KO: Is it a buy, hold, or sell?

[HenryTo]

KO: Is it a buy, hold, or sell?

[gregf]

one of my customers is a coke bottler, I didn't know/understand the relationship the bottler had to coke - very interesting read!

I agree with your analysis entirely. Coke is richly valued at this point.

A P/E of >15 should be held for growth stocks. A PE <15 for a big behemoth with limited growth prospects might be interesting. I try to not buy stocks based on dividend yield as that can go away in a hurry and a 10% correction on an earnings miss could take years of dividends to recoup.

[HenryTo]

A November 2000 article from the Motley Fool:

http://www.fool.com/portfolios/rulemaker/2000/rulemaker001121.htm

An April 2000 article on the relationship from CFO Magazine:

http://www.cfo.com/article.cfm/2987250/c_3046532?f=insidecfo

[HenryTo]

Sales of Coke Classic still declining steadily. Perhaps they need something like the New Coke "fiasco" once again?

-----------------------------------------------------------------------------
Associated Press
Coke, Pepsi Lost U.S. Share in 2004
Friday March 4, 5:48 pm ET
Coke, Pepsi Lost U.S. Soft-Drink Market Share in 2004, According to Annual Rankings


ATLANTA (AP) -- Coca-Cola Co. and PepsiCo Inc. saw their share of the U.S. soft-drink market decline in 2004, according to annual rankings released Friday.

Cadbury Schweppes PLC maker of Dr Pepper, and Cott Corp., the biggest supplier of private-label soda, increased their share of the $65.9 billion market.

Coke, the industry leader based in Atlanta, saw its U.S. market share drop by 0.9 percentage point to 43.1 percent. The market share for PepsiCo, Purchase, N.Y., declined by 0.1 percentage point to 31.7 percent. Coke's volume fell 1 percent, while Pepsi managed a volume gain of 0.4 percentage point in the U.S.

The market-share results, released by Beverage Digest/Maxwell, a data service that tracks soft-drink sales, reflect the continued growth of diet soft drinks and energy drinks and the steady decline of sugary colas.

The soft-drink industry overall grew 1 percent by volume in 2004. That was better than 2003, but still below the annual growth rates of between 2 percent to 4 percent during the 1990s. That drop-off has come as consumers increasingly reach for bottled water and other noncarbonated drinks.

Cadbury Schweppes, London, the industry's No. 3 player, boosted its market share by 0.2 percentage point to 14.5 percent. Cadbury was helped by a strong performance from Diet Dr Pepper, which posted a 16.2 percent increase in volume last year. However, its 7 UP brand dropped out of the top 10 soft drinks for the first time since the rankings began in 1985.

Toronto-based Cott, the biggest maker of private-label sodas and a major supplier to Wal-Mart Stores Inc. and other big retailers, had another strong year. Its market share grew 0.8 percentage point to 5.5 percent.

Last year, price increases from Coke and Pepsi bottlers slowed volume growth and helped private-label sodas gain market share. The price gap in grocery stores between branded sodas and private-label drinks grew to nearly 40 percent last year -- at the high end of historical levels. Retailers have been putting more display space behind their store brands, oftentimes at the expense of Coke and Pepsi.

Coca-Cola Classic retained its spot as the No. 1 soft drink, but its share declined 0.7 percentage point to 17.9 percent and volume fell 3 percent. Pepsi-Cola, the No. 2 soda, lost 0.4 percentage point for an 11.5 percent share, and volume dropped 2.5 percent.

For 2005, Coke and Pepsi have already announced a slew of new drinks aimed at winning back consumers. Coke with Lime recently hit stores, following up on the success of Diet Coke with Lime. Pepsi is following with lime-flavored versions of Pepsi and Diet Pepsi.

Both companies are also trying to seize on the popularity of the Splenda artificial sweetener. A reformulated version of Pepsi One featuring Splenda rolls out shortly and Diet Coke Sweetened with Splenda debuts in May.

Last year, Diet Coke volume was up 5 percent and Diet Pepsi grew 6.7 percent by volume in the United States, according to the rankings.

[HenryTo]

The latest Bull and Bear arguments on Coca-Cola:

------------------------------------------------------------
Stock Watch: Coca-Cola

By NAUREEN S. MALIK
THE WALL STREET JOURNAL ONLINE
March 9, 2005 8:24 p.m.

Coca-Cola investors may be encouraged that its proxy statement1 bears testament to the beverage giant's commitment to a makeover, though it did little to move its stock price, which has fallen off a bit during the past two trading days.

Coke has faced criticism for paying $200 million to a handful of executives amid less-than-stellar performance since the end of 1999. In 2004, Chief Executive Neville Isdell took home $3 million in salary and bonus2 for a total of about $17.5 million with stocks, options and consulting fees. His predecessor Douglas Daft didn't receive a bonus last year.

Meanwhile, Coke's share price is incrementally pulling out of recent doldrums as it strives to capture hip, young consumers without sacrificing its "feel good" image. Coke's shares are up 4% so far this year after falling 17% in 2004.

The Atlanta company's fourth-quarter earnings eclipsed expectations but the results got a boost from one-time gains from a lower tax rate and a weaker dollar -- nearly 80% of its operating income comes from outside the U.S.

Mr. Isdell marked the improved performance as just the beginning of a transition period toward more growth, which he has said could take up to two years. Fruits of his influence, such as increased risk-taking in product development and improving relationships with bottlers have inspired confidence among investors say analysts.

Overall sentiment about how the company will perform this year is mixed, and 2005 will prove to be a real test for Coke as Mr. Isdell strives to achieve real change and sustainable growth. Here are what some analysts are saying.

Bull Case:


Product Pipeline: Coca-Cola was long criticized for its slow pace of getting new products to market "either because of failure or hesitancy to cannibalize its core business," Banc of America analyst Brian Spillane said. "This has clearly changed" since Mr. Isdell took control of the company, and should support the stock's "recent uptick," Mr. Spillane said. During the next few months, Coke has a steady stream of products hitting the market, with Flavored Dasani water and Full Throttle, a citrus-flavored energy drink, in the first quarter, followed by Diet Coke with Splenda in the second quarter. In Europe, Coke will be launching Diet Coke with Lime and expanding its Fanta Light flavors. Coke's Powerade is also planning a sports/energy drink hybrid called Advance. These additions could help the beverage giant's traction in niche markets, which "could be as symbolically important to [Coke] as the success of line extensions on core products," said Lehman Brothers analyst Michael J. Branca.

Marketing Makeover: In an effort to define its products amid a slew of line extensions, Coke will spend $400 million to market its products in 2005, with $125 million in the U.S. While the additional costs could damage earnings, Lehman's Mr. Branca says, "it is unequivocally the right strategic move for the business." Spending will mainly focus on marketing its core brand while generating buzz for new products and packaging innovations. In North America, Coke will double its marketing investment on diet soft drinks with ads targeting males "who seek a low-calorie option, but view traditional Diet Coke as a women's drink," said Mr. Spillane of Bank of America. Full Throttle is geared toward 20- to 30-year-old males. Coke is also amending its nutrition labels in the U.S., catering to health-conscious consumers.

Global Sales: Nearly 80% of operating income is from outside the U.S. and "the regional story looks positive for 2005," particularly in Latin America and Asia, said Carlos Laboy, an analyst with Bear Stearns. Europe's picture will look better in the last nine months of the year. In the fourth quarter, volume rose about 12% in China, while volumes in Latin America and Africa rose 4% and Europe gained 3%. The company has "extensive global reach and sizeable developing world business," said Mr. Spillane. Thus, it is "not difficult to see why Mr. Isdell believes over time the company can reaccelerate its growth."

* * *
Bear Case:


Innovation Challenges: Coke has a lot planned for this year, but "innovation itself may not bolster volume growth," said A.G. Edwards' Christopher Growe, who maintains a hold rating. Failure to create a substantial buzz over its C2 product and little impact from the release of its 1.5 liter bottle attest to this. So far, "innovation has gone down the classic brand management road" for carbonated soft drinks, where "both the cost and fear of failure is palpable," said Deutsche Bank analyst Marc Greenberg. Coke's approach has been to focus on driving growth of its carbonated soft drink, while short-ending the faster-growing market for noncarbonated alternatives.

Back to Basics: While Coke's fourth-quarter earnings exceeded expectations, its "results were driven by non-fundamental items," such as tax cuts and a currency benefit of about 4%," said Citigroup analyst Bonnie Herzog. "We remain on the sidelines until we receive more evidence that Isdell and his team have the business fully back on track." In fact, the valuation isn't too compelling considering operating income declined 9% if viewed in a "currency neutral" environment, said Jeffrey G. Kanter, a Prudential Equity Group analyst.

Troubled Markets: Some of Coke's most profitable markets are also its most troublesome, such as North America, Germany and the Philippines. Volume in North America was down 1% and Germany was down by about 15%. Japan, which has "generated negative volume growth and has trended downward in recent years," may face "possible systemic issues" considering Coca-Cola's overall growth was generally strong during the same periods, said Citigroup's Ms. Herzog.

Brokerage Firm Stock Rating 52-Week Price Target Last Update
Legg Mason Buy $52 Feb. 17
Bear Stearns Buy $50 Feb. 17
Lehman Buy $48 Feb. 16
Morgan Stanley Hold $45 Feb. 16
Prudential Equity Group Neutral $45 Feb. 23
Standard & Poor's Hold $46 Mar. 5
Banc of America Securities Neutral $43.64 Mar. 4
Coke's closing price Wednesday: $ 43.21
Deutsche Bank Hold $43 Feb. 23


--------------------------------------------------------------------------------

Analyst disclosures

• Banc of America makes a market in the securities of Coca-Cola and has had an investment banking relationship with the company.

• Lehman Brothers regularly trades shares of Coca-Cola and receives compensation for non-investment banking related services.

• Bear Stearns and its employees deal as principals in transactions with Coca-Cola securities.

• A.G. Edwards maintains an investment-banking relationship with Coca-Cola and owns a long-position in its equity securities.

• Deutsche Bank owns 1% of or more of common shares, was an underwriter in a Coca-Cola offering in the past five years and receives compensation for investment banking and financial services.

• Citigroup or its affiliates has acted as a manager or co-manager of fixed-income securities offered by Coca-Cola over the past five years, and regularly trades Coke shares.

• Prudential Equity Group may earn compensation for brokerage services on Coca-Cola transactions, and receives commission for orders placed through the brokerage firm.


Write to Naureen S. Malik at naureen.malik@wsj.com4

[HenryTo]

Wow... still no "buy" votes whatsoever. Perhaps the following "news" will do the trick? Note that this is an important development since the independent Coke bottlers really do a lot for the Coca-Cola company in helping them promote their products locally.
------------------------------------------------------------------------------

Coke bottlers healthier, but more work needed-exec
Thu Mar 17, 2005 11:25 AM ET

By Paul Simao
ATLANTA, March 17 (Reuters) - Coca-Cola Co's (KO.N: Quote, Profile, Research) bottling system is much healthier than it was in 2000 but still needs to improve in key markets around the world, a senior Coke executive said on Thursday.

"There has been significant improvement in the health of the bottling system in the last four or five years," Irial Finan, president of Coke's bottling investments unit, told a Banc of America Securities consumer conference in New York.

"Are we where we want to be? No, but we're in much better shape than we have been in some time," Finan said.

Finan, who is responsible for managing the soft drink giant's stakes in independent and company-owned bottlers, added that Coca-Cola was committed to helping bottlers achieve their business goals.

The relationship between the world's largest soft drink maker and its bottlers grew frosty in the late 1990s when Coke pushed through large price increases on the syrupy concentrate used by bottlers to manufacture soft drinks.

The price hikes, which came when sales of sodas were slowing in key markets, particularly North America, effectively padded Coca-Cola's profit at the expense of bottlers like Coca-Cola Enterprises Inc. (CCE.N: Quote, Profile, Research)

Doug Daft, who took over as Coca-Cola's chief executive in February, 2000, reversed course, focusing on the health of the entire Coke system, including its aggrieved bottlers. Neville Isdell, who succeeded Daft last year, pledged to follow suit.

With relations on the mend, Atlanta-based Coca-Cola and its bottlers are trying to strike a balance between boosting market share and raising drink prices.

In the past, Coca-Cola's bottlers sometimes sacrificed price hikes to protect sales and market share, especially in North America, the largest and most important market for the Coke system.

Some Coke bottlers, however, have been doggedly pushing through price hikes despite warnings that doing so might cut into sales.

Finan, who sits on Coca-Cola Enterprises' board of directors, said on Thursday it was critical that the Coke system ensure that the "right product at the right price" was available to consumers.

In his presentation, Finan added that Coca-Cola was moving ahead with efforts to fix its German bottling system, but said that would take time. He also said he expected growth of diet soft drinks to continue to accelerate in the next few years.

Shares of Coca-Cola fell 12 cents to $41.82 on the New York Stock Exchange. Coca-Cola Enterprises was up 4 cents to $20.68 on the NYSE.

[HenryTo]

Wow - still no "buy" recommendations from our readers/voters. Perhaps this may do the trick? FWIW, I think further changes will still need to be made at Coca-Cola.
--------------------------------------------------------------------------------

UPDATE 1-Coca-Cola makes management, operating changes
Wed Mar 23, 2005 09:26 AM ET
(Recasts, adds details)
WASHINGTON, March 23 (Reuters) - Coca-Cola Co. (KO.N: Quote, Profile, Research) on Wednesday announced the retirement of the head of its European division in a fresh shake-up of its global marketing and advertising groups to combat sluggish sales.

It said it was also realigning its group structures and reporting lines for its business in Europe, Asia, Eurasia and the Middle East.

Mary Minnick, president of Coca-Cola Asia for the past four years, will lead the new unit overseeing coordination of marketing, innovation and strategic growth.

Chuck Fruit, chief marketing officer, and Danny Strickland, chief innovation/research and development officer, will report to Minnick, along with a head of strategic growth paths who is yet to be named.

Sandy Allan, president of Europe, Eurasia and Middle East since July 2001 and a Coke employee since 1968, will retire, the company said.

In January, Javier Benito, Coke's chief marketing officer for the North American unit, resigned after 10 years with the company as part of the wider restructuring of marketing and advertising.

A new EU group will include all of Coke's operations in the EU member states as well as the European Free Trade Association countries. It will be led by Dominique Reiniche, most recently president of Coca-Cola Enterprises Europe.

Coca-Cola also announced the creation of two new operating groups: a North Asia, Eurasia and Middle East group; and a Southeast Asia and Pacific Rim group.

The company said the changes would be effective from May 1, 2005.

Coca-Cola is currently seeking to increase sluggish soft drink sales in North America and other key markets while combating a consumer revolt against regular soft drinks and other sugar-laced, high-calorie products.

Recent innovations from the company have included a version of Diet Coke sweetened with Splenda as well as Coca-Cola Zero, a diet version of its Coca-Cola Classic drink, and a lime version of the flagship Coca Cola brand.

[Dubious]

KO has broken down technically. Euros are boycotting American products and they can not gain footing in China.

This is dead money. It is going to bounce around $40 for awhile - end of year target $32.

Another example of one of those high dividend "safe" large cap stocks that have crushed people trying to benefit from the dividend tax cut. What good is 15% tax rate when you lose 15 points??

Dubious

[HenryTo]

Still no sign of a revitalization. With a P/E ratio of 20 and a massive amount of debt at its bottler, I don't think I will touch it here as a value stock just yet.
---------------------------------------------------------------

Coca-Cola's Profit
Fell 11% in Quarter

By CHAD TERHUNE
Staff Reporter of THE WALL STREET JOURNAL
April 19, 2005 1:26 p.m.

Coca-Cola Co. reported an 11% decline in first-quarter profit, reflecting higher marketing expenses and slow sales in North America and parts of Europe and Asia.

Volume for the company's flagship Coca-Cola soft drink grew 22% in China and more than 13% in Brazil and South Africa. But that wasn't enough to overcome continued weakness in key markets such as the U.S., Germany and the Philippines. Coke's plan to boost spending on global marketing and product innovation by $400 million this year also began crimping the bottom line.

Neville Isdell, Coke's chairman and chief executive, is moving to improve Coke's advertising behind its core brands and accelerate new product development, particularly of healthier drinks. He expects the Atlanta company to begin airing new "iconic" ads for Coca-Cola around the world this summer.

"We clearly understand that a couple of good ads will not change the game and don't expect them to," Mr. Isdell said in a conference call with analysts and investors. "But they are one tangible measurement of our belief that emphasizing execution across the whole system and setting objectives and reaching them consistently will be the game changer."

Coke said net income for the quarter fell to $1 billion, or 42 cents a share, from $1.13 billion, or 46 cents a share, a year earlier. Revenue grew 3.7% to $5.27 billion, but it would have been essentially flat without currency-exchange benefits. The quarter also had two fewer shipping days, compared with a year earlier.

Coke took a charge of $152 million, or six cents a share, for tax accruals related to the planned repatriation of about $2.5 billion in international earnings under a new U.S. law. The latest per-share profit also was helped by about a penny due to a combination of tax matters, stock-based compensation and bottling equity.

Coke's increased spending and lackluster results in big markets such as North America and Germany are expected to keep earnings flat or up only slightly in 2005. First-quarter volume in North America, Coke's largest market, was flat, while operating income fell 11%. Powerade sports drink and Dasani bottled water posted double-digit volume gains in North America, but soda volume slipped 1%. To revive soft-drink growth, Coke is preparing an ad blitz this summer in support of new diet sodas Diet Coke Sweetened with Splenda and Coca-Cola Zero.

On Monday, Coke said it had settled accusations from the U.S. Securities and Exchange Commission that the company shipped excess beverage concentrate to bottlers in Japan between 1997 and 1999 to inflate its profit and mislead investors. The SEC said Coke pressured its bottlers to purchase $1.2 billion in extra beverage concentrate during the three-year period in a practice known as "channel stuffing" or "gallon pushing." The U.S. Justice Department closed a separate criminal inquiry into the matter on Monday without filing any charges. (See the SEC order and Coke's statement.)

Mary Minnick, the current chief of Coke's Asia division who was promoted last month to a powerful new role overseeing global marketing, innovation and growth strategies, said "our star is China. … This country is a pocket of excellence in our system." Overall volume there grew by 21%.

But sales in another key Asian market, India, have slowed considerably after Coke and its bottlers imposed a double-digit price increase late last year to cover rising costs. Coke said India's volume fell in the quarter.

In her new role, Ms. Minnick pledged to draw on her experience in Asia at quickly bringing new products to market. "We don't have a shortage of ideas," she said on the conference call. "We have a shortage of focus."

In morning trading on the New York Stock Exchange, Coke shares were up $1.53, or 3.7%, to $42.50.

The company was also holding its annual shareholder meeting Tuesday in Wilmington, Del.

Write to Chad Terhune at chad.terhune@wsj.com.

[HenryTo]

Looks like no disruptions as of now - the bottling system is still working fine. Perhaps these workers are living from paycheck to paycheck because real estate prices are so high in California? Hmmm...
--------------------------------------------------------------------------
Coca-Cola Plant Workers Go on Strike
Monday May 23, 11:55 am ET
By Kristen Wyatt, Associated Press Writer
More Than 2,000 Workers at Coca-Cola Bottling Plants in California, Connecticut Go on Strike


ATLANTA (AP) -- More than 2,000 workers at plants in California and Connecticut that bottle Coca-Cola soft drinks went on strike Monday, just before the start of the summer season.

The workers, mostly production workers and delivery drivers, were in contract negotiations with Coca-Cola Enterprises Inc., the world's largest beverage bottler. The workers walked out over the company's proposal that they pay more for health benefits.

Chris Roos, the leader of Teamsters Local 1035 in East Hartford, Conn., said the strike was planned the week before Memorial Day to pressure the company to negotiate or jeopardize summer sales.

"Within a day or two, you probably won't see too much Coke on the shelves," he said.

Despite the strike, the Connecticut plant was still running Monday. Asked if the strike would disrupt summer Coke deliveries, company spokesman Bob Lanz said, "absolutely not."

Union leaders say the workers have been arguing with management over health care costs since last fall. The bottling company has regional, not national, contracts with workers, which is why the strike was only in the two bottling plants. The two strikes are over separate contracts.

Coca-Cola Enterprises is a separate company from The Coca-Cola Co., though it produces 80 percent of Coca-Cola bottles and cans in North America. Bottlers buy concentrate from the Coca-Cola Co. and also contribute money for marketing the product.

Coca-Cola Co. owns a stake of roughly 37 percent in Coca-Cola Enterprises, which employs 74,000 people in 46 states.

Shares of Coca-Cola Enterprises rose 8 cents to $21.67 in morning trading on the New York Stock Exchange, while shares of Coca-Cola Co. fell 20 cents to $44.85 but are still comfortably above their 52-week low of $38.30.

David White of Teamsters Brewery & Soft Drink Conference said the 400 striking workers in Connecticut and 1,700 striking workers in Los Angeles were especially upset about health care plans for executives that White called "lavish."

The workers, whose average pay is $15 to $20 an hour, can't afford higher health care costs, White said.

"These are folks that live paycheck to paycheck, many of them. They're not well-to-do people. And you have the company giving out huge consulting contracts and lifetime health care coverage for departing executives and that doesn't seem to bother them," White said.

Lanz said the contract was fair and wouldn't raise health care costs for workers.

"We don't know why they're striking," he said. "We offered them a very, very competitive contract."

Another company spokeswoman, Lauren Sayeski, said the summer soft drink season wasn't in danger.

"We're business as usual right now. We prepared for this, and our customers won't be affected," she said.

John Sicher, editor of Beverage Digest magazine, said he doubted the bottling strikes would have immediate impact on the bottler.

"Every strike creates some disruption, but as of now the plants are still running," he said. "They're the biggest Coke bottler, and they have a pretty fair amount of experience with this kind of situation."

[HenryTo]

A positive development at KO for the first time in a long while (courtesy of WSJ). Don't forget that compensation consultants have their own agendas as well:
----------------------------------------------------------------------------
Coke Directors Agree to Give Up Pay
If Company Misses Earnings Goals

By CHAD TERHUNE and JOANN S. LUBLIN
April 6, 2006; Page A1

Coca-Cola Co. unveiled a radical new plan for compensating directors: eliminating their pay altogether unless the company hits financial targets.

The plan appears to be unlike any other at a major company, and comes at a time when rising pay for executives and directors has drawn fire from critics. But it was greeted with skepticism by some compensation experts who said prior efforts to tie pay to performance have given executives an incentive to focus too much on short-term gains.

Coke said it aimed to give directors the same incentives as shareholders and executives. Standard corporate practice is to award board members a mix of cash and stock regardless of how the company performs.

"This aligns the interests of shareholders and directors on both the upside and the downside," said billionaire investor -- and longtime Coke director -- Warren Buffett. "I've never seen a system as good as Coke has now."

Under its new plan, the Atlanta beverage giant will annually allocate "equity-share units," initially valued at $175,000, to each director. The units granted in 2006 can't be cashed until three years have passed -- and only if Coke posts compounded annual growth of 8% in operating earnings per share in 2006, 2007 and 2008. The value of the units can rise or fall depending on Coke's stock price.

Coke calculates that for directors to get paid, earnings per share will need to rise to at least $2.73 in 2008 from $2.17 in 2005. From 2003 through 2005, Coke's operating earnings -- the measure being used -- grew by 9.3% on a compounded annual rate.

The program, which takes effect immediately, replaces a more standard plan, under which directors got $50,000 in cash and $75,000 in share units each year -- plus other fees -- regardless of Coke's performance.

Greg Taxin, chief executive of Glass, Lewis & Co., a San Francisco investment research and proxy-advisory firm, said Coke's plan "sets up the wrong incentives" for directors by tying their pay completely to company performance. "I think it's a scary thing to have an audit committee have those incentives," Mr. Taxin said.


Corporate critics have said the lure of huge financial incentives tied to generous stock-based awards played a role in the wave of corporate scandals exposed earlier this decade, at companies such as Enron Corp. and WorldCom Inc., because executives and board members benefited personally from rising stock prices and weren't diligent about fraud. Indeed, partly in reaction to the scandals, big companies have been moving away from tying director compensation to corporate performance because of concerns it compromises independence.

Some experts said it could be harder for Coke to attract future directors, especially among academics, nonprofit group leaders and former government officials with limited incomes. "There are going to be people who take a hard line," said Charles H. King, head of the global board practice for recruiters Korn/Ferry International in New York. "They will say, 'My time is worth something. I'm not going to put my time at risk.'"

Moreover, tying pay to performance could create "economic disincentives to leave the board if you have a disagreement," said James Kim, a principal at pay consultants Frederic W. Cook & Co.

But Coke directors said they had considered such questions too, and concluded there was little risk. Directors began debating the approach late last year, said James D. Robinson III, the former head of American Express Co. who has been a Coke director since 1975 and heads the board's corporate-governance committee. They discussed whether earnings-per-share was too narrow a measure, but concluded it wasn't, he said.

Asked whether directors might be tempted to prop up short-term earnings growth, Mr. Robinson said: "The likelihood of that happening to meet a payout is very remote" because "you have a very responsible set of directors."

As for new directors, they will get a one-time cash payment of $175,000 as a sort-of signing bonus, Mr. Robinson said. If recruiting becomes a problem, he said, "we will deal with it.''

Mr. Buffett, who is leaving the Coke board this month, said he "would feel better about owning the stock of a company that had this kind of plan. It would not be the sole factor. But I like the idea of directors thinking with the same kind of calculus I would be using." He added that a strict pay-for-performance compensation plan might not be appropriate for directors of some companies that are struggling.

To be sure, most directors on Coke's star-studded and very stable board will barely feel the loss of their guaranteed pay. In addition to Messrs. Buffett and Robinson, Coke's board includes investment banker Herbert Allen, Internet mogul Barry Diller and James B. Williams, the retired chairman and CEO of SunTrust Banks Inc., which is a major Coke shareholder and keeps Coca-Cola's secret formula in a bank vault.

Given that, it's far from clear whether Coke's plan will catch on elsewhere or be seen as a one-shot. "I don't foresee this being widely adopted," said Mr. King of Korn/Ferry.

"A lot of companies would have difficulty selling this kind of plan," to prospective directors, said Mr. Kim. But he added that Coke may be an exception because it can attract directors with prestige as much as with money.

Still, Mr. Kim said, he knows of no other company that ties all of a director's compensation to performance. "It's not even a topic," in discussing director compensation, he said. A recent survey by the Corporate Library, an independent corporate-governance research organization in Portland, Maine., found just 2% of companies had a plan directly tying any director pay to company performance.

Under the plan, Coke's board can reset the three-year financial target each year or keep it the same. Coke spokesman Ben Deutsch said the earnings-per-share goal is likely to remain in place, but there is flexibility to use other measures in future years.

But Mr. Buffett said the board took the added step of making the performance target for the director's pay easily identifiable, in this case Coke's 2005 earnings per share of $2.17. "Corporations are famous for moving the target," he said. "This won't get gamed."

All additional cash that had been paid to Coke directors for attending meetings and heading board committees has been eliminated. For example, director Peter Ueberroth was paid $25,000 last year for heading the Coke audit committee.

The plan is the latest step taken by Coke to shake up its governance practices. In recent years, its board has been ahead of many others in expensing stock options and ending the practice of issuing quarterly earnings guidance.

At the same time, Coke directors have been criticized for granting lucrative payouts to departing executives at a time when company performance was lackluster. Last year, in response to pressure from investor groups, the Coke board said it would seek shareholder approval for severance agreements if the payout exceeds 2.99 times the sum of the executive's annual base salary and bonus.

Coke's senior executives currently receive a mix of salary, bonus, stock options and performance-based stock awards contingent on earnings goals over a three-year period, much like the directors' pay plan. Last year, Chairman and Chief Executive Neville Isdell received $6 million in salary and bonus. In February, Coke's board granted him 900,000 stock options and the ability to earn another 160,000 shares if Coke hits certain profit goals.

Coke shares were down 13 cents at $41.95 in 4 p.m. New York Stock Exchange composite trading.

[tranc3]

I predicted a value of $58.65311864
by December - 2007. This is because my estimated sales rises, while the estimated number of shares outstanding falls, meaning more value per share. That's why I got a high prediction...

I still wouldn't buy a KO stock. Too much bad publicity going on.

[stavos]

how can we know? You should date your articles.

[rffrydr]

Buffet, you sly old devil. Coke reinvents itself with "Coke Zero." That "zero" is worth anything but:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ax8C8egzfSUM&refer=home
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

rffrydr, you beat me to it! KO is now breaking out of its three-year trading range.

http://finance.yahoo.com/q/bc?s=KO&t=5y&l=on&z=m&q=l&c=