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. Game theory
What's good for the goose isn't necessarily good for the gander. Shares of video game publishers rose after Electronic Arts
Why did the video game retailer tumble 4% on encouraging gaming news? Well, EA's best results came from its digital platform. As developers and publishers continue to forge direct distribution relationships with gamers through apps, console online marketplaces, and in-game purchases, physical hawkers such as GameStop may get squeezed out.
This obviously won't happen overnight, since GameStop's been holding up reasonably well in recent quarters. However, the inevitability of its business model's eventual demise has been enough to keep the retailer in check. EA's healthy deferred revenue on digital sales simply provided a fresh reminder.
2. You've got fail
Sometimes, the timing of a leak is everything. Copies of a presentation detailing an aggressive content-mill makeover at AOL
The slides detail how AOL wants to go from cranking out a baseline of 33,661 monthly articles generating a median of 1,512 page views at the start of the current quarter, to a run rate of 55,000 monthly content pieces amassing 7,000 views apiece by April.
AOL also hopes to get there by shutting down servers, paying less per article, and ramping up the number of embedded videos. Everything outside of the actual number of articles -- since freelancers are numerous and eager for the work -- seems overly ambitious.
However, the goals appeared even more unlikely when AOL posted its quarterly results the following morning. Subscription revenue fell by 26%. Advertising revenue -- AOL's once-promising outlet to cash in on web traffic outside of its paywall -- also fell by 26%. How will AOL grow in prominence if it's shrinking in relevance? Now there's an article worth writing.
3. Do not feed the zoo animals
Shares of travel-deals publisher Travelzoo
The company behind the namesake Top 20 list that goes out weekly to 18.9 million willing recipients posted better-than-expected earnings. However, its top-line performance simply met Wall Street's target. When your shares have quadrupled over the past year, simply OK performance just won't cut it with Mr. Market.
Travelzoo also stung itself. 18.9 million active registrations may sound like a lot, but it's only 200,000 more global subscribers than Travelzoo had on its rolls three months earlier. The website operator turned heads a week ago when it revealed that it was on pace to add 125,000 new users in the United Kingdom alone last month. Right now, the country has just 2.3 million Travelzoo subscribers. Naturally, there will always be some turnover from mailing-list cancellations, but 200,000 net additions worldwide seems like a weak sequential step for a company priced for speedy expansion.
4. Questionable decision for the "decision engine" parent
Depending on which side you believe, either Google caught Mr. Softy red-handed, or Microsoft's simply incorporating user-approved data mining techniques that Google itself has been incorporating in its toolbar for years.
The end result of this week's fisticuffs is that both companies are coming off as sneaky miners of data. Yes, this practice makes a search engine better, but greater awareness also encourages more people to forbid sites from tracking their surfing. In other words, the accusations will ultimately make search query result pages less effective.
Who wins that war? No one.
5. Speaking of weight loss
Shares of Orexigen Therapeutics
This is the risk that biotech investors take when they buy into companies with a potential blockbuster in development … and little else.
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
Google and Microsoft are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers choice. Motley Fool Options has recommended writing covered calls on GameStop and a diagonal call position on Microsoft. The Fool owns shares of GameStop, Google, 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. 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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