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In today's Motley Fool Take:
- OracleSoft a Go?
- Discussion Board of the Day: 77's House of Foolish Pigskin
- Lessons for Airlines
- Quote of Note
- Defense for Your Portfolio
- More on Fool.com Today
OracleSoft a Go?
The saga continues. Late yesterday, a federal judge ruled that Oracle
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
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 Fool.com.
Lessons for Airlines
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
In my opinion, the airline industry is currently going through the same evolution. The announcement this week that Continental
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
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
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
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
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 Amazon.com
The following Takes feature other P&G topics:
Fool contributor Steven Mallas owns none of the companies mentioned.
More on Fool.com Today
Emotion is part of the investing game and can be hard to master when a favorite company falls on hard times, Zeke Ashton says in When Good Companies Get Bad Breaks.... Where Are The Superinvestors? Whitney Tilson will tell you.... Crystal balls are so much cooler when the screen is wide, Rick Munarriz says in 3 Box-Office Predictions.
In other news:
- Insurers Eye Ivan the Terrible
- Jos. A. Bank Sews Up Profit
- Were You Ready for Some Football?
- Nucor's Fission
For a list of all our stories from today, see our Today's Headlines page.