Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five head-spinningly dumb financial events from the past seven days.
1. Video killed the networking star
Maybe you can't teach a old-media dog some new-media tricks after all.
NBC has bowed out of Google's
Google is the undisputed champ of online advertising, but it's had its struggles in porting its model to more traditional forms of advertising. It has retreated or coped with setbacks in the print, radio, and now television ad markets.
You can rest easy, Howard Stern. Google is no threat to dethrone you as the king of all media.
2. You've got bail
Can you throw a wedding without the bride's consent?
The Wall Street Journal confirmed buyout chatter that's been circulating among financial blogs all month: Private-equity firms are trying to stage a buyout of Yahoo!
There are many reasons to believe that this will never happen.
- The plan appears to have AOL CEO Tim Armstrong heading up the combined company, even though AOL commands a substantially smaller market cap than Yahoo!.
- Getting Yahoo! to play second fiddle will require a hefty premium on Yahoo! shares, which private-equity titans are unlikely to pay.
- Snapping up Yahoo! would likely involve selling its Asian investments, which could reportedly result in proceeds of roughly $10 a share. That's a reasonable strategy, but Yahoo! can also do the same thing itself if it really feels that its independence is at stake.
It takes three to tango here, and having AOL and private equity on board leaves this deal one dancer short.
3. Gap out of it
Folks can't let a stodgy retailer attempt a revival in peace.
The new logo was lousy -- too bland and corporate. However, Gap's decision to go back to the original theme shows just how out of touch the once-relevant apparel retailer has become.
This isn't Coca-Cola Classic revisited. Gap is responding only to its dwindling customer base by letting the online critics shape marketing. Gap's real target for the new logo should have been potential new customers -- folks who have no recollection of the earlier icon.
Gap was great a decade ago, when shoppers stormed its stores to load up on stylish basics and denim. Once discount department stores caught on to the "cheap chic" movement, Gap was toast. A company that claims to be fashion-forward shouldn't be looking backward.
4. Heavy medal
Shares of Electronic Arts
Earlier this month, EA was bragging about pre-sales clocking in ahead of any installment in the franchise's 11-year history. However, that enthusiasm cooled off when the game hit retailers on Tuesday, and reviewers with advance copies began talking.
IGN wrote that the game "walks into a quagmire it never really escapes from." Game Informer concludes that "it's no secret that the franchise has lost its way over the years."
EA needed a hit to revive its prospects. Like many of its gamers, EA's shares have been stuck in the teens for too long. This battlefront shooter could have been the big hit that EA needed heading into the holiday season. Now gamers will just wait for rival Activision Blizzard
5. A cup of Joe
When a hedge fund manager talks, investors don't always listen. Long or short, there's usually an agenda behind any public cheerleading or bashing.
However, shares of St. Joe
Even when it was a run-of-the-mill paper company (pun intended), value investors were warming up to St. Joe for its massive acreage in the Florida panhandle. However, now that real estate prices have been plunging for years, the same folks who felt that St. Joe's book value was understating its assets are now starting to wonder whether it's overstating the diminished value of its Florida real estate. Einhorn showed his math, and while bulls may nitpick over his methodology, impatient investors won't stick around, in case St. Joe does have to mark down its assets.
Maybe it's not too late to fire up the paper mill again.
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
Google and Coca-Cola are Motley Fool Inside Value selections. Google is a Motley Fool Rule Breakers pick. Activision Blizzard and Electronic Arts are Motley Fool Stock Advisor recommendations. Coca-Cola is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended a synthetic long position on Activision Blizzard. The Fool owns shares of Activision Blizzard, Coca-Cola, and Google. Try any of our Foolish newsletter services free for 30 days.
True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.
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.