Last month we launched a brand-new newsletter called Motley Fool Inside Value. If you don't consider value stocks for your portfolio, today guest writer Chuck Saletta has some reasons you should. If your interest is piqued, you can always take a free trial to Inside Value for more ideas.

In today's Motley Fool Take:

OracleSoft a Go?


Alyce Lomax (TMF Lomax)

The saga continues. Late yesterday, a federal judge ruled that Oracle(Nasdaq: ORCL) can pursue its hostile takeover of PeopleSoft(Nasdaq: PSFT), a deal with a $7.7 billion price tag. (Much thanks to Fool contributor Tim Beyers for coining the term "OracleSoft" in this informative piece in March, seeing how I have taken the liberty of swiping the nickname for my headline.) Is smooth sailing ahead for the takeover now? Not a chance.

At one time, it seemed doubtful that the U.S. courts would let this hostile takeover proceed. Now that Chief Judge Vaughn Walker has shot down the Justice Department, perhaps the best advice is to remember that Oracle still has plenty of hurdles ahead, including possible scrutiny from the European Union. (And history has shown us that the European Commission can be one tough customer when it comes to U.S. companies and antitrust concerns.)

More thought can be given regarding further consolidation in the industry, which Tim predicted when he asked whether Larry Ellison had gone crazy, given his vows to eye even more acquisitions. It's being bandied about that this ruling clears the way for big fish such as Oracle, IBM(NYSE: IBM), and SAP(NYSE: SAP) to swallow up the little guys in the space.

As much as this might be important to the industry, setting a precedent for consolidation, recently Tim discussed how little this particular courtroom victory would mean. He pointed out that there's still PeopleSoft's poison pill to worry about, though some suspect that yesterday's ruling could put some additional pressure on the company's leader, Craig Conway, to play ball. Given the last 15 months of fighting words, to me, that seems unlikely.

Meanwhile, what additional damage is being done? PeopleSoft's letter to employees today (many thanks to zoningfool on our Oracle board, who supplied the text of the letter that was filed with PeopleSoft proxy materials with the Securities and Exchange Commission last night) makes one imagine the rancor with which PeopleSoft's employees must view Ellison & Co. If and when the PeopleSoft takeover occurs, will that make for good business?

While the entire letter is a good read for investors, its highlights include one connected to the upcoming trial against Oracle in November: "During the course of the recent antitrust trial, internal Oracle documents came to light demonstrating that Oracle's strategy was as we believed all along -- to create confusion and let PeopleSoft 'twist in the wind.' " No wonder Fool contributor Tom Taulli compared Oracle's actions with Sun Tzu's The Art of War.

Despite what may seem good reason to believe that the worst is over, hold on to your hats. There's still plenty of drama in store, and for now, it seems likely that this situation is going to drag on... and on.

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

Discussion Board of the Day: 77's House of Foolish Pigskin

Are you ready for some football? How will your favorite team fare this year? Which rookies will step up and make a difference for your fantasy football team? All this and more in the 77's House of Foolish Pigskin discussion board. Only on

Lessons for Airlines


Salim Haji

As I first wrote in March of this year, I have a clear and simple perspective on the airline industry: It's a business that is commoditizing. When commoditization happens to an industry, the product in question (in this case, a seat on an airplane) goes from being a differentiated, branded product to a commodity where price becomes the primary reason that customers pick one company's product over another.

This is a pattern that has played out in many other industries, including the PC industry. Like airline seats, PCs were once branded, differentiated products sold through high-cost distribution channels. The industry was dominated by the likes of HP(NYSE: HPQ) and IBM(NYSE: IBM), but these incumbents didn't change either quickly or radically enough when the industry began to commoditize. Ultimately, they got crushed by innovative start-ups such as Dell(Nasdaq: DELL) that recognized the commoditization pattern early and built a business model specifically designed to offer low-priced computers direct, either by catalog or online.

In my opinion, the airline industry is currently going through the same evolution. The announcement this week that Continental(NYSE: CAL) and United Airlines were joining other legacy carriers in charging an additional fee for tickets not purchased either online or at airport self-service kiosks is an important step toward commoditization. The move will push increasing numbers of customers to shop online, where price comparisons are easier and differentiation by service or brand loyalty is much more difficult.

In a commodity business, the economics are simple -- the lowest-cost supplier wins. And as Dell proved, it's much easier to create a low-cost structure from scratch than it is to take a high-cost structure and transform it. The recent struggles by legacy carriers to get their cost structures in line with the low-cost carriers illustrate that the pattern of the PC industry is repeating itself with airlines.

Given their bleak prospects, I'm a bit surprised that none of the legacy carriers are attempting a radical strategic remake. One option could be to shrink in size and focus exclusively on the more profitable business travelers. The Boston-New York-Washington shuttle is an example of a niche market segment that is highly profitable. Perhaps a regular, business-class-only red-eye from major West Coast cities to East Coast business centers could be a viable and profitable service for Delta(NYSE: DAL) and its peers. One can imagine a service modeled on transatlantic business class, with flat beds, dinner before the flight and showers and breakfast on arrival. Such a service would be difficult for JetBlue(Nasdaq: JBLU), Southwest(NYSE: LUV) and the other low-cost carriers to attack.

At every new step toward full commoditization of the airline industry -- such as the announcement about ticket fees this week -- the survival of the legacy carriers becomes increasingly at risk. Without some creative, radical strategic change soon, it's just a matter of time before they all run aground.

Fool contributor Salim Haji lives in Denver and does not own shares in any of the companies mentioned.

Quote of Note

"Never confuse movement with action." -- Ernest Hemingway

Defense forYour Portfolio


Steven Mallas

The macroeconomic picture is certainly debatable lately, with various bullish/bearish opinions coming from anywhere and everywhere, all sides seeming equally plausible to one degree or other. Amid such an ambiguous backdrop, investors are bound to see the baleful Wall Street tradition of profit-warning issuances rear its ugly, Grendel-like head. Rite Aid(NYSE: RAD) has tempered its guidance. Coca-Cola Enterprises(NYSE: CCE) has also revised its expected results in a downward trajectory. And even Abercrombie & Fitch(NYSE: ANF) has discovered that it's difficult to remain hip during times of tenuous consumer confidence.

There are always companies, even in dubious market conditions, that don't find the need to alter their projected earnings take. Just when the sky seems it is about to fall and crush the terra firma below it, a sturdy entity such as Procter & Gamble(NYSE: PG) comes along to bring faith back to the individual investor.

P&G issued a release stating that its next quarterly report is going to be just fine. The company remains a believer in its ability to deliver double-digit earnings growth for its fiscal first quarter compared with the same time frame one year ago. Shareholders are looking at an EPS value of approximately $0.72, which would represent a 14% improvement. How sunny delightful is that?

This is precisely why investors should own a big consumer giant or two in a well-diversified portfolio; such confident guidance represents the best definition of "defensive stock" to me. There's no guarantee, of course, that P&G won't be whacked in a severe equities downdraft brought on by a sudden true bear posture, but holding such a stock during times of questionable market direction makes sense and tends to bolster an investment program.

Several cliches can be trotted out to support this kind of defense for your portfolio, such as "blue-chip dividend payers fare better when the grizzlies are out of hibernation" and "people still need to buy toothpaste and laundry detergent" -- pick your favorite. There is merit to these aphorisms, and I think individuals who are in love with stocks such as AMZN) and Yahoo!(Nasdaq: YHOO) should keep in mind that the search for all-out growth tied to newer-economy concerns needs to be balanced with established, older-economy instruments even if they tend to be less exciting in nature.

The following Takes feature other P&G topics:

Fool contributor Steven Mallas owns none of the companies mentioned.

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