This Week's 5 Dumbest Stock Moves

Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five dumb financial events this week that may make your head spin.

1. A $15 mistake
Delta (NYSE: DAL  ) became the sixth of the six legacy carriers to begin charging passengers for checked baggage. Delta will now hit fliers with a $15 fee on the first checked suitcase (second bags will set passengers back another $25). Even though the carrier is pairing this move with a scaling back of other fees, this is always the fee that gets publicized the most.

What are you thinking, Delta? Falling fuel prices will make running a carrier, profitably, so much easier. Introducing a new fee at this point just feels like gouging, especially given the effective Southwest ads poking fun at the fees. Delta could have been the lone holdout to this practice, but now it's simply seen as a late follower. Then again, going by the timeliness of flight arrivals and departures throughout the industry these days, aren't they all late followers?

2. The $1,600 question
Herman Miller (Nasdaq: MLHR  ) sure has moxie. The corporate furniture specialist that set the opulence standard with its Aeron chairs is now raising the stakes with its $1,600 Embody chair.

The skeletal spine-contoured chair supposedly offers comfort breakthroughs that promise to make sitters more productive, but it sure picked a lousy time to roll out a piece of furniture that costs roughly twice as much as the once ballyhooed Aeron. Companies are laying people off and scaling back on office spending. The public is skeptical after bailing out the banking industry and wants to make sure that money isn't being blown on executive bonuses, resort junkets, or $1,600 chairs. I don't care how good the Embody's lumbar support is, this is not the time to introduce office luxury.

3. No more "rent to own" at Netflix
If you're a fan of picking up used DVDs through Netflix (Nasdaq: NFLX  ) for as little as $5.99 delivered, start looking elsewhere. Netflix will stop selling pre-viewed discs by the end of the month.

The logic may be sound. Studios don't want cheap secondhand product on the market. Netflix wants to focus on the rental experience. There is money to be made by simply unloading a surplus of fading releases to a wholesaler. However, this forces Netflix subscribers to hit local DVD rental chains, rival e-tailers, and real world closeout superstores for celluloid bargains. For a company that prides itself on convenience, why is it sending its subscribers out to the very establishments it seeks to supplant?

4. You've got hate mail
A few years ago, AOL decided to tear down the wall. Instead of pushing its profitable dial-up access service, Time Warner's (NYSE: TWX  ) site would be refashioned as a free destination and make it up in online ad volume.

As you can imagine, paying AOL subscribers have been plummeting on a quarterly basis for years. Growth in Web ads hasn't been enough to offset the revenue lost in the migration away from America Online, but at least it was -- yes, was -- growing. Online ad revenue at AOL fell by a head-scratching 6% this past quarter.

I got it! Build a new wall! Charge people to see those same ads! Not a good idea? I know. Besides, AOL beat me to it. It's called America Online.

5. Use the salesforce, Luke
The name salesforce.com (NYSE: CRM  ) is synonymous with cloud computing, given the way the company has revolutionized enterprise software with its cheaper, server-hosted customer relationship management solutions. Well, now it's launching Force.com in a move to host third-party apps.

It makes sense, given the company's established relationships with forward-thinking clients. Unfortunately, salesforce is breaking into this space just days after Microsoft (Nasdaq: MSFT  ) rolled out Azure and years after Amazon.com (Nasdaq: AMZN  ) won over the IT citizenry with its booming Web Services. It's the right company with the right product, only it's coming in at the wrong time.

Let's beat the dumb drum:

Microsoft is a Motley Fool Inside Value recommendation. Netflix and Amazon.com are Motley Fool Stock Advisor recommendations. It would be a smart move to try one of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. Hdoes not own shares in any of the stocks in this story, save for Netflix. Rick is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy worked one summer as a car hop.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2008, at 5:58 PM, tarkill wrote:

    Why do you expect airlines to drop fares as soon as the price of oil drops? Delta has absorbed millions of dollars in lost revenue due to the high price of oil over the past 20 months. The meager fare increases barely put a dent in those losses. Now that the fuel prices are lower, why shouldn't they get the chance to recoup some of those losses? And, if everyone else is recouping losses by charging a checked bag fee, why can't Delta? That's probably what they were thinking.

  • Report this Comment On November 10, 2008, at 1:13 AM, Frankster13 wrote:

    I love hearing all these people running their mouth that have no understanding of the industry or economics. Including business media.

    Anything an Airline can do to get the price of a ticket down means they have a better chance of showing up on a search. If you can lower the price by $15 and charge them if they have a bag then you have a lower ticket fare. It is all search engine driven, six bucks less for a pillow means you pop up on the screen....six bucks more and you would never even be seen as an option. It is all about the lowest fare and the search engine listing.

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