Mother Nature is not letting us catch our breath, tossing one name at us after another: Charley, Frances, and Ivan. And now, still wet from Ivan, coastal residents are being alerted to yet another storm moving their way. Hurricane Jeanne is raking the Dominican Republic today, and is expected to move north of Cuba and then along Florida's east coast toward Georgia and South Carolina.

Oil and gas operators in the Gulf of Mexico are only now making their way out to assess damage from Ivan. However, oil prices fell today on word that the hurricane did not do nearly the damage many expected. And, thankfully, Jeanne is not going to be as powerful as Ivan.

That's small consolation to those still picking up the pieces from the earlier storms, however. Hang in there, everyone. Our thoughts and prayers are with you.

In today's Motley Fool Take:

The End of the "Next" Tech Bull?

By

Bill Mann (TMF Otter)



Yep, if you look off into the distance, you can see it. A little bit at a time, we're seeing the end of something that likely should never have started -- the notion that the technology industry was in the midst of some massive rebound, the beginning of the "next bull market."

We've noted that many of the biggest tech companies, such as Hewlett-Packard(NYSE: HPQ), Intel(Nasdaq: INTC), and Cisco(Nasdaq: CSCO), have had spiraling inventories over the last few quarters. Naturally, those who are quite positive on the industry have an explanation: Inventories rise as companies anticipate an increase in sales. This, of course, is correct. A company caught short with insufficient supply in the face of rising demand risks sending its customers off to competitors to fill their orders.

But the risk in rising inventories is that sales do not continue to improve. This has already started happening; in the second half of the year companies such as Intel have stated that customers were delaying orders, and as a result these companies were going to burn off inventory to respond to the "soft spot" in sales. The implication is that the softness in technology spending is short-term in nature, a problem that would work its way through in a quarter or so.

Recent supplier warnings tend to confirm what I had thought all along: It's not the soft patch that is short-lived, it was the spike that was temporary in nature. On Tuesday, integrated circuit manufacturer Xilinx(Nasdaq: XLNX) warned that its guidance was too high and then dropped a bombshell -- in a quarter it had previously set aside to burn off inventory, its days inventory outstanding actually rose substantially to 155 days. For those of you who are playing the home game, that's nearly a half-year's worth of products sitting on the company's shelves. This at a time when the company says sales are down dramatically from its Asian clients because of "excess inventories held by U.S.-based customers."

But who are Xilinx's customers? Well, to start with, another company that warned recently, contract manufacturer Celestica(NYSE: CLS), which also said that its inventories are growing. Celestica's big customers? Cisco and IBM(NYSE: IBM) are among the biggest. Who else is warning? Cypress Semiconductor, Altera, Texas Instruments(NYSE: TXN), and LSI Logic have each made a trip to the confessional as of late. All of these companies have to some degree been ramping up their production in advance of continued improvements in technology sales, either from replacement cycles or from new sales. That they're each sitting on tons of product hoping that the hair ball will clear should be more than a little disconcerting.

Bill Mann owns none of the companies mentioned in this story. He is waiting for prices to drop before he replaces his current PC and is sure that they will do just that. Please check his profile for a list of current holdings.

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Apple's Bitter Success

By

Seth Jayson (TMF Bent)

The worm may have turned for Apple(Nasdaq: AAPL). After years -- decades really -- of instigating, exacerbating, or at least cheering every regulatory swipe at Microsoft(Nasdaq: MSFT), the captains of Cupertino are finally reaping what they've sown: heat from the bureaucrats.

A U.K. consumer protection agency, the Office of Fair Trading (OFT), is reportedly investigating claims that Apple is unfairly charging U.K. customers a substantially higher price for iTunes downloads than it charges customers on the European continent. Brits pay 79p for each song. That comes out to about 1.20 euro, or 20% more than the 0.99-euro price that French and Germans must cough up.

The nonprofit Consumers' Association filed a complaint with the OFT, "urging them to investigate what appears to be anti-competitive and discriminatory behaviour by iTunes against UK consumers."

Wow -- that sounds familiar. Sounds a lot like the same behavior that Apple, along with RealNetworks(Nasdaq: RNWK), assorted other also-rans and, oh, the entire European Union, has been criticizing. But only when it comes from Microsoft, or might possibly come from Microsoft, even though that firm has yet to build any presence, let alone a monopoly, in the music download scene. (In the U.S., its Media Player software actually provides direct links to competing services such as Wal-Mart's(NYSE: WMT), Roxio's(Nasdaq: ROXI) Napster, and Yahoo's(Nasdaq: YHOO) soon-to-be acquired Music Match.)

Getting back to Cupertino's woes, while I'm tempted to sit back, smirk, and ask, "How you like them Apples?" I'm going to have to take the side of reason, and Apple, and tell it like it is: You Brits are way off on this. I've been to London and paid up for a fish and chips. You can't tell me the 100% markup over Caldbeck prices is due to real costs. It's purely a question of demand.

Ever taken economics 101? Here's a refresher. Apple charges the Brits what it thinks they will pay, and a certain number of people -- 5 million in all of Europe, according to some reports -- either shell out or go elsewhere. If consumers don't like the price, they can vote with their pounds, and demand will fall. Unless...

They happen to have purchased an iPod. The iPod, true to Steve Jobs' xenophobic vision, won't play the Microsoft-formatted files available from most of the competition. That means iPod owners are probably stuck downloading from iTunes (or turning to the recent and controversial "hack" from RealNetworks). Now that sounds like a harmful exploitation of a monopoly.

Sure, music lovers could use iTunes to convert the WMA files and clutter up their hard drives with needless dupes. But remember, in the EU, offering consumers a technical remedy as simple as an installation CD is not enough to keep the regulators off your back.

OK, enough playing devil's advocate. Fans of free commerce should be on Apple's side in this dispute. To the Brits on board, I say: If you don't like the price, stop paying it. I guarantee that if you stop buying, Apple will lower the price. To Apple, I say, charge what you think is fair, but watch your back. Now that you're a leader for once, the haters are going to set their sights on you, whether you deserve it or not.

For related Foolishness:

Seth Jayson wonders whether this defense will convince the Appleheads to finally lay off with the angry email. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here. Fool rules are here.

Quote of Note

"Change is the constant, the signal for rebirth, the egg of the phoenix." -- Christina Baldwin, author

Kodak Hopes to Click With IBM

By

Alyce Lomax

Is Eastman Kodak(NYSE: EK) getting close to being picture-perfect? It hasn't been hard for anyone to get the fact that Kodak needs to do some pretty fancy footwork to survive in a world where film and developing have become passé with the amateur photographer.

Today, Eastman Kodak announced it will team up with IBM(NYSE: IBM) to produce image sensors for digital cameras and camera phones, two hot ticket items among the electronics-shopping public. The deal will meld Kodak's image sensor portfolio and IBM's CMOS (complementary metal oxide semiconductor) processing expertise. CMOS imaging chips convert light into digital data and are often found in high-end digital cameras.

This shows that Kodak is stepping more fully into photography's future, as opposed to being mired in its past. Another announcement, released in the wee hours of the night, announced that Kodak will close its Australian plant, where it once cranked out color photographic paper. In August, Kodak purchased National Semiconductor's(NYSE: NSM) imaging business to add to its Image Sensors Solutions unit, a move giving further credence to Kodak's planned entry into the consumer market.

It's not hard to imagine why Kodak wouldn't covet a piece of the camera-phone action. This year, some analysts expect 100 million camera phones to fly off the shelves, versus 20 million digital cameras. The Semiconductor Industry Association says the market for digital cameras is forecast to grow by 27% in 2004. The SIA also sees optoelectronics device sales projected to grow by 37.3 percent to $13.1 billion in 2004 and to $16.9 billion in 2007. Optoelectronics include image sensors used in camera phones.

In addition, there's room for growth in camera phones, considering that many still feature murky picture quality. The next generation of camera phones will bring the photo quality closer to that of digital cameras. If Kodak can get into the action there, that could be quite a boon.

However, before investors get too excited about Kodak's fortunes related to this deal, there's heavy competition to think about. Omnivision(Nasdaq: OVTI), Canon, and Sony(NYSE: SNE) are just a few of the bigger names in the space. Meanwhile, Cypress Semiconductor(NYSE: CY) and Micron Technology(NYSE: MU) recently made acquisitions to help tackle the digital camera market.

Although Kodak trades at what sounds like a low forward P/E of 12, there's still a lack of resolution when it comes to its transition into the digital photography universe. And while Kodak's making moves that aim toward continued viability, it's got plenty of competition that's already looking for the perfect shot.

For more on Kodak, read the following Foolish coverage:

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

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For a list of all our stories from today, see our Today's Headlines page.