As Gulf Coast residents continued their clean up after Hurricane Ivan left town, others farther north had to deal with the storm's rain and the threat of flooding and tornadoes. So far, Ivan is reportedly responsible for at least 28 deaths in the U.S., making it the deadliest hurricane since Floyd in 1999. Early damage tallies have put Ivan's destruction at a range of $2 billion to $7 billion.
Hopefully, tropical storm Jeanne, which has been fluctuating between tropical storm and hurricane status, will not bring the fury that Ivan did should it reach these shores. We'll be watching the Bahamas and Caribbean this weekend with a nervous eye.
In today's Motley Fool Take:
- Is Ford Out of the Ditch?
- Discussion Board of the Day: Great Movies
- Qualcomm's Hazy Visibility
- Quote of Note
- EDS Is Grounded
- No Telling With Nortel
- More on Fool.com Today
Is Ford Out of the Ditch?
Let the record show that not every company these days is coming out with an earnings warning. Some of them are clever enough to tease investors for months with low expectations, then release good-looking mediocrity at a later date. Ford
Those naive enough to believe that a single company can move the entire market are thanking the firm for putting tire tracks over the reams of pessimistic headlines based on recent recantations from Coca-Cola
Today's announcement speaks of third-quarter earnings, and by raising the target to a range of $0.10 to $0.15 per share, Ford is merely meeting the expectations analysts have set for quite some time. True, we at the Fool usually try not to pay too much attention to what analysts have to say, but when the legions of veteran Ford watchers expect a dime and the company's shooting for a nickel, it's probably safe to assume that the firm is lowballing so it can look like a hero further down the road. Hence today's announcement.
The seals may be barking and clapping their flippers together for now, but you're not fooling (little f) many of us, Ford. We know you and your peers do pretty good business as bankers, but what's going to happen if U.S. citizens run out of home equity to borrow against? Isn't it possible that most people already have enough new cars? Will oil shocks dampen your SUV sales? Never happen? Please. All that financing is making you look a bit desperate. And that ought to make investors sweat, too.
Seth Jayson loves his little Ford truck, especially when it's parked and he's riding his bike instead. At the time of publication, he had positions in no firm mentioned. View his stock holdings and Fool profile here.
Discussion Board of the Day: Great Movies
Which films are you looking to rent these days? What's in your online rental queue? Is your favorite flick of all time even out on DVD yet? All this and more in the Great Movies discussion board. Only on Fool.com.
Qualcomm's Hazy Visibility
Wireless technology kingpin Qualcomm
The news was refreshing on one front -- it settled some nerves in the market that Qualcomm would follow Texas Instrument's
But Qualcomm's stock took a hard hit this morning, falling as much as 7% at the opening bell. What really got the market in a tizzy was a statement from Qualcomm about royalty recognition: It may change how it books ongoing royalty from its licensees. The change could impact its reported fourth-quarter income by as much as $298 million.
The $298 million slug in the chest would come if Qualcomm chose to convert all of its licensees' income to an as-reported basis of accounting rather than the current method of project and adjust. Currently, Qualcomm estimates earned royalty income from licensees' sales in the current quarter and then adjusts this amount three months later when the licensees actually report their past-quarter sales to Qualcomm.
The company is now questioning its ability to accurately project sales of some of its licensees. Its press release gave several reasons for this, but it ultimately boils down to this: Qualcomm does not own the code division multiple access (CDMA) chipset market anymore, and it has less visibility in the wideband CDMA market.
In the past, Qualcomm sold almost all the CDMA chips to vendors making mobile phones. This gave it great visibility into how many handsets its customers were planning to sell and actually selling, so it could fairly accurately predict how much royalty it would earn. With many other vendors such as Samsung now producing its own CDMA and WCDMA chipsets, Qualcomm has less visibility into how many phones are being made and sold with its technology inside.
Ultimately, the potential change doesn't amount to a hill of beans -- the company still commands the lead in CDMA technology, and the level of royalty has not changed. Smart investors have known for a long time now that Qualcomm will be giving up its near monopoly of the CDMA chip market in return for increased royalty on higher product volumes from suppliers. It's a natural development of a maturing market, one that Qualcomm is still well positioned to capitalize on.
Fool contributor Dave Mock likes to project how many millions he'll make in future quarters, but he always seems to come up short. He owns no shares of companies mentioned here, but he has authored a book on the company, The Qualcomm Equation.
Quote of Note
"You can't wait for inspiration. You have to go after it with a club." -- Jack London
EDS Is Grounded
Man, have the skies turned unfriendly. In the last three weeks alone we've heard that United and Delta
Add another casualty to the list, only this one -- wait for it -- is a landlubber. Thursday, services firm EDS
EDS reported in a filing with the Securities and Exchange Commission that US Airways had an unpaid bill of more than $27 million at the time of its bankruptcy filing. That doesn't include more than $16 million in other assets such as equipment related to its work with the airline. EDS has not said how much it will set aside to cover bad debt from the US Airways contract, but investors should expect the charge to be close to what it is owed.
Will there be more collateral damage from the airline industry meltdown? That's hard to predict, but it's worth noting that EDS hasn't exactly been flying at cruising altitude recently. According to published reports, the services giant could let go as many as 20,000 workers in an effort to cut expenses by 20% before 2006. And in July, the firm cut its dividend and had its credit rating reduced to junk status. With a record like that, yesterday's news could indicate nothing more than poor management.
Still, Foolish caution probably demands investors take a peek to see whether their holdings include a major airline creditor. After all, the storm clouds over the industry aren't likely to clear anytime soon.
For more Fool coverage of airlines:
- Believe it or not, there is good news among smaller airlines: Hawaiian Holdings
(AMEX: HA), parent of Hawaiian Airlines, will soon make your vacation hassle-free; and World Airways' (Nasdaq: WLDA)billion-dollar tease can't disguise the fact that the stock may be a bargain.
- Radical change appears to be the only way to save the major carriers. As it is, several big airlines could still fail.
- The parade of storms through the southeastern U.S. just might mean it's time to buy Motley Fool Stock Advisor pick JetBlue
No Telling With Nortel
The hits just keep on coming at Nortel
This comes on the tail of a warning at the end of July that the company was not going to meet its gross profit margin goals of the mid-40% range and that its restatement would wipe away more than $730 million in previously reported profits. There were a few other things that I noted several months ago:
- Nortel is currently working on restatements of its financial statements from 2001 to the present.
- Nortel is under investigation by the Securities and Exchange Commission, the U.S. Justice Department, and the Ontario Securities Commission.
- Nortel is facing criminal investigations in Texas, while Canadian authorities consider similar action.
- Its reported earnings from 2003 will be halved after the restatement.
- This is still at its essence a telecommunications equipment company, and telecommunications hasn't turned around.
- Nortel is in technical default with some of its creditors.
This latest warning is a very, very bad sign. Previously, the company had expected that its overall profitability would drop but that its equipment mix would help it generate more customer wins. Now it's failing to meet profit goals, and other telecommunications equipment companies are growing faster, and as Nortel's CEO William Owens noted recently, Nortel must now contend with lower-priced competition from China from companies such as Huawei, where no such competition had existed in the networking sector in the past.
The company noted that it now expects second-quarter revenue to be in the range of $2.6 billion, but it did not give a specific target for the third quarter. What hurts here is that shareholders had been able to talk their way past the restatements, the executive firings, the turmoil, and the restructuring because of a belief that Nortel was a growth company with a superior core line of products, especially in the wireless sector. As long as Nortel was winning customers faster than Lucent
Fore more Foolish coverage, see:
- Enticed By Cheap, Cheap Nortel?, by Ben McClure
- Feeling Nortel's Pain, by W.D. Crotty
- Nortel's Big What-If, by Ben McClure
More on Fool.com Today
In Hit 'Em Where They Ain't, Rich Smith offers tips on how to outmaneuver the wizards of Wall Street.... Will the next person to fill Michael Eisner's shoes ask for glass slipper shoehorns or Odor-Eaters? Rick Munarriz wants to know in The Next Big Cheese.... Bankrate keeps its customers -- and advertisers -- coming back for more, Nathan Slaughter learns in The Value of Loyalty.
In other news:
- Doing the Texas Two-Step
- Viacom vs. Blockbuster
- Peering Into "Technical Analysis"
- Cintas Can't Wear Out Success
For a list of all our stories from today, see our Today's Headlines page.