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 head-spinningly dumb financial events from the past seven days.
1. Like a Rosetta stoned
There's a cardinal rule among IPOs: Don't disappoint investors during your rookie season. It sets the wrong tone, and obliterated trust sometimes takes years to restore.
Well, Rosetta Stone
Rosetta blames marketing mistakes and out-of-control research and development costs for the bottom-line cutback. It still expects sales to hold up, which makes these wounds truly self-inflicted. If Rosetta Stone can't keep its costs in check, how the heck is it going to teach me Mandarin?
2. Time Warner times three
Let's go with three blunders for the price of one. Time Warner's
- Just one of the country's four largest free email services -- Time Warner's AOL -- faded in popularity over the past year. Don't be surprised. AOL has been neglecting its dial-up service over the years, which has a way of dinging brand prestige. It's a sad day when you can't even give away an AOL email address.
- Time Warner's movie studio is trying to keep distributors from providing its latest releases to the two fastest-growing DVD renters in the country. Time Warner hopes to sell more DVDs that way, or at the very least force couch potatoes into pricier pay-per-view sessions. Is Time Warner so cocky that it thinks Redbox renters won't wait a month? All this will do is force Time Warner into a third marketing campaign (after the theatrical and initial DVD release) to interest thrifty disc renters.
(NYSE:CBS)is promoting its new fall season by inserting a costly cardboard ad into Time Warner's Entertainment Weekly next month, equipped with a special chip and screen that play a full 40 minutes of video! It sounds cool, but it's so expensive that CBS is only offering this to select subscribers in Los Angeles and New York. Now that everyone is finding out about this campaign, Time Warner will have a lot of unhappy subscribers outside of those two cities.
Sure, that last one isn't Time Warner's fault, but the company will still have to deal with ire and potential cancellations from subscribers in the majority who don't get the much-touted new ad.
3. Bing! Fries are done
A scorching report shows that nearly 90% of the drugstore ads that pop up on Microsoft's
Prescription drug keywords offer some of the juiciest rates for search engines, so Microsoft has some serious-soul searching to do if the report is accurate. The exclamation point here is that even with questionable advertisers, Microsoft is still losing money online.
There has to be something Microsoft can take to make it forget about its dot-com's profitability shortcomings. I know just where the company can get it, too.
4. The game only gets harder from here
Three months ago, GameStop expected a profit of $2.83 to $2.93 a share this year. Yesterday's revised outlook calls for earnings of just $2.40 to $2.64 a share. It only missed analyst expectations by $0.05 a share during the second quarter, so you know where most of this carnage will come from.
Hold on tight, gamers.
5. Some price cuts will never heal
In a desperate move to delay its eventual irrelevance, Sony
Big mistake, Sony. Did you catch GameStop's gruesome "dumb move" in our previous item? Folks are buying fewer games, and GameStop at least has the benefit of its thriving resale business (where Sony doesn't get a cut the second time a tired title is resold).
Now that even more retailers are jumping into the resale market, and gamers are often settling for free Facebook games and smartphone apps to take the edge off their gaming needs, Sony's price cut seems like loaning your deadbeat cousin a hundred bucks. It may feel like you're doing the right thing, but you'll never see that money again.
Let's beat the dumb drum:
Baidu is a Motley Fool Rule Breakers recommendation. GameStop is a Motley Fool Stock Advisor selection. Microsoft is a Motley Fool Inside Value pick. 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. 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.