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. Dell's leaving on an Aero plane
Dell (Nasdaq: DELL  ) finally introduced the Aero, the meandering computer company's first stateside smartphone.

Strategically speaking, this makes more sense than the Streak tweener it put out last month. That gadget with its 5-inch screen is too cumbersome to be a phone, yet too small to be a workable tablet.

However, Dell's unfashionably late arrival into the smartphone space also deserves a fair deal of razzing. It's shipping with a dated version of the "me too" Android operating system software, packing a pedestrian spec sheet. Sans buzz, where's the demand going to come from?

Dell does have a large enough customer base to target the device to, but I'm guessing that even folks and corporations that lean on Dell for their tech hardware needs can spot smartphone obsolescence and skirt the pitch accordingly.

2. Click the "thumbs down" button twice
A bad earnings report is a bad earnings report, no matter what a company's executives may say.

"TiVo remains on solid financial footing, exceeding our revenue and earnings guidance and with a strong balance sheet," CEO Tom Rogers notes in the earnings release. He also points to "several strategic relationships in place that further demonstrate our growth plans" -- but there's the rub.

Mr. Market isn't always bright, but he can see through that quickly. TiVo (Nasdaq: TIVO  ) shares tumbled 6% yesterday on the news, as investors are scratching their heads in finding said growth.

Revenue and subscribers fell -- both sequentially and year over year. TiVo posted its sixth consecutive quarterly loss. TiVo is now down to less than 2.4 million subscribers, and that's 2 million fewer families of couch potatoes than it watched over when its popularity peaked four years ago.

If TiVo is as cool as it seems to be and brand-defining licensing deals continue to be inked, why isn't this showing up in the financials?

3. Losing the Halo effect
Value hunters buying GameStop (NYSE: GME  ) under the "shares can't get any cheaper" scenario may want to reconsider the floor.

Best Buy (NYSE: BBY  ) will begin accepting used video games as trade-ins for gift cards this week at 600 of its stores, and on Sunday will kick off a promotion where it's offering a $20 Best Buy gift card for trade-in on more than 100 of the most popular games.

The move and related gift card bonus prove that Best Buy is taking this venture seriously. This would be bad news for GameStop, since the small box retailer scores its thickest margins on trade-in resales.

A hungry giant in Best Buy will likely force GameStop to pay more to diehard gamers for used titles than it used to, especially if it doesn't want to run out of pre-played inventory.

4. Bad Jazz
Jazz Pharmaceuticals (Nasdaq: JAZZ  ) got slammed this week, after the FDA shot down a key drug in its pipeline.

It wasn't even close, as 20 of the 22 voting members of the Food and Drug Administration advisory committee struck down Jazz's treatment for fibromyalgia. This isn't the end of the line for drug, but approval will likely be harder and any shot at an eventual launch gets pushed out.

Jazz remains a profitable company, regardless of the nearly unanimous FDA head shaking. It's the only silver lining as the stock gets pounded.

5. Hey! You! Get off of my cloud-computing cloud
Until last night, Hewlett-Packard (NYSE: HPQ  ) had but locked up a slot on this week's list of smartest stock moves.

After all, HP seemed brilliant earlier this week in making a competitive bid on Dell-target 3Par (NYSE: PAR  ) , forcing Dell to come back with a sweetened offer.

Perfect! HP gets Dell to overpay for a cloud-based data storage specialist by raising a phantom bidding card. Dell needs 3Par more than HP does, since HP has already diversified from its hardware stronghold through its EDS and Palm acquisitions. The pressure is on Dell to stretch out into higher margin areas.

So what does HP do last night? Yikes! It comes back with the fourth bid in this battle, offering to buy 3Par for $27 a share. HP can afford the $1.8 billion, but paying 100 times next year's projected profitability for 3Par is as dilutive as it is unnecessary.

Unless this is a plot to get the more desperate Dell to drum up an even higher offer, HP is looking lost without Mark Hurd. Dell agreed to match HP's offer this morning, but I'll keep HP here until it finally pulls down its bidding card. 

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

Motley Fool Options has recommended writing covered calls on GameStop and a bull call spread position on Best Buy. The Fool owns shares of Best Buy, which is a Motley Fool Inside Value selection and a Motley Fool Stock Advisor recommendation. 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. Investors can learn plenty from both. Hdoes not own shares in any of the stocks in this story. Rick 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.


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  • Report this Comment On August 27, 2010, at 11:39 AM, ner25 wrote:

    I'm not convinced HP are playing all that dumb - by all appearances at the moment, Dell can be pushed even higher. Assuming that is their strategy...

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