The U.S. stock markets will be closed this Friday during a national day of mourning for former President Ronald Reagan. On that day, Reagan will be eulogized at the National Cathedral in Washington, D.C., in the morning and then buried at sunset in a spot overlooking the Pacific Ocean at his presidential library.

In today's Motley Fool Take:

Ho me Depot Eyes China


Seth Jayson

At first, you may not be able to decide if this is just a crazy idea or an idea so crazy that it just might work. Home Depot(NYSE: HD) announced today that it's got its eye on China.

In a brief press release, the firm named Bill E. Patterson to head the business development operation. Chairman, President, and CEO Bob Nardelli said, "Based on our success in expanding to international markets, I am confident of the portability of our model to China."

I don't know that I'd be quite so smug. To date, Home Depot's "successful" international operations are found in Canada and Mexico. Consumers in those two countries behave an awful lot like we do here in the U.S. Things are likely to be much different in China.

Both the Chinese citizen and the Chinese landscape lack a lot of the commercial resources that we take for granted on this continent, like the ubiquitous giant car or relatively quick access to the wide arteries that feed strip malls and megastores. And while the Chinese appetite for things like cars and cell phones is pretty well established, you have to wonder if they'll snap up plywood and drywall with the same enthusiasm.

That doesn't mean that the big-box concept is impossible in China. Wal-Mart(NYSE: WMT), for instance, runs a few dozen Supercenters and Sam's Club stores, proving that the concept can succeed.

Since there are no firm plans for the number of stores, or the format they will take, Home Depot will undoubtedly work hard to figure out exactly what will work for its Chinese operations. I'm betting shoppers on that side of the Pacific will see fewer two-by-fours and lawn tractors and a lot more paint, fixtures, and other finishing products. Either way, this is a development worth watching. If Home Depot can score a hit in China, shareholders will be richly rewarded.

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Fool contributor and frequent thumb hammerer Seth Jayson thinks he personally contributed about 10% of Home Depot's revenues last quarter, but he owns no company mentioned. View his Fool profile here.

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Shareholder Dilution Delusions


Chris Mallon

Investors generally consider stock buybacks an effective tool for enhancing shareholder value because they reduce outstanding shares, increasing the ownership percentage of existing stockholders. That's great in theory, but as Rich Smith points out in his Symantec(Nasdaq: SYMC) piece, buybacks are often used to disdainfully mask the dilutive effects of stock option grants, and quietly transfer shareholder wealth to employees.

Intel(Nasdaq: INTC) is a perfect example. The chip company's basic share count declined by 234 million shares from 2001 to 2003, a result of $12 billion in stock repurchases. In those three years, Intel bought back a total of 492 million shares at an average price of $24.46, while 237 million options were exercised for an average price of $14.05, including the company's tax benefit. The company also issued 21 million shares associated with acquisitions.

Here's the repurchase breakdown: 234 million shares repurchased for the benefit of stockholders and 237 million shares handed over to employees for a $10.41 loss per share -- a total transfer of $2.5 billion in shareholder wealth to employees. Whatever euphemistic spin management uses to describe this redistribution, it's still a lot of money. Not to mention other issues the company is dealing with related to stock options.

I call attention to Intel only as an example, and don't think for a moment it's the only company that does this. For instance, in 2003 alone, Cisco(Nasdaq: CSCO) transferred $182 million to employees, Oracle(Nasdaq: ORCL) $170 million, and EMC(NYSE: EMC) $41 million. And lest you think only tech companies are guilty of this deceptive practice, even motorcycle company Harley-Davidson(NYSE: HDI) gave away $20 million in shareholder capital to employees in 2003. That may sound like a minor amount, but it's enough to have added $0.06 to the dividend, which is a more appropriate use of excess cash. (If more companies considered this, Mathew Emmert's job might be a little easier over at Motley Fool Income Investor.)

Investors shouldn't be deluded by claims of enhancing shareholder value through stock buybacks. The use of shareholder funds to stem stock option dilution is a real cost, one that can't be found in earnings, operating cash flow, or even free cash flow. So the next time one of your companies proclaims its love of shareholders by announcing a buyback, be skeptical, because if deceptively shifting money from owners to employees enhances shareholder value, you have to wonder what destroying it looks like.

Fool contributorChris Mallongets burned up when he sees management waste shareholder dollars. He owns shares of Harley-Davidson through his private investment partnership.

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McDonald's Stays Warm


Alyce Lomax (TMF Lomax)

Though McDonald's(NYSE: MCD) sales might not outshine last year's turnaround, its comparable sales continued to sizzle, with May clocking in a 7.4% increase. Meanwhile, today an agreement came to light with SBC Communications(NYSE: SBC), through which the fast-food company will install Wi-Fi connections in 6,000 of its stores.

May's increase may be a bit less exciting than the double-digit same-store increase last month, but it's still nothing to complain about. In total, McDonald's sales jumped 10.2% last month.

In separate news reports, there's word that McDonald's has entered into a Wi-Fi connection deal with SBC. Through the agreement, McDonald's customers who also happen to subscribe to the service will be able to bring their laptops and PDAs into the participating restaurants and hook up to the Internet to surf the Web or check email. To put it into perspective, it's not a huge deal, considering that there are a total of 30,000 McDonald's restaurants across the globe.

The move is reminiscent of other novel ways that McDonald's has been trying to attract and retain customers, though, in the past, we've discussed some of the reasons why McDonald's may not be an optimal placement for Wi-Fi. Using a wireless Internet connection to check on important work certainly seems a bit more conducive to customers of quieter, less messy venues, like Starbucks(Nasdaq: SBUX) or Border's(NYSE: BGP). (After all, do fries and mouse clicks really go hand and hand?)

The major beneficiary of the agreement seems to be SBC, which is spreading its Wi-Fi service through consumer channels. In March, it announced a similar deal with United Parcel Service(NYSE: UPS).

Meanwhile, though, McDonald's continues to break out of its high-fat, kid-centric reputation by offering some healthy menu items and different types of entertainment options to attract ever-expanding demographic groups. Many of us are waiting breathlessly to see what the summer -- and the rest of the year -- holds for Mickey D's. Last year's remarkable turnaround certainly will make it tougher for McDonald's to shine this time around, but if May's an indication, healthy customer traffic is still funneling through the Golden Arches.

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

Quote of Note

"I hope that when you're my age you'll be able to say, as I have been able to say: We lived in freedom, we lived lives that were a statement, not an apology." -- former President Ronald Reagan

More on Today

Should we really base an investment's worth on what someone else is willing to pay for it? Mathew Emmert says no, in The Value Proposition.... And Charly Travers shows how you can forecast potential drug sales with just a few simple calculations in Unraveling Biotech Potential.

In other news:

For a list of all our stories from today, see our Today's Headlines page.