Stocks fell into the red today after Wall Street got spooked over inflation, which last month surged at its fastest rate in 14 years. The Labor Department estimated U.S. producer prices increased 1.7%. Food and energy led the rise to take a bite out of your dollar, followed by overpriced Cher concert tickets.

In today's Motley Fool Take:

Loving Home Depot


Seth Jayson (TMF Bent)

If only this were a sexy tech like Google(Nasdaq: GOOG). Record earnings coupled with increased guidance is usually the kind of thing that gets investors' engines revving. Not so with frumpy, old, tough-to-look-at Home Depot(NYSE: HD), especially not today.

Today's third-quarter numbers may not have impressed the Street, which is dropping the stock a couple percent on an overall red number day, but there's plenty for Foolish holders to love. Revenues were up 13% over the same quarter last year, and earnings per share -- thanks in part to a dwindling pool of shares -- rose 20% to $0.60 per stub. But it's not all Peaches and Herb: Selling costs rose 1.8% as a portion of revenue. Keep an eye on these numbers.

But back to the sunny side of the street. There are a few key numbers driving the steady progress. Comps growth of 4.5% doesn't sound like the high-octane results at certain specialty retailers these days, but it's healthy in comparison to other major retailers such as Target and Wal-Mart. Mull this over: The average customer was spending 6.6% more per trip at Home Depot, more than $55 per head.

Service revenue is a sleeper no more. After another big gain -- 26% -- the $957 million represents a full 5% of revenues and is growing at twice the rate of overall sales. Wait, there's more. Speaking of the city, the firm is moving onto increasingly urban turf with smaller, more focused stores.

When you realize that comps growth at the firms' dozens of Mexican stores is growing in the double digits, you realize that there are plenty of reasons to believe that Home Depot can continue to come up with solid sales growth.

In seeing a bright future, Home Depot's management echoed the outlook at competitor Lowe's(NYSE: LOW). Although there's often a tendency for investors to make a choice between two similar competitors -- Sirius Satellite Radio(Nasdaq: SIRI) vs. XM Satellite Radio(Nasdaq: XMSR), eBay(Nasdaq: EBAY) vs. OSTK) -- the beauty of the market is that you can have it both ways. Buy 'em all! Though Home Depot's been a better performer this year, there's little reason to doubt that both these behemoths will continue to perform.

For related Foolishness:

Regressing apartment dweller Seth Jayson liked his home, and admires Home Depot, but doesn't miss spending a few hundred bucks on repair goods every month. At the time of publication, he had no positions in any company mentioned. View his stock holdings and Fool profile here. Fool rules are here.

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The PeopleSoft Battle Intensifies


Tim Beyers

The battle for who will ultimately control business software maker PeopleSoft(Nasdaq: PSFT) is reaching a fever pitch not seen since the red state-blue state smackdown from earlier this month.

This morning, PeopleSoft's two largest shareholders decided to take opposite positions as to whether to sell their stakes to Oracle(Nasdaq: ORCL). According to TheWall Street Journal, Capital Guardian Trust, which owns 10% of PeopleSoft's outstanding shares, wants to sell. But Private Capital Management, which owns 9% of the firm, filed a brief with the Securities and Exchange Commission (SEC) this morning in which it says it won't sell.

This follows on the heels of a group of PeopleSoft shareholders going to court to ask a judge to force negotiations with Oracle, presumably to get a better bid. So it appears this is yet another race that's "too close to call."

It's likely we won't know much more before Saturday, but if investors continue to wonder if the grass is indeed greener, Oracle could attain the 50% it's looking for, or darn close to it. Though there's no explanation from Capital Guardian as to why it would sell, Private Capital said in its filing that it "has significant concerns" that Oracle's $24 per share offer for the company doesn't recognize the full value of PeopleSoft.

True? Well, folks, that depends on whom you believe. PeopleSoft's guidance for next fiscal year calls for stellar improvements. Take the mid-point of its fiscal 2005 per-share estimates, or $0.85, and you find a firm that trades for roughly 27 times its expected income, well below its proposed growth rate. Technically, that's a bargain.

Here's the problem: Accepting that valuation requires you to trust the crystal ball management is using. But crystal balls break, and relying on them can be like betting on the lottery to pay off your mortgage, especially when PeopleSoft's management is involved. Consider: It was January when PeopleSoft called for $0.64 per stub in earnings for all of 2004. Now that total rests at $0.32. Oops.

That spectacular error calls into question the veracity of any guidance offered by PeopleSoft. (It may also be why PeopleSoft's rejection of Oracle's latest offer last week read more like a come on.)

Here's the ugly truth to it all, Fools: PeopleSoft had to turn down Oracle $24 per share offer, even if it didn't want to. Why? Because Oracle offered $26 per stub in February. Selling for a lower price than previously offered could open the floodgates to shareholder lawsuits. Then again, so could not selling at any price, as former CEO Craig Conway proclaimed earlier. So, this fight gets thrown to the people -- or, really, to the institutions with huge stakes in the business. Still, it's another situation where every vote could count. If you're a PeopleSoft shareholder, you'd better not sit this one out.

For related Foolishness:

Fool contributor Tim Beyers owns shares of Oracle. You can view his Fool profile and other stock holdings here.

Quote of Note

"When you get to the end of your rope, tie a knot and hang on." -- Franklin D. Roosevelt

Sirius Highs


Rick Aristotle Munarriz (TMF Edible)

Yes, Sirius Satellite Radio(Nasdaq: SIRI) matters again. The stock closed yesterday at a level last seen 30 months ago. If you go by market cap, given the stock's unfortunate habit of speed-printing new shares, the company has never been valued as high as it is right now at $5.5 billion. Yet if things pan out just right, the stock will be worth every penny.

I've already waxed positive on the stock more than a few times this year and you are more than welcome to revisit the reasons for my optimism if you wish. While it's true that David Gardner and the Rule Breakers team successfully shorted the stock at $6.90 back in January 2002 and profited from its slide all the way down to $0.93 a year later, I believe that the fundamentals have improved smartly since then.

The migration to satellite radio is real. Sirius and rival XM Satellite Radio(Nasdaq: XMSR) will be signing up a million new subscribers this quarter alone. Attractive deals with automakers are making satellite radio receivers a popular factory-installed option in more and more cars, and now the content is coming.

While Sirius is still behind XM on the subscriber count, it's holding a strong hand for the future after landing the NFL and then Howard Stern. The Stern deal is what is truly promising as he will be heard exclusively on Sirius come 2006. If just 10% of his free radio listeners make the move to Sirius to tune into Stern's rowdy morning show, it will be a profitable move for Sirius.

While a bullish initial stock rating from CIBC World Markets helped the stock last week, more than a few Sirius watchers will be tuning into David Letterman's The Late Show come Thursday. Handcuffed by Viacom(NYSE: VIA) when it comes to pimping his deal with Sirius on his Viacom-owned radio show, Stern has already told his listeners that his stint on Letterman will be like an infomercial. The fact that Viacom also owns CBS will make this very interesting for more than just the potential for verbal fireworks.

If Stern ruffles enough feathers, it may be quite possible that Viacom and Sirius would negotiate an early buyout of the Stern show. It's not what either party would want, as Sirius could use another year of milking the publicity to shore up its user base before committing to its $100 million annual contract with Stern, and Viacom would hate to lose a money maker who rules the critical morning drive radio market.

However, if free radio is going to become a casualty of the satellite radio revolution, there may be no better time like the present to get it started. If Stern's mouth proves to be the equivalent of the assassination of Franz Ferdinand, history may write a new chapter come Thursday. As the early adopter columnist in our new Rule Breakers research newsletter, I couldn't be more excited.

Longtime Fool contributor Rick Munarriz thinks that XM and Sirius will defy the cynics and the skeptics over the coming years and he only hopes that they learn to treat their income statements and balance sheets a little better. He does not own shares in any of the companies mentioned in this story. He is a member of the Rule Breakers analytical team.

Is Wal-Mart Warming Up?


Alyce Lomax (TMF Lomax)

Wal-Mart (NYSE: WMT) turned in a decent quarter today (with earnings that exactly matched the consensus estimate). Investors shrugged off the numbers. The discount retailer, which is often examined to look for trends in consumer spending, also forecasts a happier holiday season ahead.

The retailer's third-quarter earnings increased 12.7% to $2.29 billion, or $0.54 per share. Net sales came in 9.7% higher at $68.5 billion, a little slim compared with what analysts were looking for. Meanwhile, domestic same-store sales showed a 1.7% increase, with Wal-Mart increasing just 1.3% and Sam's Club up 4%. Gross margin improved without the discount giant raising its trademark "falling prices."

In its conference call, Wal-Mart management continued to opine on the high price of oil its negative impact on its customers as a reason for the slightly skinny sales. You may recall it was a touch-and-go summer, what with hurricanes and oil prices supposedly preying on retail sales. However, even though back-to-school sales were in question for a while, they seemed to right themselves later.

Despite it all, Wal-Mart increased its guidance and primed us for the expectation of "a better Christmas than last year." Wal-Mart now expects to post earnings of $2.39 to $2.41 per share. It had previously forecast earnings of $2.36 to $2.40 per share.

The quarter might not have been highly exciting, but it still behooves investors to remember that with such a behemoth, robust growth is often difficult to achieve. Meanwhile, Wal-Mart is still up against very difficult comparisons to last year's same-store sales, for example. It's been said here before that the important thing is to keep an eye out for trends rather than sweat the day-to-day machinations too terribly much.

Meanwhile, Wal-Mart had encouraging words about the economy -- saying that while it has not been growing at the rate we would have liked, it is growing. Such words from Wal-Mart not only stir up hope for other discount retailers such as Target(NYSE: TGT) but also bode well for other retailers and consumer confidence in general.

Read other recent Foolish content about Wal-Mart:

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.