Sometimes a $139.5 million payday just isn't enough to cover the bills. And sometimes pride has a hefty price tag. Whatever the reasons, former New York Stock Exchange Chairman Dick Grasso filed suit today against the NYSE for at least $50 million for breach of contract and defamation of character. Apparently, the value of your character increases with your tax bracket.
In today's Motley Fool Take:
- Schwab's New, Old Chief
- Shameless Plug: IRA Center
- The Marlboro Paradox
- Discussion Board of the Day: Intel
- Margins of Error
- Quote of Note
- What's Wrong Inside Intel?
- More on Fool.com Today
Schwab's New, Old Chief
By Nathan Slaughter
Last month, Fool contributor and former Charles Schwab
During Pottruck's tenure, Schwab was caught in the middle of the brokerage industry, unable to compete on a pricing basis at the low end with online trading firms such as Ameritrade
Though Schwab has scaled back the work force, cut costs, reduced commissions, and slowly transitioned into more of a full-service brokerage firm -- moves that I believe will eventually get the firm back on track -- the restructuring has yet to turn the tide or salvage Pottruck's fortunes.
Aside from the management reshuffling, Schwab also released disappointing second-quarter results this morning. Skittish investors caused daily average revenue trades to fall 20% lower, resulting in a 10% drop in net income to $113 million, or a penny shy of $0.09 estimates. However, in a testament to Pottruck's efforts to diversify revenues away from market-dependent trading revenues, asset management fees and other non-trading sources of income reached record highs. Furthermore, at the midway point of the year, Schwab is well ahead of last year's pace: Earnings of $274 million ($0.20) are 39% higher than the $197 million earned at this time last year, on a 20% rise in revenues to $2.3 billion.
Pottruck has made a few costly mistakes, such as failing to properly integrate U.S. Trust and needlessly overpaying for Soundview Technology (which Schwab is already looking to unload at a loss after only eight months), but probably deserved better after a 20-year career at the company. However, the harsh reality is that management is just as result-driven as in football, and as the coach of a losing team, all blame has fallen squarely on his shoulders. Charles Schwab the man has a unique opportunity to resurrect Charles Schwab the company, something that can't happen soon enough for shareholders, clients, and employees alike.
Fool contributor Nathan Slaughter owns none of the companies mentioned.
Shameless Plug: IRA Center
You probably want to retire. You also probably want to pay as few taxes as possible. If so, then an Individual Retirement Account is for you. Weigh your options in our IRA Center. And while you're there, compare brokers' IRA fees, too. It's one-stop shopping for busy folks like you.
The Marlboro Paradox
By Alyce Lomax (TMF Lomax)
Despite what can be seen as a downright difficult climate for its core offering, sinful tobacco, Altria Group
Altria reported earnings of $2.63 billion, or $1.27 per share, and revenues increased 10% to $23.01 billion. Current earnings included a $0.13 per share charge, partly because of the restructuring of Kraft
While overseas shipments rose, there were a few international trouble spots. The company saw double-digit volume declines in France, Germany, and Japan as the overall markets dipped because of variables such as What istax-driven price increases on tobacco products.
Not so long ago, Motley Fool Income Investor analyst Mathew Emmert explored the ins and outs of investing in sin. Though widely recognized sin stocks such as Altria and its archrival R.J. Reynolds
Indeed, for the tobacco companies, the risks seem to be increasing all the time. Cigarettes are increasingly prohibitively priced, giving good reason for smokers to quit, cut down, or go generic. Public opinion continues to skew extremely negatively towards the habit; R.J. Reynolds' once-controversial Joe Camel is certainly less of a lure. Every time you turn around, there's another city that has banned smoking in bars and restaurants -- sometimes, even out on the public street.
And though Fool Seth Jayson quite rightly bashed the wisdom of New York's law requiring "safer cigarettes" that stop burning if unattended, it's a law that could have repercussions on the industry at large. Not only could it make the act of smoking less satisfying for smokers, but it could also open up the question of why these "safer cigarettes" aren't sold across the country.
Altria stood by its expectation to report earnings of $4.50 to $4.60 per share for the year. Despite the decent quarter, investors nudged shares down. Trading at just 11 times forward earnings, shares of Altria sound like a bargain -- but considering the trends, investing in tobacco companies remains a high-risk habit, a point of view that, obviously, many investors subscribe to. Though there may always be people who will choose to smoke, given trends, the numbers seem destined to dwindle with every year.
Alyce Lomax does not own shares of any of the companies mentioned.
Discussion Board of the Day: Intel
What do you think of Intel producing wider net margins than anticipated? With IBM and 3M reporting similar news, could this be the trend that will move the market higher? Share your views with other Fools on our Intel discussion board.
Margins of Error
By Rick Aristotle Munarriz (TMF Edible)
Give up? Well, all three companies reported quarterly earnings over the pastfewdays. All three companies met or exceeded their profit projections. All three stocks got hammered because the companies failed to live up to their revenue targets.
Here is where I think the market misses the big picture. What is the implication behind a company nailing its bottom-line expectations while falling short on the top? Yes, it means that the company produced net margins that were better than Wall Street was banking on. So why isn't that rewarded?
Profit margins matter. It's why we can get more excited about a company with rich margins when it grows sales -- we know that much more of the incremental dollar will work its way down to the bottom line unscathed.
Naturally, companies can manipulate sales and earnings to some extent. IBM can work an innocent smile, but we know how the company can get its hands dirty when it wants to. But if we take a look at the performance of all three companies in sum, which makes it easier to laugh off any conspiracies, you see outfits that are milking that revenue dollar even more efficiently. As the top line continues to improve -- and it should -- it will mean even richer rewards on the earnings front.
That's what ultimately matters. Well, that and that cool adhesive chip.
Longtime Fool contributor Rick Munarriz prefers margins over butter on his toast. He does not own shares in any of the companies mentioned in this story.
Quote of Note
"An economist is a man who states the obvious in terms of the incomprehensible." -- Alfred A. Knopf
What's Wrong Inside Intel?
By Tim Beyers
A recent portfolio review reminded me that I don't invest in enough large-cap stocks. What can I say? I like the small guys, such as beer-and-wings purveyor Buffalo Wild Wings
Of course, every portfolio needs ballast and, over the weekend, I went looking for some. During the process I found myself finally starting to like Intel
But then came yesterday's Wall Street Journal report that a design flaw will cause Intel to delay for several months its Alviso chipset for laptop computers. Yeesh.
The setback is one in a series of recent missteps by Intel. For example, last month it had to recall some chips because of a manufacturing flaw, resulting in a $38 million charge to earnings. Alviso, which was to ship to computer makers such as Dell
This is also the second time this year Intel has delayed new chips, the first coming at the beginning of the year with its Pentium M notebook processor. Notably, Alviso is designed to enhance the graphics processing features of the Pentium M.
These should be great times for Intel. Chip shipments were way up again in the second quarter after a blowout first quarter. Further, a deal has been brokered that will remove a crippling tax on American suppliers of chips to China. And other big chip makers are turning in big profits, including rival Advanced Micro Devices
Should you be concerned? Yeah, maybe. After all, it's usually when the pundits start blowing off bad news that the wheels finally come off. And investors and pundits alike are treating this news like I used to treat earthquakes when I lived in Los Angeles. I didn't care about the mini roller coasters till a big one threw me out of bed and shook our house to its very core. Call me crazy, but when it comes to Intel, I don't want to get caught napping.
For more Fool news on Intel, AMD, and the rest of the chip industry:
- Will Intel's missteps finally allow Dell and AMD to get together?
- Intel couldn't beat its own earnings guidance, and investors noticed.
- China's chip tax finally gets lifted.
Fool contributor Tim Beyers wishes Intel would get back on track. He'd really like to add the company to his portfolio, which includes shares in Buffalo Wild Wings. You can view Tim's Fool profile here.
More on Fool.com Today
In The Case Against Index Funds, Nathan Slaughter busts the myths and tells the truth about investing in index funds.... Salim Haji takes a close look at the average American's net worth and finds cause for concern in Consuming Ourselves.
In other news:
For a list of all our stories from today, see our Today's Headlines page.