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Show __ TheSalt Lake Tribune BUSINESS Sunday, May 30, 1999 Askthe Fool The Motley Fool Earnings and Assets Q WhenIBMreportedits eamingsfor the first quarter of 1999, they were up a whopping 46 Our Mission: To Inform, to Amuse, and to Help You Make Money percent. Yet at the sametime, total this be? — S.R., Tampa,Fla My Dumbest Investment Eamings and assets don’t movein lockstep. Rising You’ve Got Spam eamingsare good, andfalling Rememberthat many components ofnet assets are items such as inventories andaccounts receiv able, which you'dideally want to see at lowlevels. If IBM's assets are falling. that might indicate greater inventory managementefficiency or more rapid collection of money due. If assets suchas property. plant and equipmentare decreasing,this sug gests that the business is getting I received ane-mail last year suggesting that a company called Internet Stock Market Resources wasrated “Very Strong Buy.” I looked for any information on the company I couldfind. Most brokers had nothing onit. 1 couldn't find its financial statements. I lookedat its Web site and found no useful infothere, either. But I figured that someone more knowledgeable than me liked it, and it was cheap, so | bought. It fell from $1.75 per share to $0.56, and [ lost a thousand dollars. The moral: Delete all unsolicited e-mails conceming “Strong Buys” and don’t buy any stock that you can’t get any informa- tion on! Now I'm investing Foolishly and am much happier. — D.M.V., SanPedro, Calif The Fool Responds: Great lesson. Your instinct to research the com- “lighter,” able to churnout more pany wasexcellent profit fromless equipment. in-boxes these days. It’s referred to as “spam,” andit isn’t worth the bytes it’s carriedon. Do youhave an embarrassing lesson learnedthe hard way? Boil it down 10 100words (or less) andsendit to The Motley Foolc/o My Dumbest Investment, Got one that worked? Submit to My Smartest Investment. If weprint yours, you'll win a Fool's cap! IBM chairman and CEO Louis Gerstner Jr. explained, “Ouroper: ating results wereexcellent, led by services and software, which together produced60 percent of ourgrossprofits this quarter.” IBM Remember Shakespeare? Remember “As You Like It”? In Elizabethan days, Fools were the only people whocould get away with telling the truth tothe King or Queen. The MotleyFooltells the truth aboutinvesting, and hopes you'll laughall the assets dropped 5 percent. How can assets are also often good. What Is This Thing Called The Motley Foci? stick withthat instinct andvisit us online for researchtools. There's a lot of unsolicited junk e-mail clogging people's S$ is becoming less of a capital-inten: sive manufacturing company and Name That : Company is increasingly engagingin lighter operations, such asselling soft wareand services. IBM also spent about $2 billion buy ing back its own shares I began as a small New Jersey This reduces assets and bene: fits shareholders. Q I heard Tom Gardner say on the radiothat he prefers companies with lots of cash and no debt. Is this always a requirement W.R., Livonia, Mich. Not necessarily. True, companies withpiles of cash have a lot of flexibility toact quickly whenvarious opportunities arise available to them. Gillette is one strong companythat doesthis. You're intrigued by Wookie formance, while the 10-K features a lengthy discussion ofthe firm's Cookies Inc. (ticker: CHEWY), andbeing a good Foolish investor, you want to research it. operations andchallenges. Financial statements reveal how menttosend youaninvestor growth, how muchprofitit’s free!) Tell them you'd like to receive the most recent annual report, the latest attentiontotrends,to see if the Simply give the firm ajingle and ask the investorrelations depart- quickly sales are growing, how the companyis financing its making and much more. Pay information package. (They're firm’s financial health is improving or declining. Compare the company 10-K and 10-Q reports, any recent pressreleases, as and any available analyst reports. Alternatively, you can save a few trees by gathering the information immediately online at www.freeEdgar.com. The annual report will probably feature glossy photosofsmiling customers(or assorted alien life forms) chomping on cookies. But withits industry peers to see howit stacks up. Remember that you can improve your chances for success if you're actually a consumer of Wookie Cookies and are familiar with the company’sofferings Also,talk about the business with other investors, perhaps in an investment club. Don’t neglect online resources. lookto the back ofthe report, where the numberswill tell you thereal story about the business. Most company Web sites feature an investor informationsection, firms in the world, with reveals where cash is coming tence. In 1998, | raked in more than $5 billion. My return on equity tops 20 percent. Who am |? Got a question for the Fool? Send it in see Write to Us 10-Q summarizes quarterly per- with press releases, financial 151 consecutive quarters of Know the answer? Sendit to us with Foolish Trivia onthe top andyou'll be enteredintoa drawing for anifty prize! Dueling Dot Coms of the intervening quarters. The answers to frequently asked ques- record highs in both revenue and earnings per share. In fact, I've never experienced a downyearin my 50 years of exis- things. If they suddenly need some cash, they draw on lines of credit 10-K is issued once a year, along with the annual report, and 10-Qs. are issued thrice a year, at the end statements there. The income statement shows the company’s last year — perhaps yours were amongthem.An outsourcing pioneer,I’ve achieved other companies, among other Gathering Company Information There are three mainfinancial some 30 million employees manage down their cash balances tonear zero. They use the money to buy back shares and acquire These statements also appear in the 10-Q and 10-K reports. The payroll processing enterprise. Today — I\'m one of the biggest independent computing service more than 425,000 clients. | cut checks to But many successful companies waytothe bank. from and goingto. Baw aeas sales and profits. The balance sheet lists assets andliabilities, such as cash, inventories and debt. The statementof cash flows statements, annual reports and tions. Investor informationsites (like ours at www.fool.com) also offer a wealth of information on companies and communities of investors sharing information. ecco ccecccovcceccecccece LAST WEEK’S TRIVIA ANSWER My founder’sfirst two names were Leon Leonwood.Created in 1912, | was the first national mail-order outfit to offer items such as hunting shoes.I’m known for my 100 percent satisfaction guarantee as well as my golden rule, to sell good merchandise at a reasonable profit and treat my customers like human beings. My flagship store has been open 24 hours a day, 365 days a year since 1951, and | handle up to 180,000 phone calls per day. My sales top $1 billion annually. You can't buy shares of me, though,as I'm not publicly traded. Who am |? (Answer: L.L. Bean) Write to Us! Send questions for Ask the Fool, Dumb: est (or Smartest) Investments (upto 100words), and your Trivia entries to Fool@fool.comor via regular mail c/o this newspaper,attn: The Motley Fool BarnesandNoble.comrecently becamepublicly traded, broughtout byparent bookseller Barnes & Noble, which raised about $422 million with the offering. Investors look- ing for another Amazon.com should take a moment to consider the company’s strategy, how- ever, Amazon.com’s stock really tookofflast investors began to understand that the companywas becoming morethan just an online bookseller. Amazon's strategy of moving into new “vertical” retailing segments such as CDs, videos, the drugstore business, auctions and so on demonstratedthat it wasn’t confining itself to one sort of product. Amazon.comis well onits way to pushing intoadditional cate- gories, such as the online supermar- ket business. This meansthe current value of the companyis based on Notjust its potential to take market share in books and CDs, butin manyretail categories. In fact,it wouldn’t be a surprise to see Amazon.commakea big pushinto toys within the next year. But BamesandNoble.com saysit will pretty much stick to books and “complementary information products.” If Barnes and Noble’sstrategy never expands, then the maximum price the marketwill payfor the company mayhave already been reached. A majorpart of Amazon.com's strategy is to continually increase its customer base and service them amazingly well. If BamesandNoble.comfollows a morelimited strategy, it’s not the same animal as Amazon.com. t 1999 The Motley Fool/Dist. by Universal Press Syndicate WARNING: If you do not shop at Advantage Wireless you might not get as many CTEi eae batt ea ent arte + SALT LAKE CITY + WR atetelr ato) options, services, carriers , Phones, rate plans, talk time and locations! 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