Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five head-spinningly dumb financial events from the past seven days.
1. Video killed the networking star
Maybe you can't teach a old-media dog some new-media tricks after all.
Google is the undisputed champ of online advertising, but it's had its struggles in porting its model to more traditional forms of advertising. It has retreated or coped with setbacks in the print, radio, and now television ad markets.
You can rest easy, Howard Stern. Google is no threat to dethrone you as the king of all media.
2. You've got bail
Can you throw a wedding without the bride's consent?
The Wall Street Journal confirmed buyout chatter that's been circulating among financial blogs all month: Private-equity firms are trying to stage a buyout of Yahoo! (Nasdaq: YHOO ) , combining it with AOL (NYSE: AOL ) along the way.
There are many reasons to believe that this will never happen.
- The plan appears to have AOL CEO Tim Armstrong heading up the combined company, even though AOL commands a substantially smaller market cap than Yahoo!.
- Getting Yahoo! to play second fiddle will require a hefty premium on Yahoo! shares, which private-equity titans are unlikely to pay.
- Snapping up Yahoo! would likely involve selling its Asian investments, which could reportedly result in proceeds of roughly $10 a share. That's a reasonable strategy, but Yahoo! can also do the same thing itself if it really feels that its independence is at stake.
It takes three to tango here, and having AOL and private equity on board leaves this deal one dancer short.
3. Gap out of it
Folks can't let a stodgy retailer attempt a revival in peace.
The new logo was lousy -- too bland and corporate. However, Gap's decision to go back to the original theme shows just how out of touch the once-relevant apparel retailer has become.
This isn't Coca-Cola Classic revisited. Gap is responding only to its dwindling customer base by letting the online critics shape marketing. Gap's real target for the new logo should have been potential new customers -- folks who have no recollection of the earlier icon.
Gap was great a decade ago, when shoppers stormed its stores to load up on stylish basics and denim. Once discount department stores caught on to the "cheap chic" movement, Gap was toast. A company that claims to be fashion-forward shouldn't be looking backward.
4. Heavy medal
Shares of Electronic Arts (Nasdaq: ERTS ) took a hit earlier this week, after a Cowen & Co. analyst drew investor attention to the disappointing reviews of EA's Medal of Honor video game.
Earlier this month, EA was bragging about pre-sales clocking in ahead of any installment in the franchise's 11-year history. However, that enthusiasm cooled off when the game hit retailers on Tuesday, and reviewers with advance copies began talking.
IGN wrote that the game "walks into a quagmire it never really escapes from." Game Informer concludes that "it's no secret that the franchise has lost its way over the years."
EA needed a hit to revive its prospects. Like many of its gamers, EA's shares have been stuck in the teens for too long. This battlefront shooter could have been the big hit that EA needed heading into the holiday season. Now gamers will just wait for rival Activision Blizzard (Nasdaq: ATVI ) to roll out the latest installment in its more popular Call of Duty franchise next month.
5. A cup of Joe
When a hedge fund manager talks, investors don't always listen. Long or short, there's usually an agenda behind any public cheerleading or bashing.
Even when it was a run-of-the-mill paper company (pun intended), value investors were warming up to St. Joe for its massive acreage in the Florida panhandle. However, now that real estate prices have been plunging for years, the same folks who felt that St. Joe's book value was understating its assets are now starting to wonder whether it's overstating the diminished value of its Florida real estate. Einhorn showed his math, and while bulls may nitpick over his methodology, impatient investors won't stick around, in case St. Joe does have to mark down its assets.
Maybe it's not too late to fire up the paper mill again.
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.