Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. Shopping with Mr. Softy
Windows 7 isn't the only thing new at Microsoft (Nasdaq: MSFT ) . The company opened its first Microsoft Store at an Arizona shopping mall yesterday. It also began selling third-party Windows-based computers on its website.
You're not Apple (Nasdaq: AAPL ) , Microsoft. You will never be Apple. Some will argue that you should never even aspire to be Apple.
As a software company, you risk alienating the hardware makers who may feel slighted by the placement of their products in your online store. Even if the "7 days of Windows 7 savings" may make the online storefront little more than a traveling trunk show -- gone in a week like the flu -- this still doesn't heal the retailers and manufacturers that aren't participating.
These same third parties may also question the logic of the more permanent Microsoft Store in mallrat form. The world's leading software giant is obviously going to showcase its wares, Xbox 360s, and homegrown gadgets, but if Microsoft's head gets too big, many of its partners will begin dabbling in other operating systems.
2. No mas, Citigroup
Citigroup (NYSE: C ) is running into a little turbulence south of the border. It may have to sell its 30% stake in Banamex, as the Mexican government appears ready to flex the muscles of a law that prohibits state-owned banks from operating in Mexico.
Taxpayers applauding the opportunity for Citi to sell an asset that could raise as much as $20 billion may want to hold their clapping until the end of the performance. Forced sales aren't always on favorable terms. The sale would also put even more pressure on Citi to turn its domestic operations around if it's going to deliver the gains worthy of its recent stock gains.
3. Yahoo! inside?
Yahoo! (Nasdaq: YHOO ) delivered better-than-expected results this week, but there's a quote from the conference call just dying to be let into this week's column.
I hear it knocking, so I may as well let it in.
CFO Timothy Morse filled in at the last minute for a flu-ridden Carol Bartz, but that's still no excuse for comparing his company's decision to outsource its basic search technology through Microsoft's Bing to the ability of PC makers to differentiate their products using Intel's (Nasdaq: INTC ) microprocessor.
"An Intel chip is used in Dells, HPs, and Macs to provide the computation needed to operate them, but the differentiation between these products isn't at the chip level: It's in the different user experiences that are provided on top of them," Morse explained. "It's the same for us in search. We will innovate on top of the results that are provided to us by Microsoft."
Outside of Macs, most PCs are pretty much the same, beyond HP's disc-labeling features and its new line of touchscreen systems. I'm guessing Yahoo! is saying that it can be the Apple of search, and it can do it by standing on top of Microsoft. Doesn't the analogy pretty much fall apart there? If not, one has to wonder why Yahoo! is going with Microsoft, a company that is barely the AMD of search.
4. Winning to lose
After six straight months of year-over-year declines, the video game industry finally gained ground. Industry watcher NPD Group estimates that gamers rang up $1.28 billion in hardware and software sales last month, marginally ahead of the $1.27 billion it delivered last year.
Is this really cause for a victory lap? Let's not dwell on the fact that a negligible 1% increase isn't even much of a match to keep up with inflation. There were a lot of heavy hitters out in full force last month:
- The Wii announced a 20% price cut on its console, joining recent PS3 and Xbox 360 markdowns. Systems should have been flying off the shelves.
- The latest installments in the popular Guitar Hero, Wii Sports, and Rock Band franchises hit the market, with Viacom's (NYSE: VIA-B ) ballyhooed The Beatles: Rock Band promising to introduce music games to an older, nostalgic generation.
If all of the stars aligned and the results were essentially flat, I dread what the holidays will bring.
5. Backs to the Wal-Mart
Wal-Mart (NYSE: WMT ) is coming out swinging this holiday season. Unfortunately, it's swinging a chainsaw.
Wal-Mart got into the seasonal sale spirit early on Wednesday, launching its first wave of price cuts. The world's leading retailer will introduce a new wave of crowd-drawing slashes every week. Who needs Black Friday when you can have Black October?
Consumers will love this. You and I will be able to get some pretty sweet gift deals this season -- as if $8.99 hardcover best-sellers aren't enough. However, Wal-Mart's flinch is going to cost retailers. Margins are going to be crummy during the historically potent holiday quarter. If you see mall tenants crying on Santa's lap come December, you'll know why.
Let's beat the dumb drum:
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