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?

By

Seth Jayson (TMF Bent)



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(NYSE: F) looks like one such clever beast.

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(NYSE: KO), Nortel Networks(NYSE: NT), Intel(Nasdaq: INTC), and others. One might even wonder whether our Foolish pessimism about the last few months of sales warnings -- which also came from competitors General Motors(NYSE: GM) and DaimlerChrysler(NYSE: DCX) -- were completely misplaced. I don't think so.

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

By

Dave Mock



Wireless technology kingpin Qualcomm(Nasdaq: QCOM) issued revised guidance today, slightly increasing its expected fourth-quarter revenue and earnings along with full fiscal-year financials. The company stated that the improved outlook gave it confidence that it would hit the high end of -- or just slightly above -- its previous guidance in each area.

The news was refreshing on one front -- it settled some nerves in the market that Qualcomm would follow Texas Instrument's(NYSE: TXN) cue and cite upcoming weakness in semiconductor sales to wireless device makers because of its customers' trimming inventory levels. Instead, it followed Nokia's(NYSE: NOK)upbeat outlook in maintaining that mobile phone sales volumes are still looking up. Qualcomm now sees calendar year 2004 mobile phone sales using its technology to be in the range of 170 million to 176 million units, more than the earlier view of 161 million to 168 million.

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

By

Tim Beyers



Man, have the skies turned unfriendly. In the last three weeks alone we've heard that United and Delta(NYSE: DAL)may fire as many as 13,000 workers, US Airways(Nasdaq: UAIRQ) has gone broke again, Continental(NYSE: CAL) is canceling pension payments, and major carriers are lining up to hike ticket fees.

Add another casualty to the list, only this one -- wait for it -- is a landlubber. Thursday, services firm EDS(NYSE: EDS) said the bankruptcy filing by US Airways could cut earnings by more than one-third, or $0.03, in the third quarter that ends this month. Wall Street estimates had EDS earning $0.08.

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:

Fool contributor Tim Beyers has no ownership interest in any of the companies mentioned, but he has family members who are retired from United Airlines. You can view Tim's Fool profile here.

No Telling With Nortel

By

Bill Mann (TMF Otter)



The hits just keep on coming at Nortel(NYSE: NT), the ever-increasingly less-massive Canadian telecommunications and data networking equipment company. The latest in a long string of successive disappointments comes in the form of a warning from the company that its third-quarter revenues will decline from its second quarter's and that its full year's revenue growth will fall below industry averages.

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(NYSE: LU), Ericsson(Nasdaq: ERICY), and other wireless network providers, this faith in the underlying strength of the company made some sense. But if Nortel is losing market share, this core growth/underlying strength thesis starts to come apart. While Nortel's new management team sports the bona fides for turning it around, a company that lacks several years' worth of credible financial statements and seems to be losing ground to its competition would have to have some massive margin of safety before I'd be interested. With Nortel, I don't see any such thing.

Fore more Foolish coverage, see:

Bill Mann does not hold shares of any company mentioned in this article. Please view his profile for a complete list of his holdings.

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