Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five dumb financial events from last week that may make your head spin.
1. It's slot you, it's me
Flash memory giant SanDisk
This one is too easy. Are the same consumers who have tired of CDs going to take to tiny little data cards? Of course not. Does your car have a microSD slot? I didn't think so. To SanDisk's credit, it has lined up a select number of artists from all four major labels to back the project. It won't be the first time that the labels have backed a loser platform. The cards will come with USB sleeves, so it will open up the number of gadgets that can play the cards.
In the end, music shouldn't be this complicated. The upside is that the gigabyte microSD cards will supposedly be rewriteable. So once slotMusic flops, the cards will live on. I'll save my PowerPoint presentation on my Weezer card and my summer vacation snapshots on Rihanna.
2. The $40 billion tech stock bailout
Who needs the Fed when you have Microsoft
So what's so dumb about Microsoft's move? Well, let's just say that Microsoft isn't in a position to deploy its greenbacks. That money can be used for other things like acquisitions so that Microsoft can take on Google
3. They were made for each other, unfortunately
This is pretty much the last thing that either company needs. Yahoo! is a company that serves up a ton of free pages to moochers that it can't effectively monetize on its own. AOL is the spitting image, only slightly less relevant. In fact, one can call AOL a poor man's Yahoo!, but Yahoo! has already become a poor man's Yahoo!.
What about the synergy? Oh, please. There is no energy here, and the only sin is that Yahoo! isn't on Microsoft's arm and AOL on Google's. AOLHoo would be like topping a bowl of vanilla ice cream with another bowl of vanilla ice cream. Each company needs to get out there and acquire dynamic, fast-growing companies. This kind of inbreeding just isn't healthy.
4. Lost in translation
Rosetta Stone filed to go public last week. You may have come across ads for the company's popular language-learning software. Rosetta Stone got a major boost during last month's Olympic Games, with many athletes, like Michael Phelps, turning to Rosetta Stone to learn some Mandarin before heading over to Beijing.
The company is profitable and revenue is growing nicely. The only reason Rosetta Stone makes the cut is because of its lousy timing. The economy is in shambles, and Rosetta Stone is the one cranking the noisemakers and yelling out "surprise" in a somber room.
Rosetta Stone will make a fine IPO in the future. Not now. Not when even last year's IPO darling VMware
5. So much for the dollar menu
Fading residential developers don't typically make it to this weekly column. I don't like to pick on companies in tailspins beyond their control. However, Lennar earns a spot this time with the selfless CEO quote of the week.
"While we expected the housing market to remain constrained throughout the third quarter, the weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards," CEO Stuart Miller notes in the company's earnings press release. A fair observation, but he couldn't end it there. "Although the Federal government has recognized that stabilizing the housing market is critical to solving the current credit crisis, the government has yet to act meaningfully to help stabilize home prices."
Looking for a Fed handout now, are we? Get real. Home prices are still too high. There is a glut of empty existing homes, with "For Sale" signs collecting cobwebs. Even at fire sale foreclosure prices, some of these digs can't be given away. Is it a shame for developers that existing homes in depressed markets are selling for less than the construction price of a new home? Perhaps, but that is why housing is cyclical. Where was the call for the Fed to stabilize home prices and tighten credit when companies like Lennar were making a ton of money on skyrocketing real estate prices and iffy loans? My heart goes out to construction workers and architects, but the sad truth, Lennar, is that we never really liked your cookie-cutter developments out in the suburbs.
The Fed doesn't have to act "meaningfully," because the free markets and good taste beat it to the punch.
Let's beat the dumb drum:
Microsoft is a Motley Fool Inside Value recommendation. VMware and Google are Motley Fool Rule Breakers picks. Apple is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.
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 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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