Bidding for a record sixth-straight win in the Tour de France, Lance Armstrong took the overall lead for the first time today in cycling's biggest event. Rain couldn't slow down Armstrong's squad as it averaged 32 miles per hour, the third-fastest time in the history of the Tour de France. The race ends in Paris on July 25.

In today's Motley Fool Take:

All Hail Microsoft's Ballmer


Bill Mann (TMF Otter)

There may be no company that brings up more extreme emotions than Microsoft(Nasdaq: MSFT). The Apple(Nasdaq: AAPL) people cringe. Oracle(Nasdaq: ORCL) seethes. The EU starts to salivate. When a video clip of Steve Ballmer dancing around and hollering at a company event began to race around the Internet in 2002 (yeah, you know the one), the pleasure people felt watching it wasn't just because a pudgy guy looked a little ridiculous; they liked it because it was a pudgy Microsoft guy who looked ridiculous. Schadenfreude, pure and simple.

But for whatever competitive fear Microsoft strikes in the hearts of competitors, whatever bullying tactics it uses to cow regulators, suppliers, legislators, church choirs, or whatever else, Microsoft is a leader. Microsoft's actions provide plenty of cover for other companies. Big stock options packages? Microsoft paved the way. Hoarding cash? Microsoft could buy a small island out of its checking account. Like Maui.*

Many point to Microsoft's cash and state that it gives the company plenty of options. But as we've pointed out many times before, corporate cash isn't company money: it's shareholder money. If the company doesn't have a good use for that money, it should return it to shareholders in one form or another. The cashmongers like Microsoft and Cisco(Nasdaq: CSCO) aren't really doing their shareholders any favors by keeping umpteen billions of scratch lying around idle. These aren't investment companies.

Yesterday Microsoft CEO Ballmer released an open letter to employees noting that the company would be undertaking a $1 billion cost-cutting program, eliminating some employee benefits and changing how it sourced other things. The reality is that the company's expenses had grown over the last three years faster than its income, and Ballmer has elected to address cost issues now while the company can do them leisurely rather than waiting for a crisis.

Naturally, some employees grumble about the loss of some vaunted perks. However, it is unlikely that Microsoft's lack of stock price appreciation is lost on many of them. Hot towels in the company gymnasiums are nice. The rising stock price associated with a firmer bottom line and more cash generation is better.

Ballmer noted in the letter that some employees had suggested the company dip into its $56 billion to keep certain perks. Ballmer rejected this, noting that this money should go to the benefit of shareholders, stating, "we need to either invest in new opportunities or return it to them." The company is expected to announce within the month a plan to do the latter, through an increased dividend or a special disbursement, share buyback, or combination.

This is great. For while the special interest of employees is to spend a little more to keep things as they were, the interest of all Microsoft shareholders, including those employees, is for the company to generate extraordinary amounts of cash and to do the best thing it possibly can with that money. This doesn't mean shareholders should expect Microsoft employees to prepare for a Spartan existence: the benefits in Redmond remain exceptional, and are compensation for hard, profitable work. The key word, though, is profitable. Steve Ballmer recognizes his company is in business to make a profit, and if adjustments must be made to maximize its ability to do so, he's gonna.

I hope to see other companies that are treating their cash assets in less than ideal fashion follow Microsoft's lead.

* Yes, I am aware Microsoft couldn't actually afford Maui.

Bill Mann owns none of the companies mentioned in this story. It looks like a payoff is in store for Microsoft shareholders. Want to know what other companies generate cash for their owners? Try a free trial of Mathew Emmert's Income Investor .

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Software Meat Eaters


Tom Taulli

If Chinese philosopher Sun Tzu were transported from 500 B.C. to 2004 A.D., he would probably be a high-paid management guru for the software industry. On his lecture circuit, he would quote such strategies from his best-selling book, The Art of Execution: "Software is a matter of life and death. First, you need to attack your competitor with a sudden all-cash hostile takeover. If this is rebuked, then create disorder by dragging your competitor into the American court system."

This is basically Oracle's(Nasdaq: ORCL) business strategy, and it is working perfectly, as evidenced today by PeopleSoft's(Nasdaq: PSFT)warning for its second-quarter sales and earnings. According to PeopleSoft's management, Oracle's hostile bid and antitrust lawsuit is generating bad PR for the firm, which has had "substantial" adverse impact on the company's business.

While Wall Street consensus was for $0.21 a share on $689.3 million in revenues, PeopleSoft indicated that earnings will range between $0.13 and $0.15, with revenues from $655 million to $665 million.

Antitrust trials are costly and time-consuming. Take Lawson(Nasdaq: LWSN), which is an enterprise software company and on the target list for Oracle CEO Larry Ellison. Last quarter, management said that the firm experienced customer pushback because of the trial.

Oracle, on the other hand, does not have to worry about such things. Rather, it has billions of cash on its balance sheet earning a measly amount of interest. Why not use the hoard to blitzkrieg the competition?

True, Ellison has always been a meat eater in terms of dealing with his competitors. But, his hostile takeover attempt and massive fight in the courtroom are signs that the enterprise software market is changing fundamentally. That is, it's not a growth story any more.

So far this week, there have been a variety of major warnings from software companies, such as Veritas(Nasdaq: VRTS) and JDA Software(Nasdaq: JDAS).

Yesterday, we also got the 4,900-word missive from Microsoft(Nasdaq: MSFT) CEO Steve Ballmer, who announced $1 billion in cost cuts and rallied the troops to win more business. Ballmer also warned against new disruptive technologies, such as Linux. Yes, enterprise software developers worry about customer resistance and upstarts such as CRM) and RedHat(Nasdaq: RHAT).

Many pundits were puzzled when Ellison decided to fight the antitrust suit against the U.S. government. Wouldn't he lose? Of course not. PeopleSoft is the loser.

Sun Tzu would be proud.

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.

Discussion Board of the Day: Oil and Gas

Spanish oil and gas company Repsol YPF(NYSE: REP) is now drilling for oil off the coast of Cuba. Discovery of large energy reserves would be a major coup for Repsol and a big victory for cash-strapped Fidel Castro, which is why U.S. companies are prohibited from exploring in Cuba. What's your opinion? Should we allow U.S. companies to drill for oil off Cuba? Discuss the Oil and Gas industry with other Fools.

U.S. Carmakers Sweat Sales


Seth Jayson

It wasn't too long ago that we were announcing that car sales at GM(NYSE: GM) and DaimlerChrysler(NYSE: DCX)were on the rise. At GM, for instance, May truck sales were up 11%. That looked pretty impressive given that gas prices were high enough to induce unprecedented whining by politicians and pundits and even -- prepare to be shocked -- alternative consumer behaviors.

The only May laggard was Ford(NYSE: F), which turned in a dismal 3.1% decrease. Perhaps the venerable automaker was just ahead of its time, because, despite rosy late-June predictions, that month saw an 8% slump, but that was just half the 15% pothole that GM hit. (DaimlerChrysler was just above flat for the month.)

Given results like that, it may be no surprise that Ford and GM have returned to costly giveaways, like the 0% financing, that have been helping to keep them afloat over the past few years. Despite record-breaking incentives in June, foreign competitors like Toyota(NYSE: TM), Honda(NYSE: HMC), and Nissan(Nasdaq: NSANY) turned in robust sales and snatched yet more business from U.S. firms.

If there's one thing domestic carmakers hate, it's losing market share to foreign competitors. If there's one thing shareholders hate -- or should hate -- it's losing margins. Unfortunately, that is exactly what happens when these incentive plans pay out up to $5,000 per SUV in cash and take away the lucrative financing business that have, in the recent past, helped juice earnings.

Frankly, none of the U.S. carmakers, not even GM with its sub-10 P/E ratio, looks like an attractive investment to this Fool. They already sport razor-thin operating margins -- a good 7% lower than Toyota's. If they need to dig deeper in their own pockets just to hang onto their share of the market, it looks like they're not addressing the real problem, whatever that might be.

For more Fool coverage of the auto industry:

Fool contributor and conflicted car hater Seth Jayson saves several thousand dollars a year for his investment accounts by riding a bike instead of driving. He has no position in any company mentioned. View his Fool profile here.

Quote of Note

"Everyone thinks of changing the world, but no one thinks of changing himself." -- Leo Tolstoy

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