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1. Yeah, Well, the Glass Looked Pretty Half-Full in April

This week's "Mission Accomplished" Award goes to




For a year now, PeopleSoft has been fighting off what it and the U.S. government say is an objectionable hostile takeover bid from software rival


(ORCL) - Get Oracle Corporation Report


And in late April, PeopleSoft CEO Craig Conway announced to the world that the difficulties posed by the unwelcome Oracle bid were all but over.

"We announced a growth objective for 2004 that was by far the most aggressive in the enterprise application software business, and we are delivering to that plan," he said in a statement. "With most of the extraordinary distractions now behind us, we can return our full attention to our business."

Well, Conway sure got that one wrong.

On Wednesday, more than two months after Conway assured everyone that the worst was over, he told Wall Street it wasn't.

"Although we have been able to meet or exceed our financial projections since Oracle launched their hostile tender offer more than a year ago, the extensive publicity of the antitrust trial during the last month of our quarter was impossible to completely overcome," he said. "We believe the adverse impact to our business has been substantial, with even greater impact this past month."

Second-quarter license revenue is now projected to come in 18% below the company's forecast. Total revenue will be 4% lighter.

So much for the all-clear signal.

2. The Ken Lay of the Land

We admire Ken Lay's moxie. But we're not ready to start cheerleading for him just yet.

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On Thursday, the former chairman and CEO of


-- that is, the man who oversaw one of the largest business implosions in recent memory -- was indicted on criminal fraud and conspiracy charges.

So what does he do? He does the thing that 99% of lawyers tell their clients 100% of the time


to do before trial: He talks. And talks. And talks.

In Lay Man's Terms
Ken lays it on the line

We refer to this now as the Martha Stewart strategy. Look what it got her.

Anyway, we watched a little of Lay's Thursday news conference, and it didn't immediately seem to us that he said anything that will come back to bite him, legalwise.

But Lay did manage to say a few things that had us scratching our heads.

Like this comment in which he laid much of his troubles at the feet of former Enron Chief Financial Officer Andrew Fastow: "My worst mistake was in trusting someone in the chief financial officer job who chose to use that position for his own enrichment," Lay said.

We'll see about that. Lay represents himself as a clueless victim, but unlike so many other clueless Enron employees, he managed to walk away from the company with millions. That means nothing in a court of law, of course, but if he thinks his argument wins the day in the court of public opinion -- well, maybe that's his biggest mistake.

3. Pouring Money Down the Drain

As the winner of last Friday's Mega Millions jackpot will soon learn, after you've won $294 million in the lottery, it's hard to avoid picking up the check the next time you head out for some drinks with the guys.

Yes. As much as your pals can afford to chip in, it's hard for them to forget that paying for a round of beverages causes a much smaller dent in your pocket than it does in theirs.

So now you get a sense of how


(MSFT) - Get Microsoft Corporation Report

employees are feeling these days. As the

The Seattle Times

reported Thursday, Microsoft President Steve Ballmer says the company may end its legendary employee perquisite of free sodas in the company fridge.

It's a cost-cutting thing, of course. It's a competitive world. Some belt-tightening -- literally and figuratively, we guess -- is in order.

After all, as we have noted here in times past,




) started charging employees for coffee as things started sliding down the drain there.

Of course, the difference between WorldCom and Microsoft is that WorldCom was bankruptcy fodder and Microsoft is sitting on $56 billion in cash.

Ballmer acknowledged that point in the annual state-of-the-company memo he released this week: "Some employees have asked why we can't use some of our $56 billion in cash to avoid making the benefits changes," he wrote. "Using the cash reduces profits, which reduces the stock price. The cash is shareholders' money, so we need to either invest in new opportunities or return it to them."

Of course, over at


, co-founders Sergey Brin and Larry Page have warned shareholders that given the choice between returning money to shareholders or spending it on employee benefits, they'll pick the benefits.

Not that that makes us want to be Google shareholders, but Sergey and Larry sure sound like our kind of drinking buddies.

4. It's Not Such a Wonderful Return on Invested Capital

You're all familiar, of course, with the basic premise of

It's a Wonderful Life

. George Bailey, a small-town banker who one day in despondency says he wishes he'd never been born, gets the opportunity to see the error of his ways. He learns that, thanks to his existence, everyone around him is happier and the world is a better place.

Well, lucky for George Bailey he was a commercial banker, not an investment banker. Because this week we learned that if he'd been busy with mergers and acquisitions, the movie might not have had such a life-affirming ending.

Here's why: On Wednesday, Banc of America Securities analyst Doug Shapiro issued a fascinating report about major media mergers. His conclusion: They don't work. That is, the big ones haven't, not in recent history. That much-vaunted vertical integration? Too costly. The money spent? Poor capital allocation. All those synergies? Their value is suspect given management's usual protestations that intracompany deals are done at arm's-length terms.

The problem deals, according to Shapiro, include even


(CMCSA) - Get Comcast Corporation Class A Report

takeover of


(T) - Get AT&T Inc. Report

Broadband -- a deal that epitomizes what Wall Street considers to be a model, value-creating merger. Comcast, trading at $27 now, would be $35 without AT&T, calculates Shapiro.

Time Warner


, now trading below $18? Had it never met America Online, nor bought all of

Turner Broadcasting

, it would be a $43 stock, Shapiro says.


(VIAB) - Get Viacom Inc. Class B Report

-- a company whose Sumner Redstone has portrayed himself as a disciplined acquirer? Hah! Had it never acquired




(BBI) - Get Brickell Biotech, Inc. Report






Comedy Central

, says Shapiro, Viacom would be trading at $77, not around the $36 it traded at when he published his report.

"Clearly, there have been tremendous financial benefits for shareholders and broadband benefits for consumers as a result of the AT&T acquisition," says a Comcast spokesman.

"We're very focused on returning value to shareholders," says a Viacom spokeswoman. "And the company has said it will be aggressively buying back its shares once we complete the Blockbuster splitoff."

Time Warner declined comment.

So there you are. The investment bankers we've met seem like nice folks. And -- partly because Shapiro indicates smaller deals have worked out well -- we assume Shapiro has nothing against bankers, either. But he raises a frightening thought, nonetheless: All you shareholders would have been better off if certain media bankers just hadn't shown up at the office on a few crucial days in their careers.

5. Easy to Be Hardness

Kudos to

The Wall Street Journal

, and to the

Securities and Exchange Commission

, for uncovering another example of every accounting fraud's essential ingredient: the code word.

See, as we pointed out a month ago, if you're going to cook a company's books, you can't go around saying, "Hey, guys! It's end-of-the-quarter time again! Time to cook the company's books!"

Hard Attack
The new buzzword

Nope. As we've already noted, you need a little shorthand. Over at HealthSouth, they called certain alleged cash-flow-enhancing entries "pixie dust" or "fairy dust." Back at WorldCom (now MCI), the ritual of fixing the numbers was called "Close the Gap."

Well, as the Journal reported recently, Nortel (NT) execs had their own little expression to describe extra reserves that could be inappropriately released to improve quarterly results: "hardness." As in, we understand, "I think my division will hit its quarterly numbers, because we've got hardness."

And as the SEC pointed out in its amended complaint against Lay et al., Thursday, Enron had its special vocabulary, too. If the company appeared to be missing its earnings and cash flow targets, says the SEC, the shortfall was referred to as the "gap," the "stretch" and/or the "overview." And executives, says the SEC, would end up meeting those targets unlawfully.

Will that hardness result in hard time? If it did, we think, it wouldn't be a stretch.

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