There was a time when we talked of our daily lives made better as technology trickled down from -- what did we call it then -- the military-industrial complex. Well, times have changed. Seems IBM just built a supercomputer roughly the size of a TV based on a technology to be used in gaming consoles.
The machine, capable of two trillion calculations per second, is apparently a prototype of a supercomputer IBM is building for the Lawrence Livermore National Laboratory in California. All thanks to our misspent youths and the quest for a more realistic pong. What's next, an atomic clock based on the remote?
In today's Motley Fool Take:
- SEC Eyeballs Siebel
- Quote of Note
- IBM's Days in Court
- Discussion Board of the Day: IBM
- Starbucks' Growth Strategy
- Shameless Plug: Motley Fool Credit Center
- More Fool News
- And Finally...
SEC Eyeballs Siebel
News coverage of Regulation Fair Disclosure -- Reg FD is a relatively new SEC rule forbidding companies from selectively disclosing material information -- has seemingly died down. We read that as a good sign and an indicator that companies, by and large, are behaving.
Unfortunately, one company -- and one with a close, and large, investor following -- may have gotten itself into trouble for the second time in months. In its latest 10-Q, software power Siebel Systems
The company is defending itself and hasn't admitted guilt of any kind. That said, we've been through this before: Without admitting guilt, Siebel paid a $250,000 fine a year ago and agreed to stay on the SEC's good side following a similar inquiry based on comments made at a conference. It was one of the SEC's first FD-related enforcement actions, along with cases involving Raytheon
The rule is simple enough: Either keep your mouth shut, or make sure that if you let potentially market-moving information out to some investors that you inform the rest of us. (If the commission finds Siebel at fault, we hope the penalty is somewhat stiffer than $250,000. Heck, Siebel is currently sitting on more than $2 billion cash and short-term investments.)
We highlight this story, in part, so Siebel and other companies know investors are watching. (We did the same thing in January with regard to the company now known as Time Warner
Companies that disrespect their stockholders -- or, we as like to remind them, owners -- don't deserve our money. And for the record, Reg FD violations fall squarely into the "disrespect" category.
Quote of Note
"We are all failures -- at least, all the best of us are." -- Sir James M. Barrie
IBM's Days in Court
While they're meant to serve justice, lawsuits can nonetheless be effective business tools; that is, in generating publicity, distracting competitors, getting cash in settlement from a competitor, and so on.
Look at SCO Group
SCO has attracted the services of a top-notch litigator, Boies Schiller & Flexner (they handled the antitrust battle against Microsoft and represented Al Gore in the 2000 presidential election dispute). Yet, such legal brainpower comes at a steep price. Besides the hourly fees, SCO is contemplating paying the law firm 20% if SCO is sold, 20% of the proceeds of a settlement with IBM, and 20% of the proceeds from any equity offering.
To pay the legal tab, SCO recently completed a private placement for $50 million from BayStar Capital.
The legal wrangling intensified this week with a flurry of subpoenas. SCO served Linus Torvalds, the programmer who invented Linux; Richard Stallman, the president of the Free Software Foundation; Transmeta
For IBM, Linux is clearly an area of great strategic importance. In fact, the company, recently invested $50 million in Novell, so as to carry out its Linux initiatives.
IBM has also has experience in high-stakes litigation. No doubt, IBM has the resources to drain SCO's treasury in escalating legal fees.
Besides, intellectual property litigation tends to be highly complex and can take years to resolve in the courtroom. Again, advantage Big Blue.
Of course, in litigation, the attorneys always win. And, SCO's newest major investor will probably win, too, since it built nice protection features into its structured investment. But common stockholders -- essentially betting on a lawsuit -- enjoy no such protection.
Discussion Board of the Day: IBM
Is this serious for Big Blue, or is SCO Group just another fly to be swatted? Talk it over on our IBM discussion board.
Starbucks' Growth Strategy
By LouAnn Lofton (TMF Bling)
Starbucks
Despite the market's lukewarm response, there's much to praise here, and opportunities for more growth abound. The company's comparable-store sales results were again impressive, and the future of its international expansion looks promising. Further, Starbucks' plans for domestic growth are encouraging, thanks to the rollout of more drive-through stores.
Starbucks (which I happily own shares of) posted an 8% comparable-store sales gain for the year, marking the 12th year in a row the company's comps have been 5% or better. It's projecting 3%-7% comps growth for fiscal 2004 -- the same guidance it gave for the just-completed year. Starbucks' same-store sales success is primarily transaction-driven, meaning that it's not relying only on higher prices to drive growth. That's an important factor in the quality of its comps gains.
We already know it entered its first quarter upbeat, with same-store sales growth of 9% for the month of October. With the rollout of its famed holiday drinks (don't come between me and a Gingerbread Latte), and the continued success of the Starbucks card, Q1's likely to be another winner.
Starbucks' international operations will turn profitable this year, a significant milestone for the company. It will add 350 international locations to its lineup, with 300 of them being licensed stores. Troubles in Japan haven't squashed Starbucks' belief that it can be a welcome part of diverse cultures the world over. The company will continue to partner locally in order to achieve this balance between a consistent Starbucks experience and a locally tailored one.
In the U.S. and Canada, Starbucks will add 950 locations this year. About a third of those will be drive-through locations, which have some of the best unit economics of all of Starbucks' concepts. It's surprising to me that Starbucks just now seems to be catching on to the fact that drive-throughs can be hugely successful for it. Yes, it's contrary to the whole coffeehouse culture the company wants to cultivate, but from the customers' point of view, the convenience factor is attractive.
Starbucks finished the year with 7,225 stores, and as laid out above, plans to add 1,300 new locations globally in fiscal 2004. That's all while maintaining its excellent comps growth and producing total revenue growth of 20% and earnings growth of at least 20%. Ambitious, to be sure, though Starbucks hasn't given us a reason to doubt it yet. At 38 times the 2004 estimate of $0.85, its stock, predictably, isn't allowing for much doubt, either.
As mentioned, LouAnn Lofton owns shares of Starbucks.
Shameless Plug: The Motley Fool Credit Center
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More Fool News
For a list of all our stories from today, see Today's Headlines.
And Finally...
Today on Fool.com, Rick Munarriz talks cheap in Penny Stock Nation.... As they say, successful turnarounds invariably start at the top. Just ask Coach Parcells.... And in the last installment of our Motley Fool Radio Show interview with the Vanguard founder, Jack Bogle says Mutual Funds Should Go Retro.
Contributors:
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Jeff Hwang, Tom Jacobs, LouAnn Lofton, Alyce Lomax, Bill Mann, Selena Maranjian, Dave Marino-Nachison, Rex Moore, Rick Munarriz, Reggie Santiago, Tom Taulli, Dayana Yochim
