Just when you thought it was safe to read your email, computer security company Symantec(Nasdaq: SYMC) said there has been a 400% increase in new viruses and worms aimed at Microsoft's Windows operating systems. Over 5,000 new worms and viruses were documented in the first half of the year, compared to 1,000 last year over the same time period.

Apparently hackers and spammers have joined forces to help spread the bugs as well. Computer users were advised to stock up on Lysol, Deep Woods Off, and mosquito netting. And please wear gloves while reading today's Motley Fool Take.

In today's Motley Fool Take:

Nike: Undervalued Powerhouse?


Seth Jayson (TMF Bent)

The Motley Fool has been on a bit of a sporty shoe binge over the past several months. While sports retailers such as The Sports Authority(NYSE: TSA), Dick's Sporting Goods(NYSE: DKS), and Finish Line(Nasdaq: FINL) might be all over the map with their results, manufacturers have looked like good opportunities. Reebok(NYSE: RBK) has been highlighted as a bargain, and Hidden Gems pick Saucony(Nasdaq: SCNYA)(Nasdaq: SCNYB) is not only growing but also producing great free cash flow and selling at a discount, all while courting a takeover. Should industry gorilla Nike(NYSE: NKE) be on our short list as well?

At first glance, it certainly looks that way. Today, the bad boys from Beaverton released first-quarter results that show Americans can't get enough of the swoosh, and they put rival Reebok to shame. U.S. revenues outpaced growth across the globe (even though those were juiced by foreign exchange gains), climbing 12%. Total revenues were up 18% to $3.56 billion. That helped propel net earnings to $1.21 per share, a 23% better showing than last year.

While the release is quick to point out the 1.5% improvement in gross margin, there are a few rocks in Nike's shoe this quarter. Selling, general, and administrative expenses ticked up 1.4% as well. It's not enough to offset the margin gain, but it does bear watching.

Nike's balance sheets remain as shock-absorbent as its famous air sole, with about $1 billion in cash and short-term investments to offset the $692 million in debt.

The question for Nike watchers always comes to: Is it worth the price? With one of the world's most recognized brands, and future orders up 10%, it seems to have earned a premium valuation of 22 times earnings, which puts the stock near its 52-week high. Often in the past, that meant not much of a discount and no real reason to buy.

But these days, the $78 per stub values the enterprise at only 15 times last year's free cash flow. That's plenty of green for future stock buybacks or dividend increases, and it suggests that Nike should be a rewarding investment even at today's prices.

Seth Jayson doesn't wear Nike shoes, but Beaverton does make the best pair of sunglasses he's ever owned. At the time of publication, he owned shares of Reebok but had no position in any other firm mentioned.

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

How is your favorite football team doing? Are you playing fantasy football this season? What's the deal with the New England Patriots' inability to lose? All this and more in the 77's House of Foolish Pigskin discussion board.

Colgate-Palmolive's Washed Away


Nathan Slaughter

Shares of Colgate-Palmolive(NYSE: CL) stumbled out of the gate this morning, as the consumer products giant warned that rising costs of raw materials, coupled with increased marketing spending, would weigh down second-half earnings. The firm slashed its outlook to $0.57 to $0.59 for each of the next two quarters, a significant drop from last year and about a dime below current estimates. Investors reacted harshly to the dim forecast, driving the stock 10% lower to a multiyear low of $48.38.

Lately, Colgate-Palmolive has been on the losing end of a fierce battle with rival Procter & Gamble(NYSE: PG) for dominance in the tooth-whitening business, as the company's Simply White product has surrendered market share to Crest Whitestrips and Crest Night Effects. Late last year, management conceded that its single-minded focus on the tooth-whitening market may have left other product lines vulnerable to competition.

While lowered guidance can hardly be construed as a positive sign, the principal reason for the revision should be kept in perspective. The reduced target is not the result of flagging sales, but rather ambitious marketing. Heavy commercial spending will defend Colgate-Palmolive's brands and counter competitive advances made by Procter & Gamble, Clorox(NYSE: CLX), Unilever(NYSE: UNL), and others.

According to CEO Reuben Mark, the advertising has resulted in "excellent market share increases with extraordinary toothpaste growth to an all-time market share record here in the U.S." Despite the ramped-up marketing efforts, and higher costs of packaging and raw materials, Colgate-Palmolive still expects to maintain last year's record 55% gross margins.

Colgate's consistency is worth noting, as the company has delivered 33 consecutive quarters of rising net income, earnings, and profit margins. Most of that bottom-line growth has come via cost-cutting initiatives, though, as sales have reached a plateau. North American revenues fell 2.5% last quarter, and overall sales have only grown at around a 3% clip over the past five years.

Today's selling pressure may have been overdone, as neither of the factors attributed to the shortfall are alarming. Raw material prices have been plaguing the entire industry for a while now, and an aggressive marketing response was essential to boost brand awareness and address increased competition in North America, Russia, India, China, and several other markets.

Furthermore, the company has been mired in a slump with respect to product innovation, and volume growth may hinge on marketing efforts. Still, the decision to loosen the corporate purse strings should have been made earlier, and today's announcement affirms that things may get worse before they get better.

For a clean look at related stories, click to:

Fool contributor Nathan Slaughter loves Colgate's Irish Spring Soap, but he owns none of the companies mentioned.

Microsoft Opens Up


Alyce Lomax (TMF Lomax)

Is Microsoft(Nasdaq: MSFT) opening up? The tech giant said today that it plans to reveal the source code for its Office 2003 product (a suite that includes such well-known applications as Outlook, Excel, and Word) to government clients. As dramatic as the headlines sound, this move may not be quite as surprising as it seems.

Microsoft has historically held its code very close to the vest (with the exception of a snag a few months ago when a portion of its source code leaked into the Internet wilds). Microsoft's insistence on secrecy clashed with the ideals of the open-source movement where code is open for all to see and fiddle with, and which, according to proponents, increases security while providing a more affordable alternative to Microsoft products.

Microsoft had already agreed to give government clients access to some of its code when the company launched its Government Security Program in early 2003, taking a bit of the impact out of today's news. However, the move still highlights the company's need to convince important government clients that its products are secure.

Although there are indications that the open-source movement has become a thorn in mighty Microsoft's side, other variables are at work that could pose some trouble. For one, frustrations with frequent security problems have made switching to an alternative, such as Linux or Apple(Nasdaq: AAPL), more compelling for some. Plus, it's not hard to imagine that Apple's popular iPod might increase the appeal of Macintosh computers for the young -- or young at heart.

There are also increasing signs that Microsoft indeed recognizes that it might want to change the way it does business. The company recently announced that it would provide a stripped-down version of Windows XP for sale in Thailand. In some emerging markets, particularly in Asia, Linux has been become a compelling choice for both financial and security reasons.

Today's news still drums up some questions. Will the move snub out defections to open-source alternatives to Microsoft Office? Will the government programmers who view Microsoft's code help bulk up security? Will charges of theft run rampant now that more eyes will be on more code?

One thing's for sure: Microsoft knows that it faces some degree of threat to the ubiquity of its software, and it's making changes to maintain its dominance.

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

Quote of Note

"A lie can travel halfway around the world while the truth is putting on its shoes." -- Mark Twain

Stone-Cold IPO


Rich Smith

Last Wednesday, cemetery operator StoneMor Partners(Nasdaq: STON)floated 3.7 million of its common units (the "partnership" equivalent of a corporation's common stock) at $20.50 (topping out the $18.50 to $20.50 a share estimated by underwriters Lehman Brothers(NYSE: LEH) and Merrill Lynch(NYSE: MER)). In one day, the graveyard manager had dug up $75 million out of the public markets.

The units began trading at $22.40, and well, let me just say that Wall Street's traders are not the wimps you might think they are. They flipped those StoneMor units around like they were flapjacks, as volume on the Nasdaq quickly reached half the number of units floated -- nearly 1.9 million units traded hands! (Apparently, that's not uncommon. A little digging through Google's(Nasdaq: GOOG) numbers reveals that that IPO actually saw more total shares traded than were floated -- 19.6 million shares offered and 22.4 million traded.)

Unfortunately for the early buyers of StoneMor units, the trading trended sharply downward as the units began to drop like, well, a stone (I just take the puns they give me) to close out the first day of trading at $21.60. Buried further on Thursday, they began to rise from the dead on Friday.

Inquiring investors want to know: Why all the fuss over a cemetery operator? Foolish Hidden Gems subscribers can answer that. Since StoneMor competitor and No. 2 U.S. cemetery operator Alderwoods Group(Nasdaq: AWGI) was first recommended by our newsletter in October 2003, its shares have appreciated 46% against a 12% rise in the S&P 500. The morbidly named death-care industry is big business and has a guaranteed universal target audience. While there are still people who steadfastly refuse to buy a personal computer or shop online, who will never give Microsoft(Nasdaq: MSFT) or Amazon(Nasdaq: AMZN) a dime, one thing is certain: Sooner or later (don't worry, dear Fool. I'm sure you'll be later -- as will I), every living soul in the U.S. is going to become a customer of StoneMor, Alderwoods, or competitors Carriage Services, Stewart Enterprises, and Service Corporation International.

There's not a whole lot of industries that have that kind of guaranteed patronage built into their business model. StoneMor is one of them. Investors with a long-term view saw this, and on Wednesday, they took advantage of the chance to stake their claims.

Fool contributor Rich Smith owns shares in Alderwoods, but in no other company mentioned in this article.

More on Fool.com Today

In Krispy Kreme's Fair Value: Zero, Bill Mann says to watch out when a company's management wastes free cash to cover up for previous mistakes.... Mathew Emmert explains how dividend reinvestment can be a powerful growth engine in Dripping With Dividends.

In other news:

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