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. Watch the road by the bear crossing sign
Talk about Mr. Market's overreaction! Green Mountain Coffee Roasters
The stock still took a 10% beating on the news yesterday, spooked by the Keurig single-cup brewer specialist's lukewarm profit guidance for the current quarter.
Let's roll that back. The company expects to earn less during fiscal 2010's initial quarter than Wall Street was expecting, but it still projects that profits for the full year will clock in ahead of analyst estimates. In other words, any shortcoming during the current period will be more than offset during the three subsequent quarters.
Investors shouldn't put too much weight in past results -- that's rear-view mirror investing. However, the market's Thursday reaction doesn't even look beyond the speed bump it's going over. Turn on those high beams, investors!
2. Where are the cheat codes when you need them?
These aren't merry times for the video game industry. Sales of hardware and software merchandise fell a brutal 19% in October, according to sector tracker NPD Group. Lower console prices and a larger installed base aren't helping.
Even Electronic Arts
EA expects that eliminating 1,500 employees will save it $100 million annually, but the pink slips come just as the company is bragging about gaining overall market share in the industry. That's a mixed message, EA. It's also not exactly a ringing endorsement for your peers.
3. And the pink slips keep on coming
EA wasn't the only public company slashing its payroll.
Sprint Nextel
Rubbing salt in the wounds of shrinking companies isn't cool, but shouldn't these companies have made these moves at the beginning of the recession, instead of what could very well be the end?
Pfizer's move is even more puzzling when you consider the nature of drugmakers. They need to keep their pipelines flowing, because it takes several years for a promising treatment to hit the market, with a host of FDA checkpoints that can kill a drug. Pfizer is unlikely to accomplish more with less.
4. No thank queue
Is Netflix
The deal may sound great on paper. Studios will have a month to market the retail purchase of DVDs before rentals cannibalize sales. Netflix will pay a lot less for DVDs.
How about subscribers? Netflix claims that roughly a third of the rentals through its site are for new releases. What's an extra four weeks once you've waited for months after a movie's theatrical release?
Unfortunately, everybody loses in this deal. Hollywood studios will have to spend on a third marketing campaign (after the theatrical and DVD releases). Netflix will see churn climb, especially if renegade services offer rentals earlier. Even if it applies some of the savings to build out its digital streaming service, the move will only further alienate subscribers who are strictly living off red mailers.
Managed dissatisfaction is not a game that Netflix wants to play.
5. Buy nook or by crook
Preorders for Barnes & Noble's
Unfortunately, scant anecdotal evidence suggests that the Nook is actually as popular as, say, Tickle Me Elmo. This may be a supply problem at B&N, or the bookseller may be trying to incite demand by tightening availability.
That would be bad news either way. The Nook looks like a great device, but a $259 gizmo can't afford to let the holiday shopping season go by without building a critical mass of users. Amazon.com
Get it right the first time, B&N.
Let's beat the dumb drum:
- Last week's boneheads.
- The previous week's empty heads.
- Last year's silliest CEO quotes.