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. You've got bail
Anticipates? Initiate? Oh, please. Go ahead and rip off that Band-Aid once and for all. History is already snickering at the colossal collapse in market value as a result of the ill-timed merger between Time Warner and America Online nine years ago. Now we can begin laughing at the ill-timed divestiture.
It could have cashed out of AOL when Google
This isn't what investors mean by "buy low, sell high," Time Warner.
2. The E*Trade Baby needs a diaper change
Shares of E*Trade Financial
The silver lining here is that E*Trade is as popular as ever with consumers. It added 63,000 net new brokerage accounts during the quarter. Its larger rivals may have gobbled up more traders, but at least its rolls are ascending. Unfortunately, fears of the implications of raising capital loom larger at this point.
3. Putting the "buck" in Starbucks
It has to, of course. When the world's largest fast-food chain is wallpapering Seattle with a "four bucks is dumb" billboard as it plugs its entry into the realm of lattes and cappuccinos, Starbucks can't stand still.
However, instead of responding by proving the worth of its beverages, Starbucks is back with more markdowns. Its latest promotion will be grande-sized iced coffees for less than $2. The company is also positioning its lower-priced Seattle's Best Coffee chain as a growth vehicle.
Price cuts may be a reasonable tactical move in a penny-pinching economy, but it's really the point of no return for Starbucks. It is now paying the price for the mother of all contradictions: over-expanding a premium concept.
4. Limelight sheds sublime light
Now it's time to hand out a dumb award to Mr. Market. After all, when Akamai
Are you kidding me? $45 million, in of itself, isn't a huge sum to a content-delivery network titan like Akamai. However, reversing the patent infringement victory opens Akamai up to more low-priced competition. That isn't good, regardless of the market's appetite for Akamai.
5. The over-under on Under Armour
Investors loved Under Armour's
Now let's get into why the company is in this week's column. Apparel sales -- which still make up two-thirds of Under Armour's business -- grew by just 2% during the period. Nearly all of the growth came from the company's nascent athletic footwear lines.
There's nothing wrong with expanding a brand. There is certainly nothing ugly about widening margins during the new push. However, Under Armour's activewear still defines the company. If folks are tiring of its sweat-shredding clothing, as a mere 2% year-over-year gain suggests, it's time to begin worrying about the shelf-life of the UA brand itself.
Let's beat the dumb drum:
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Akamai Technologies, Google, and Under Armour are Motley Fool Rule Breakers selections. Starbucks is a Motley Fool Stock Advisor pick and a Motley Fool Inside Value recommendation. Under Armour is a Motley Fool Hidden Gems pick. The Fool owns shares of Starbucks and Under Armour. Try any of our Foolish newsletters today, free for 30 days.
Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. He does 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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