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. Scout's dishonor
Shares of NetScout (Nasdaq: NTCT ) fell 19% after the website uptime specialist warned that it would come up short on both ends of its income statement in the quarter that ended last week.
Companies warn all of the time, but NetScout makes the cut in this esteemed list this week because of its timing.
NetScout issued the press release Monday night at 8. The July 4 holiday would seem to be a great time to push through some bad news. Everyone's away from CNBC, scraping their grills clean or watching fireworks. However, if NetScout really wanted to sneak this past Mr. Market, wouldn't it have been better to go with Friday night, when the next trading day was four days away?
2. Whittling wireless
Verizon (NYSE: VZ ) finally nixed unlimited data plans for new smartphone customers yesterday.
The logic may appear sound. Smartphone owners are sucking down a whole lot of data, and a smorgasbord mindset bogs down network capacity. A tiered approach makes sure that a carrier's data hogs aren't being subsidized by casual subscribers.
Unfortunately for Verizon, buffet pricing sells even for the light eaters who simply want peace of mind that they're not on the clock. Rival AT&T's (NYSE: T ) decision to move to a tiered approach last summer hasn't been much of a growth catalyst for Ma Bell. Instead of standing out from the competition, Verizon is once again taking an ill-advised path following AT&T's footsteps.
3. News of the whirled
Well, that was a quick way to flush 168 years of history down the drain.
News Corp. (Nasdaq: NWSA ) announced that it would be shutting down its historically resilient yet recently highly controversial News of the World publication.
Troubling accusations that Britain's biggest-selling Sunday publication was hacking cell phones of celebrities, abducted children, and families of deceased military personnel were snowballing out of control.
Advertisers and subscribers were cutting ties with the publication, but nixing it entirely is more than a bit extreme.
The popular theory is that Rupert Murdoch's News Corp. is trying to buy full control of British satellite broadcaster BSkyB. The tabloid's notoriety would likely get in the way of achieving that objective. Still, after practically giving away MySpace last week, it now shutters an iconic publication instead of smoking out a buyer? As incensed as the readership may be, gossip clearly still sells.
Murdoch's apparently holding the mother of all garage sales. What will News Corp. dump next?
4. Lumber parting
Folks just aren't interested in putting in hardwood flooring these days.
Lumber Liquidators (NYSE: LL ) was a big loser yesterday, after the flooring retailer hosed down its near-term outlook.
The chain now sees net sales climbing 4% for the recently concluded quarter, with profitability falling by more than a third. Gross margins took a beating on promotional markdowns, and high transportation costs didn't help. Demand also walked the plank, as same-store sales fell 8%.
The rub for Lumber Liquidators is that it's shaving $30 million off its top-line guidance for all of 2011, roughly double the second quarter's shortcoming. In other words, the softness may linger.
5. To Russia with underwritten love
Yandex (Nasdaq: YNDX ) went public at $25 just a few weeks ago, and now the five analysts that helped take Russia's leading search engine public are out with largely bullish notes.
With the exception of a cautious Goldman Sachs, the four remaining firms are chiming in with near-term price targets between $40 and $45. Why not? The stock is already trading in the mid-$30s.
This game is getting old. We already know that underwriters are going to storm the scene with bullish calls once they are eligible to initiate coverage. However, these convenient price targets are getting old. If these analysts thought that Yandex would be worth as much as $45 in a few months, why let the dot-com darling go public at $25 in May?
Just say "nyet" to analyst games.
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
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