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
- Shameless Plug: Quarterlife Conference
- Software Meat Eaters
- Discussion Board of the Day: Oil and Gas
- U.S. Carmakers Sweat Sales
- Quote of Note
- More on Fool.com Today
All Hail Microsoft's Ballmer
There may be no company that brings up more extreme emotions than Microsoft
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
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 .
Shameless Plug: Quarterlife Conference
Are you a quarterlifer in need of financial advice? If so, join Fool co-founder Tom Gardner and senior writer Dayana Yochim for a lively workshop on paying down post-college debt, avoiding financial pitfalls, and investing for the future.
The workshop is part of the Quarterlife Conference, which will meet Aug. 20-22 at the Marriott's Georgetown University Conference Center in Washington, D.C. For details, visit the event website.
Software Meat Eaters
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
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
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.
Yesterday, we also got the 4,900-word missive from Microsoft
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
U.S. Carmakers Sweat Sales
It wasn't too long ago that we were announcing that car sales at GM
The only May laggard was Ford
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
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:
- Think that an SUV is safe? Think again.
- Why 0% financing is no great bargain.
- Are hybrids the answer?
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
More on Fool.com Today
In 2 Small Caps You Can Understand, James Early takes a look at two small caps with clear business models.... Bill Mann's Nortel: You Must be Joking explains how Nortel cooked the books even as it investigated itself for, well, cooking the books.... In A Clever Growth Strategy, Cam Goodwin asks if Accredo's acquisition strategy is the best way to grow.... Middle East reforms could present an opportunity for a few risk-taking companies, says Brian Gorman in Middle East Payoff?
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- Four-Dimensional Stocks
- A New Breed of Software Company
- The Best Hotels for Your Money
For a list of all our stories from today, see our Today's Headlines page.