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. There will be blood
"I'm finished," are the final lines of Daniel Day Lewis' ruthless Daniel Plainview character in There Will Be Blood, and now Microsoft (NASDAQ: MSFT  ) is saying that it's Finnish. The software giant struck a roughly $7.2 billion deal to buy Nokia's (NYSE: NOK  ) devices and services business.

It's been speculated that Nokia had finally seen the light, realizing that it was a trap to accept Microsoft's money to back the fledgling platform in the first place, and gearing to move on to the Android standard. Microsoft's Windows Phone would've been toast.

However, buying a hardware company essentially does the same thing. Samsung and HTC will likely abandon the halfhearted support that they were showing Windows. It will be all on Nokia now, and that's probably not a good wager.

Yes, Android's parent did the same thing when it snapped up Motorola's handset business, but it was the open source platform of choice. No one was going to turn its back on that money tree. It will be easy to do that to Microsoft now.

2. Come back to the penalty box, Mr. Softy
We can't let Microsoft get off that easily. Let's also talk about announcing Nov. 22 as the availability for the Xbox One. There's plenty riding on its new gaming console, and the $500 price tag -- $100 more than the PS4 and $200 more than the recently reduced price of the deluxe Wii U -- leaves little margin for error.

Yes, it's great that Microsoft is putting out its machine a week before Black Friday. You certainly don't want to hit the market after the shopping holiday season begins. However, the PS4 is coming out on Nov. 15. What can Microsoft gain by coming out a week after its rival?

Sure, the plan will work if the PS4 is scarce or critically panned, but wouldn't the same thing happen if Microsoft had put its machine out a week or two before the PS4? There are no bragging rights in being the last console to hit the market, especially if you're also the most expensive.

3. This won't look good on your resume
LinkedIn 
(NYSE: LNKD  ) didn't need the money, but it still went ahead with a secondary offering. Yes, it raised $1.2 billion by selling nearly 5.4 million shares, but there's something wrong about announcing a secondary when your stock is at $246.13, and then pricing the freshly minted shares at $223. 

The difference -- in market cap -- is $2.6 billion, or more than double the amount that was ultimately raised.

However, what really has to leave you scratching your head is how the shares bounced back to hit an all-time high on Thursday. Isn't an unnecessary secondary offering after a strong rally an implication that the board feels that the shares are priced dearly? 

4. YuMe and everyone we know
YuMe 
(NYSE: YUME  ) was shown some analyst love this week, but it's largely irrelevant. Sure, shares of the online advertising company initially moved higher on news that Citi, Piper Jaffray, Needham & Co., and Deutsche Bank all began coverage with buy ratings. However, the important distinction here is that these are the same four companies that took YuMe public at $9 last month.

Of course, the underwriters are going to be bullish about a company that they priced at $9 a share and had fallen to $8.48 to start the week. Anything else would've invited angry clients that were sold stakes in the now-busted IPO.

Thankfully, the market's smarter than that. Shares of YuMe had fallen every single day this week heading into Friday.

5. This frog is no prince
Shares of LeapFrog  (NYSE: LF  ) slipped on a lily pad after an analyst downgrade that may not seem fair. BMO Capital Markets is also lowering its price target -- from $15 to $10 -- on fears that the electronic learning toy maker's LeapPad Ultra may not be the holiday hit that bulls are hoping for.

The $150 kid-friendly tablet does face a more competitive market than its LeapPad and LeapPad 2 predecessors did over the past two holiday shopping seasons. However, BMO pointing to glitches that it has come across, fly in the face of the initial wave of customer reactions. LeapPad Ultra's customer ratings on Amazon.com aren't all that different than the favorable critiques that the first two incarnations have received. 

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  • Report this Comment On September 06, 2013, at 9:38 PM, techy46 wrote:

    Microsoft just pulled off it's best acquisition in the last decade. It probably equals the Ruby (Visual Basic) or Sybase (SQL Server) deals. MS can now use Nokia's world class hardware design and patents to do what Dell and HP failed at doing. MS can now bring featured and smart phones to match Lenovo and Toshiba's notebooks and tablets. Dell and HP can still provide enterprise client PCs to go along with their server lines which Lenovo and Toshiba have no answers. You fools need to stop looking at everything through apple colored consumer glasses. Hhow's that iTV and IWatch coming along?

  • Report this Comment On September 06, 2013, at 10:50 PM, H3D wrote:

    @techy46

    Come on, the market has spoken.

    MS paid $5B for Nokia and the market knocked $12B off the value of MS

    Now if MS had announced that they were pulling out of mobile, the market cap would probably have gone UP $12B

    The Surface has failed. Both versions. There'll be another Billion dollar write down this quarter. And nobody wants Windows phone. The marketing bill per phone is off this planet.

    The only way Ballmer has been able to raise the price of his stock, is to resign.

    Cut the marketing BS and get real.

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