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. Optical illusion
I'm always cautious when a stock soars heading into an earnings report. I believe that "priced for perfection" is a myth, but there is little margin for error when a market darling is blazing the way Finisar
Shares of Finisar plunged 39% Wednesday, after the optical equipment provider followed up a blowout quarter with ho-hum guidance. A slowdown in China and telecoms' adjusting their inventories are just two of the culprits, but this is really a lesson about heightened expectations for a quality company that is ultimately at the mercy of an iffy sector's ups and downs.
2. HP goes both ways
Injecting Palm's fledgling operating system into tens of millions of computers may seem like a brilliant way to build an audience and woo developers, but there's a problem here.
HP already has a nasty reputation for bloatware (i.e., loading new PCs with a ton of unwanted programs). Isn't this going to be seen as just more usurping of hard drive space for a platform that few will use? I can see this being a knock against buying HP systems next year, and I say this as someone whose last two PCs have been HPs.
I understand that HP is losing serious ground in tablets and smartphones given the lethargic rollout of webOS devices, but ramming it down the throat of its unwilling PC user base seems like a short-minded strategy.
3. Facebook flicks flicks
Shares of Netflix
That's the way the financial headlines played it out anyway:
- "Netflix Falls On Hint Of Facebook Rivalry" --Investor's Business Daily
- "Netflix Unfriended by Facebook TV" --TheStreet.com
- "Netflix Shares Are Tanking As Facebook Unveils Movie Deal With Warner Brothers" --Business Insider
It doesn't add up. Netflix has never been threatened by the companies digitally renting the latest releases -- even the ones that aren't available through Netflix -- on a piecemeal basis. Netflix is an unlimited streaming model. Time Warner's move may be a threat to Blockbuster, Redbox, or pay-per-view, but this bullet ricochets off Netflix's bat suit.
4. Up the creek without a paddle
The water's icy at Coldwater Creek
Sometimes a retailer will see a sharp plunge in sales as it retains pricing integrity, but that's not the case here. Gross margins actually fell during the period. Unlike most chains that live for the lucrative holiday season, Coldwater Creek was a bad Santa. Its pre-tax loss more than doubled during the telltale holiday quarter.
5. Double occupancy in China
Healthy top-line growth and a profitable turnaround wasn't enough for 7 Days Group Holding
Investors may have been spoiled when rival Home Inns
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
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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.