What's Wall Street Thinking? Donuts Debut, AT&T Shifts, BlackBerry Squeezes, Warnings Season
Who needs a buoyant market when a stodgy doughnut maker can perform some crazy levitation trick?
Dunkin' Brands (DNKN) went public at $19 on Wednesday, bucking the downward malaise to close out the week nearly $10 a share higher.
It's hard to see the appeal of its flagship Dunkin' Donuts concept. This is a slow-growth company that has posted negative store-level sales in two of the last three years. Its Baskin-Robbins ice cream scoop shops have had it even worse, posting three consecutive years of negative comps.
Some investors will argue that this isn't a play on doughnuts or ice cream. Dunkin' is a popular morning stop for its namesake coffee. There is also some serious expansion potential in the West Coast. Well, expanding a sluggish franchise concept is easier said than done. If the coffee is such a big draw, why aren't investors bidding up shares of J.M. Smucker (SJM)? It's the Folgers parent that sells the packaged Dunkin' coffee in nonfranchised outlets.
If this is the kind of pop that sleepy concepts are drumming up in their IPOs, one can only imagine what will happen when hot chains go public.
Here are some of last week's other big surprises, blunders, and just flat-out boneheaded moves.
Unlimited Redefined
AT&T (T) is at it again.
The wireless carrier that turned heads when it stopped selling unlimited data plans to new customers last summer is now playing throttling games with loyal data hogs that were grandfathered in after last year's move.
AT&T announced on Friday that, come October, it will begin slowing down network speeds for smartphone customers among the top 5% heaviest data users. The process will reset at the start of every billing cycle, multiple notices will be sent, and a grace period will exist, but how will this work out well for AT&T?
If this is a response to its overtaxed network, isn't this simply proof that the telco giant isn't doing enough to beef up its capacity? Even if it succeeds in shooing away its heartiest data sippers, it will also lose those who despise the practice on principle or fear that they'll be the next ones to step on the scale in this new weigh-in buffet.
BlackBerry Allergy
Sometimes even smartphone makers make dumb decisions. Research In Motion (RIMM) announced it would be eliminating 2,000 jobs, or roughly 10% of its workforce, last Monday.
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Given RIM's sparkling balance sheet that is flush with $2.4 billion in cash and equivalents and no long-term debt, I wondered why cash-rich companies were engaging in layoffs.
There was a time when a corporate restructuring would draw cheers from investors, but shareholders have gotten smarter than some of the companies that they're buying into. RIM's stock shed 10.4% of its value last week -- coincidentally near its workforce trimming -- because it sends the wrong message about the future of RIM's flagship BlackBerry.
It's true that BlackBerry is no longer the star of the smartphone ball. Consumers and even RIM's hotbed of corporate clients are clamoring for Android and iPhone handsets. However, this is still a company with tens of millions of users that it needs to keep. Slashing payroll is not going to build up confidence the next time a major corporation needs to decide if sticking with BlackBerry is the right decision.
Warm to the Touch
It was a bad week for several companies that tempered their quarterly reports with weak near-term outlooks.
Navigation specialist TeleNav (TNAV), printing services provider Vistaprint (VPRT), solid-state-drive maker STEC (STEC), and Internet security Websense (WBSN) all hosed down their guidance for the current quarter.
They weren't the only party poopers, but these four stocks in particular suffered double-digit percentage dips as a result of their grim perspectives. They toil away in diverse industries, so this may be bad omen for the economy as a whole.
Why didn't they let us know sooner? The reason their stocks got slammed was because investors were blindsided with the slowdown at this stage of the economic recovery.
"Essential Information Protection" is Websense's ironic tag line. Really, Websense?
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Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this story. The Motley Fool owns shares of Vistaprint and Research In Motion. Motley Fool newsletter services have recommended buying shares of Vistaprint and AT&T.
