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. Revenge of the stream-nots
Shares of Netflix
I'm all for Netflix raising prices. If your cable provider and corner multiplex bump prices higher every year, why shouldn't Netflix get in on the margin-widening fun?
However, Netflix appears to be making a crucial mistake by raising the price of all of its plans, except for the entry-level DVD plan that doesn't include unlimited streaming. By doing this, Netflix is telegraphing that costs to ramp up its growing digital library are behind the price hike. The problem here is that 34% of its subscribers aren't streaming at all, and we don't know how many of the other 66% were streaming only because it was made available at no additional cost.
How will a third of Netflix subscribers react to subsidizing the streaming couch potatoes? If a buffet operator raises his prices after adding a jumbo shrimp station, would those with shellfish allergies keep coming back?
Keep an eye on churn at Netflix after the new prices go into effect come January.
2. Soupy sales
Soup spoons are collecting cobwebs in the utensils drawer.
Wasn't soup supposed to be recession-proof? Campbell sells affordable comfort food, so either consumer tastes are changing or the competitive environment has gotten so cutthroat that even the mighty Campbell is seeing stars -- and not the variety that come packaged with broth and tiny chunks of chicken.
3. The wizard of Woz
Shares of Nuance Communications
This would be newsworthy if Steve Jobs made the slip, but we're talking about Apple's other co-founder, the one who watches objectively at a distance these days.
Nuance would be a somewhat decent fit for Apple, since it provides the voice recognition platform used by many of the popular third-party apps being downloaded through Apple's App Store. There are some Android-based ties that may be problematic for Nuance, but it wouldn't be a shock if Apple did snap up Nuance at some point next year.
However, the point is that the stock spiked when the wrong Steve misspoke. Before the rumor-fueled jump, the stock had actually headed lower based on a cautious outlook after an otherwise solid quarterly report Monday.
Always consider the source.
4. Speed kills
We live in competitive times for broadband and breakneck speeds. Verizon
Flying at download speeds of 150 megabits per second, this becomes the fastest mass-market broadband offering in the country, according to the company's press release. Unfortunately for Verizon's fiber-optic FiOS network, the plans start at $195 a month, and that's with a 12-month commitment and agreeing to switch to Verizon's broadband phone service.
This is the perfect time to roll out speedy access. More consumers than ever are cutting the cord that ties them to their cable bills, so uberfast connectivity should be an easy sell. Sadly, Verizon is missing the point with the $195 monthly plan. Folks are cutting the cord to save money.
Can you hear me now? I didn't think so.
5. This wasn't worth the wait
Well, they never exactly materialized, so Novell is now settling for an exit strategy at $6.10 a share.
For starters, the 6% difference didn't even keep up with the 11% Nasdaq advance in that time.
The buyer is also getting away with robbery. The deal to buy Novell at $2.2 billion also includes Novell's roughly $1 billion in cash, though some of it is overseas. It will also turn around and sell a chunk of intellectual property to a consortium led by Microsoft
Novell's no garage sale Picasso. Its best days are in a time capsule. However, for a sale this weak, it probably should have remained independent and used its greenbacks for an aggressive share buyback and gone after acquisitions that would make it relevant again.
Don't throw in the towel. You owe it to your backers to get all bloodied and let the manager concede the fight.
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
Apple, Netflix, and Nuance Communications are Motley Fool Stock Advisor recommendations. Nuance Communications is a Motley Fool Hidden Gems pick. Motley Fool Options has recommended a diagonal call position on Microsoft, which is a Motley Fool Inside Value selection. The Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
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, except for Netflix. 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.