%, up from 21% in the prior year.
Just who is this WebEx, you ask? WebEx is the leader in corporate video-conferencing over the web, with more than 7,000 corporate customers. WebEx "meetings" allow users to share presentations, applications, documents and desktop, with full-motion video and integrated telephony. The company recently got a lift from a deal with Yahoo!
Bears insist that WebEx software will eventually be commoditized, perhaps by the likes of Microsoft
Assuming WebEx maintains its 25%-plus free cash flow margins, a current market cap of $675 million may offer a reasonable entry for risk-tolerant investors.
Cash In On Credit
As you may have noticed by now, July is Cash In On Credit month here at The Motley Fool. Taking care of your credit can certainly be one of your best investments. If your credit needs a helping hand -- or you just want to learn how the industry works -- you can participate in our upcoming online seminar, Achieving Perfect Credit, starting August 1. You can get a free sneak peek at the seminar this week with our 7 Naked Truths of Credit Reporting article.
AOL Time Warner
Toy maker Mattel
For those of you looking to spice up your daily cup of joe, a Santa Barbara-based company called Passion Café announced today that it has developed several aphrodisiac-flavored coffees. If you think that's weird, wait until you hear that one of the coffee flavors is Champagne. Yes, Champagne. A Mocha Valencia from Starbucks
Today on Fool.com:
- For updated stories throughout the day, bookmark our ever-changing News section.
- The Quest for Yield: Investors are hungry for yield. Be wary of too much of a good thing.
- Beautifully Battered Stocks: These three frogs may yet become princes.
- In our Tax Center, check out your charity.
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Kate Southerland, Dayana Yochim