There's word today that scientists in Italy have created the world's first cloned horse. The 220-pound pony is named Prometea, in honor of Prometheus, the Greek mythological character who stole fire from the gods and gave it to humans.

This gives the horseracing industry something to worry about, as if it needed any more troubles. What do they do about owners who send 10 clones of Kentucky Derby winner Funny Cide to the starting gate? Perhaps the industry could create a "clone circuit" where the horses are all the same, and the idea is to identify the best trainers and jockeys.

In today's Motley Fool Take:

Cisco's Top-Line Woes

Cisco Systems (Nasdaq: CSCO) announced 27% earnings growth for the quarter yesterday. Taken by itself, this might be cause for celebration, but here's a dose of reality: Earnings numbers should never be taken by themselves.

The networker's earnings growth stemmed almost entirely from cost cutting, along with wider gross margins for its products. Cisco's top line -- the dollar value of products and services it sold -- was actually 2.5% lower than the same quarter last year and 1.9% lower for fiscal 2003 vs. 2002.

The bright side is a dramatic increase in product gross margins -- from 67% to more than 70%. Much of this, however, was offset by lower gross margins for services, which saw costs increase 19% on a mere 1% increase in revenues.

The company also repurchased nearly $6 billion in stock during fiscal 2003, showing that it has finally decided to share some of its enormous stash with shareholders -- maybe. The number of diluted shares used to calculate earnings declined by more than 2.4%. But while Cisco bought back 424 million shares, in the past three years the company has granted on average 299 million employee options. Investors better keep an eye on this year's grants when the 10-K is released in a few weeks, as the benefits of that $6 billion in shareholder equity could evaporate.

The dark side is that Cisco clearly strained to reach its numbers, managing no top-line growth whatsoever. Annual sales and marketing, and research and development costs were substantially lower than in 2002. The former could imply more streamlined operations, but the latter is a nearly unmistakable sign that Cisco is shortchanging its future to improve current results.

So while we can look at the 27% bottom-line earnings growth and say "good times!" almost every other number in Cisco's results says anything but. Operating cash flows declined by more than 20% to $5.2 billion for the year. And let's not forget that 2002 was a miserable year for router sales, so you can't argue that the hurdle was set too high.

And keep in mind, even with the 7% sell off in early morning trading, Cisco sells at a gaudy 27 times free cash flow. In other words, people who invest in Cisco are not only expecting a massive "Internet changes everything" type rally in equipment spending, but also that this rally happens soon. And they assume that Cisco shares will not be heavily diluted meanwhile.

None of this is supported by yesterday's results. CEO John Chambers was cautiously optimistic that a sector recovery is coming and that first-quarter 2004 revenues will be 2%-4% higher. Given current multiples, I'd say he'd better hope for a darn sight more than that. Cisco's results show nothing more than a company treading water, cutting costs wherever possible -- amid little evidence of economic improvement, the kind that generates things like, oh, jobs and capital spending.

No company in the history of mankind ever cost-cut its way to prosperity. Eventually Cisco's going to have to show real top-line growth, or its stock could once again get hammered. -- Bill Mann (TMF Otter)

Your IRA, Your Future

Do you have an IRA? Are you funding it for your future retirement? If not, get cracking. The tax advantages are not to be missed. We can help. Visit our IRA Center where you can learn more and even open an account with one of our partners if you choose.

Microsoft Faces EU Punishment

In the latest development of a four-year investigation, European Union antitrust regulators are charging Microsoft(Nasdaq: MSFT) with monopolistic abuses. As the probe winds down, the world's largest software maker faces a large fine, and may also have to give up some trade secrets to its rivals.

EU officials say Microsoft is "leveraging its overwhelmingly dominant position from the PC into low-end servers." Because the company won't disclose information related to how its servers and PCs communicate with rival servers, "an overwhelming majority" of buyers surveyed by the commission said they artificially alter their choice in favor of Microsoft products. The proposed remedy is to force the software king to reveal the interface information so that rival vendors such as Sun Microsystems(Nasdaq: SUNW) and Oracle(Nasdaq: ORCL) are able to compete on a level playing field.

Another issue is Microsoft's practice of bundling Windows Media Player with its dominant operating system software (Windows XP, Windows 2000, etc.). Media Player allows users to listen to music or watch video, and competes with products offered by Real Networks(Nasdaq: RNWK) and Apple(Nasdaq: AAPL). The EU says the fact Media Player is already installed on the vast majority of PCs "weakens competition on the merits, stifles product innovation, and ultimately reduces consumer choice." The remedy would force Mr. Softie to either offer its operating system software without Media Player or to include competitors' versions along with its own.

The EU commission, which says Microsoft's abuses have continued during its investigation, is giving the company one last chance to respond to the charges before it concludes the probe and levies punishment.

Quote of Note

"I like buying companies that can be run by monkeys -- because one day they will be." -- Peter Lynch

Creative Writhing

If you've dabbled in computers long enough you remember when Creative Technology(Nasdaq: CREAF) rocked. After all, time was if you didn't have a Creative Labs Sound Blaster in your machine you were a nobody. But where's the earth-shattering kaboom now?

It's in the share price for starters. Creative's groundbreaking peripherals have become commodities, and investors have turned down the volume. Today the stock trades at just a quarter of what it fetched at its peak three years ago.

Last night, Creative reported fiscal 2003 results, posting earnings of $0.29. Sales again fell -- this time to $701.8 million. In fiscal 2000, by contrast, the company earned $1.86 a share on $1.3 billion in sales. The top line has fallen every year since.

It's not that Creative isn't trying. The company continues to acquire smaller players in an effort to resume its growing ways and will roll out 90 new products in fiscal 2004.

So why aren't folks buying into Creative's storage devices, MP3 players, and Web cams? Well, they are, only at lower prices.

Creative's NOMAD MP3 jukeboxes are looking awfully sleek and pack a lot of juicy specs, but Apple(Nasdaq: AAPL) is hogging that stage with its iPod line. Box makers, meanwhile, like Dell(NYSE: DELL), Gateway(NYSE: GTW), and Hewlett-Packard(NYSE: HPQ) are packing machines with their own powerful tools.

In last night's release, Creative Labs President Craig McHugh gushed over upcoming product lines. He bragged about the "killer looks" of the new speaker systems. One wonders what's the bigger shame -- a corporate bigwig using the word "killer" or the fact that Creative is down to praising the appearance of something that should be heard rather than seen.

As management struggles to reposition Creative, a cash-rich balance sheet and (meager) profitability should contain the stock's downside. But the upside catalyst just isn't there yet. Catalysts are, after all, to be seen rather than heard.

Discussion Board of the Day: Stupid Computers

How's your computer feeling today? Does it feel like tossing its cookies? Want to know where you can turn for personal computer help in the Foolish Community? All this and more -- in the Help with this STUPID Computer discussion board. Only on

Quick Takes

Despite the highest interest rates in over a year, Americans applied for mortgages at near-record numbers last week. Experts say the frenzy may simply be from those rushing to buy before rates go even higher, however. The number of refinancings, meanwhile, has fallen by over 50% since May.

Sirius Satellite Radio (Nasdaq: SIRI) reported a second-quarter loss of $0.12 per share -- much better than the $1.62 loss last year, but not enough to satisfy the market as its shares slipped 10%. The company now has 105,186 subscribers, 55% more than at the end of the first quarter. Rival XM Satellite Radio(Nasdaq: XMSR), which has nearly 700,000 subscribers, reports earnings tomorrow.

Zimmer Holdings (NYSE: ZMH) , a U.S. company that makes reconstructive implants and other devices for orthopedic surgery, beat out Britain's Smith & Nephew(NYSE: SNN) with a $3.1 billion bid for Swiss surgical products firm Centerpulse(NYSE: CEP).

In local news, Smith's niece, who hails from Poland, had no comment.

And Finally...

For updated stories throughout the day, bookmark our ever-changing News section. Or, blow off market news altogether because if you're investing for 10 years or longer, does it really matter? (OK, we're just checking to see if you're reading).... Today we start a three-part interview with Stocks for the Long Run author Jeremy Siegel.... Rex Moore continues his discussion of portfolio diversification.... Mike Tyson isn't the only celebrity to blow millions. Find out how not to go bankrupt once you're rich and famous.

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