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 from last week that may make your head spin.
1. A chip off the old Blockbuster
Shares of Blockbuster
It happens. Some companies aren't at their best right now. However, the DVD rental giant makes this week's list in its explanation for the dramatic 10.9% slide in comps during the quarter.
"The reduction of inventory and lower advertising spend, combined with weaker DVD title strength and competition from strong theater box office traffic, had a dilutive impact on sales," explains the company's earnings release.
The inventory reductions and marketing budget cuts are sound excuses and reasonable tradeoffs. However, did Blockbuster really blame weak DVD releases and the surprisingly magnetic multiplex for its shortfall? Doesn't it know that another DVD rental specialist posted a 21% revenue gain, tacking on 920,000 more net subscribers during essentially the same three months?
2. Run, don't Walkman
Oh, if only it was that easy. Sure, the major labels did themselves in when they launched restrictive music sites at a time when peer-to-peer music file swapping was taking off. As the only major label to have a prominent role in portable music players, Sony could have been sitting pretty if it gave consumers exactly what they wanted.
However, what Stringer fails to realize is that rival labels wouldn't have warmed up to a device platform run by a competitor. Apple
3. Sometimes too much still isn't enough
Despite a balance sheet that glistens with $25.3 billion in cash and short-term investments, Microsoft
Microsoft surely has its reasons. Maybe it wants to throw underwriters a bone. Maybe it's taking a hit for the team, giving bond investors some high-quality paper to chew on. Either way, if it is borrowing money -- just to park it on its balance sheet, earning less in interest than it will have to pay in the debt -- this is insane. A massive buyback or the mother of all shopping sprees may be the only reasonable justifications.
4. Breaking all the Ruehls
This has been a rough time for specialty retailers, but few have had it as bad as Abercrombie & Fitch
The killer is store traffic, or lack thereof. Comps at its four largest concepts fell between 26% to 34%. And you thought its catalog models wore skimpy outfits! A&F is also reviewing the fate of its Ruehl chain. Like others in the family tree, Ruehl isn't doing so well as its biggest same-store sales bleeder. Gee, imagine that? Folks aren't anxious to pay $35 for cotton t-shirts or $150 for a pair of jeans in this iffy economy!
However, I don't know how prudent it would be to kill off the concept if the "strategic review" suggests as such. This is a company where all of its concepts are in the gutter. When you're catering to the fickle youth with money to burn, it's probably best to have many oars in the water since you don't know which chain will bounce back first.
5. Nothing but netbooks
Where have you gone, netbook mania? The pint-sized laptops that fit snugly in the stockings of last year's holiday season are taking a hit this year. That is bad news for the makers of netbooks, who figured that the cheap computing gadgets with Wi-Fi connectivity would be recessionary winners.
It's also bad news for Intel
Intel's total processor market share shrank from 82% to 77.3% this past quarter, according to market research specialist IDC. AMD picked up most of the difference.
This doesn't mean that Intel is doomed. Moving away from the lower-priced Atom processors may actually help in the long run. Unfortunately for the industry, this is more a case of netbook sales taking a dive than a corresponding ascent of conventional laptops.
Netbooks! Soooo 2008 they are.
Let's beat the dumb drum:
Apple is a Motley Fool Stock Advisor pick. Intel and Microsoft are Motley Fool Inside Value recommendations. The Fool owns shares and covered calls of Intel. 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 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.