Apparently, diamonds and auto racing just don't mix. A $200,000 diamond was placed at the nose of a Formula One racer at the Monaco Grand Prix as part of a sponsorship with diamond company Steinmartz and a promotion for the upcoming movie Ocean's 12 about a diamond theft. (The movie is the sequel to Ocean's 11 and stars George Clooney, Brad Pitt, and Matt Damon, each of whom attended the race) Unfortunately, however, the car nicked a barrier and when it returned to the garage the diamond was gone and has yet to be recovered.

Expensive accident, or elaborate heist? You decide.

In today's Motley Fool Take:

Yahoo! Goes Retro

By Tim Beyers

Sometimes, denying the truth in the face of the obvious is so sad that it's funny. Like when the former Iraqi information minister went on TV as Americans were entering Baghdad to proclaim that, uh, Americans weren't entering Baghdad.

Other times, it's just plain sad. Like Friday, when Yahoo!(Nasdaq: YHOO) shareholders voted down an options expensing plan for the second consecutive year even as new accounting standards have emerged that are likely to require options expensing. The proposal was rejected by a 53% to 45% margin, according to a preliminary count of shareholder votes.

Yahoo!'s news comes at an interesting time, and in an interesting place. Silicon Valley is home to both Yahoo! and much of the opposition to options expensing. Yet several big Valley companies have recently seen their shareholders demand expensing, including Hewlett-Packard(NYSE: HPQ) and PeopleSoft(Nasdaq: PSFT).

Having worked in Silicon Valley, I'm not really surprised. Despite the myth, options aren't some egalitarian gift to the rank and file. Indeed, the vast majority of options issued usually go to upper management, as fellow Fool Bill Mann has pointed out. It's no different at Yahoo!, where the top five executives other than CEO Terry Semel, who earned 2.9 million stubs for 2003, collected an average of 99,000 options last year. The other 5,500 employees split 20,606,000 options among them, for an average of 3,747. In other words, management's share of the options pool was, on average, 26 times greater than that of the rank and file.

Opponents of expensing will likely cite the Yahoo! victory as evidence that shareholders don't want options on the books. Don't you believe it, Fool. Think of it this way: Would you want to share your $500 of ownership interest with 49 acquaintances, or with 499 strangers? Exactly.

Without the yoke of options expensing, Yahoo! and others -- Intel(Nasdaq: INTC)comes to mind -- have proven that they are likely to continue issuing new shares with reckless abandon. The numbers are crystal clear on this point. In its most recent 10-K filing, Yahoo! says that, had options been expensed, its 2003 net income of $237.9 million, or $0.37 per share, would have fallen to $34.8 million, or $0.05 a share.

Watching as the options pile up at Yahoo! makes me wonder if Mr. Peabody has somehow pushed me into his wayback machine and turned the dial to the heady dot-com days of 1999. I sure hope not. This is one place where I could do without the retro.

Fool contributor Tim Beyers bore a striking resemblance to Mr. Peabody's sidekick, Sherman, in his younger days. He owns no interest in any of the companies mentioned, and you can view his Fool profile here.

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Campbell's Not So Hot

By W.D. Crotty

Is it me, or were this morning's results out of Campbell Soup(NYSE: CPB) about as opaque as its creamy mushroom soup? Let's try for some clarity.

For the third quarter, earnings came in at $0.34 a share, up from $0.31 a year ago. Umm, that's good. Then there is a $0.02 gain from a class action settlement. Umm, that's OK. Finally, there is guidance for next quarter of $0.17 a share, down from $0.18 a year ago (though this year's quarter is a week shorter). Umm, good? Not really. That still adds up to growth of just 4% on the year.

CEO Douglas Conant identified the problem: "... we must address the decline in our operating margins." That's right. Operating margins declined from 17.6% to 15.2%.

Problems are clearly evident at North America Soup and Away From Home -- the largest of the company's four segments. Sales declined 4% from last year, and the earnings contribution fell a startling 23%. It gets worse when you consider that promotional spending was actually up.

If you're thinking, "But the company is diversified," consider this: North America Soup accounts for 35% of sales but a full 45% of operating income. Biscuits & Confection and International account for 47% of sales combined but a meager 9.5% of operating earnings. Diversification is there -- but the margins beyond soup are far from yummy.

To be fair, while those 15.2% operating margins are declining at Campbell's, they marginally exceed those at H.J. Heinz(NYSE: HNZ). It's also fair to point out, however, that the 18% margins enjoyed by General Mills(NYSE: GIS) and Kraft(NYSE: KFT) make clear that CEO Conant is right on when he says there are improvements to be made.

Meanwhile, the stock has been something of a laggard, yet trades at 16.5 times 2004 earnings. And while it does yield 2.5% -- in other words, creeping into Motley Fool Income Investor territory -- analysts expect earnings growth of just 6% for fiscal year 2005. Put it all together and Campbell's is lukewarm, at best.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.

Di scussion Board of the Day: Boring Stocks

Do sleepy companies provide a better night's sleep? Can you love the unloved? What makes a stock truly boring, yet still a compelling investment? All this and more -- in the Boring Stocks discussion board. Only on

McDonald's: Dinner and a Movie

By Alyce Lomax (TMF Lomax)

Soon, a trip to your neighborhood McDonald's(NYSE: MCD) might include picking up a new release to pop into the DVD player for the evening's entertainment. According to USA Today, the fast food giant is continuing to test kiosk DVD rentals in all its Denver stores.

McDonald's has already been testing locations in Las Vegas and the Washington area, which the article described as having had a "huge response," leading to this new test.

We know that McDonald's has been putting the gold back into the Golden Arches. A lot of the success has had to do with a new flexibility on the menu, including healthier options like salads to complement the traditional Big Mac, and sacking the Super Size.

However, it's no secret that McDonald's is trying to increase reasons to stop in, principally through entertainment and tech. We recently reported that the company is expanding its Wi-Fi presence, as well as considering music downloads.

According to the article, the DVD rentals wouldn't be intended to make McDonald's money -- they'd be more of a play for the patronage of busy families who don't have time to make stop after stop after stop in the evenings.

If this underlines anything, it's the pain of stand-alone video stores like Viacom's(NYSE: VIA)Blockbuster(NYSE: BBI) and Hollywood Entertainment(Nasdaq: HLYW). (One could argue that as soon as the compact and easily portable DVD hit the scene, it was probably time to foresee change.)

After all, Netflix(Nasdaq: NFLX) took the movie rental industry and turned it on its ear by offering a flat monthly charge with no late fees and a mail-order method -- something that would not have been feasible with clunky, bulky, and easily breakable VHS tapes.

However, Netflix may find its chief differentiator is to keep true movie aficionados happy through its wider selection than the corner video store offers. USA Today claims the top 30 DVD rentals in video stores comprise 80% of video rentals, which is exactly what McDonald's would offer.

Therefore, McDonald's kiosks could hit Blockbuster and Hollywood where it hurts. McDonald's has 30,000 locations and an estimated 47 million customers daily. Nobody has yet come up with a way to offer dinner and a movie, condensed and at home, and everybody knows our society is all about convenience.

Meanwhile, the flicks can be dropped off at any McDonald's location the next day. And as was pointed out by one of the denizens of the McDonald's discussion board, who can resist a quick snack, a cold beverage, or a sundae upon return? Mickey D's could be on to something here.

Alyce Lomax does not own shares of any of the companies mentioned.

Qu ote of Note

"Consistency is the last refuge of the unimaginative." -- Oscar Wilde

Mo re on Today

Bob Bobala shows how dividend investing offers a way to have your cake and eat it, too.... Bill Mann says if you want to learn about companies and their prospects, watch 'em. Find out more in Forget the Numbers!

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