This Week's 5 Dumbest Stock Moves

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. Kin dull
The average life span for a creepily marketed Microsoft (Nasdaq: MSFT  ) smartphone is six weeks, apparently. The world's leading software company is killing off its Kin, presumably because the funky-shaped handset with a passion for social networking failed to catch on.

It seems that I wasn't the only one squirming when the original ad found Rosa Salazar going through the country to meet her online "friends" in real life. Was this really enough to build a smartphone tethered to a costly data plan?

But at the same time, why does the Kin get swiped from the crib while the Zune toddler is allowed to meander through Redmond largely unnoticed?

What kind of message will this send to wireless carriers as Microsoft tries to beef up its mobile operating platform? Microsoft is cash-rich enough to afford failure but execution-poor enough to blow it again and again.

2. Barnes burner
Barnes & Noble (NYSE: BKS  ) isn't much of a page-turner these days. The bookstore giant posted a widening deficit of $0.89 a share before extraordinary items in its fiscal fourth quarter. The superstore chain is targeting a similar loss for its current quarter.

The company is growing nicely in cyberspace, where a 51% spurt helped deliver an overall 19% gain in sales. Unfortunately, its bread-and-butter bricks-and-mortar empire isn't holding up so well. Barnes & Noble suffered a 3.1% slide in comps at the retail store level.

It's not easy selling physical books these days, but Barnes & Noble makes this week's list by projecting positive comps at its fading stores for all of fiscal 2011. Really? The e-book revolution is what's been fueling its online growth, and the bookworm baiter is doing its best to wean shoppers from actual books by launching last week's price war on e-book readers.

I think it's making promises that its registers won't be able to keep.

3. Yahoo!'s your sugar daddy?
If nobody wants shares of Yahoo! (Nasdaq: YHOO  ) , the dot-com giant will eat alone. The search-engine pioneer announced an ambitious share-buyback plan this week. Yahoo! is hoping to repurchase as much as $3 billion worth of its stock over the next three years.

I hate to look a gift buyback in the mouth, but is this the best use of the company's money? It had $4.2 billion in cash and marketable securities at the end of the first quarter. Giving itself three years of generating gobs of free cash flow will help keep the impact on its balance sheet at a minimum, but this is an arms race.

Because Yahoo!'s stock hit a 52-week low this week, it's not as if it can use its shares as legal tender. The company will need to go shopping for growth to help offset the organic sluggishness on the top line.

4. Shock a Hulu  
The tollbooths are being erected at Hulu. The popular video site -- which, unlike YouTube, is stocked exclusively with clips from cable and broadcast networks -- is rolling out Hulu Plus.

Folks willing to pay a subscription of $9.99 a month will be treated to a deeper catalog of content than on the free site. They will also be able to stream in high-def across a series of new platforms.

The free, ad-supported site will continue, so I'm not sure there's much of a market for a pay option. Then again, I don't think Hulu knows its market all that well. The hydra-headed ownership of Hulu -- with media heavies News Corp. (Nasdaq: NWS  ) , Disney (NYSE: DIS  ) , and NBC parent General Electric (NYSE: GE  ) as stakeholders -- can prove a bit disorienting.

Check out this quote from the company's CEO, pertaining to how Hulu Plus will work seamlessly among different leisure appliances.

"You can start watching a show on your HDTV one night, pick up where you left off on your laptop at lunch, watch another chunk on the bus ride home on your iPhone, and finish watching in bed on your iPad," Hulu CEO Jason Kilar says.

Really? You have a high-def TV and an iPhone, and you choose your laptop over the more portable iPad during lunch, yet you still have to take a bus to get home? Does that person even exist?

5. Google yourself
Google (Nasdaq: GOOG  ) continues to dig itself into a deeper hole in China. With its Google.cn license up for renewal this week, Big G has decided to stop automatically redirecting visitors to its unfiltered site in Hong Kong in a move to appease regulators.

As of now, Google has its Google.cn landing page back up, but with a link to its unfiltered Hong Kong platform.

This is unlikely to be enough to appease regulators, forcing Google to either eat crow by providing censored search in China or walk away but without all of its karma points intact

Which of these five moves do you think is the dumbest? Share your thoughts in the comments box below.

Walt Disney and Microsoft are Motley Fool Inside Value recommendations. Walt Disney is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google, which is a Motley Fool Rule Breakers selection. Try any of our Foolish newsletter services free for 30 days. That certainly wouldn't be a dumb move.

Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves alike, because investors can learn plenty from both. He owns shares of Disney and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (12)

Comments from our Foolish Readers

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 July 08, 2010, at 7:58 PM, n8larson wrote:

    "Really? You have a high-def TV and an iPhone, and you choose your laptop over the more portable iPad during lunch, yet you still have to take a bus to get home? Does that person even exist?"

    Yes. In Seattle, San Francisco, and New York, among other places, there are plenty of well-deviced people who choose to commute by bus (or train) even though they can afford to drive. It's not a giant demographic, but it must be big enough for Hulu to target it.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1224229, ~/Articles/ArticleHandler.aspx, 9/23/2014 8:45:40 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement