This Week's 5 Dumbest Stock Moves
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. Fire sale on flame-retardant clothing
It seems as if every few weeks finds Research In Motion (NAS: RIMM) drumming up a new sale to clear out its otherwise unloved PlayBook tablets.
We've seen disheartened tablet makers offer ridiculous sales to clear out unwanted devices, but RIM really takes the cake this time. The rudderless BlackBerry parent is offering all three models -- the 16-gigabyte entry-level model that originally retailed for $499, the $599 32-gig unit, and the high-end 64-gig tablet that originally commanded $699 -- for the same $299 price.
Unless RIM simply has a ton of the 64-gig PlayBooks it needs to move quickly, why would RIM price all three versions the same? Obviously folks will flock to the high-end model. When that one sells out, this deal is as good as dead. No one wants to feel like a chump and buy an inferior model at the same price that RIM was offering for the 64-gig tablet.
PayPal head Scott Thompson will begin his reign of the dot-com behemoth on Monday.
The market didn't seem to like the news, sending Yahoo!'s stock 3% lower on the news. Thompson shouldn't take it personally. Even though he is an odd fit -- his experience rests largely in tech-based banking and not the media and content emphasis that drives Yahoo! -- the market is simply reacting to what the move telegraphs about Yahoo!'s near-term independence.
If Yahoo! was close to being acquired or was on the cusp of a breakthrough deal to unload its Asian assets, it wouldn't hire a CEO at all. Why bring in a new helmsman with a meaty contract that will make it that much more expensive for an acquiring company to buy Yahoo! out?
On the other hand, it's not as if Yahoo! could've been too choosy here. Who wants to step into a situation where the stock has bubbled up in recent weeks solely based on its buyout potential? The choice of Thompson itself isn't a dumb move, though his qualifications are suspect. The real head-scratcher here is Yahoo! actually hiring a CEO -- killing off the buyout buzz and returning the company back to its languishing financial mediocrity.
3. It's another Barnes burner
Shares of Barnes & Noble (NYS: BKS) fell 17% yesterday after the sluggish bookstore chain hosed down the guidance it had issued just last month and revealed that it's exploring spinning off its Nook business.
The retailer's now eyeing just $150 million to $180 million in EBITDA for its fiscal year ending in April. It was during its most recent quarter -- in early December -- that Barnes & Noble was targeting EBITDA of $210 million to $250 million. Its new bottom-line guidance calls for a loss between $1.10 a share and $1.40 a share, well short of the $0.63 deficit that Wall Street was bracing itself for.
The move to consider separating its high-growing yet profitless Nook business from its sluggish yet profitable superstore chain is also leaving investors stunned.
The market figured that it would take some time for the Nook to pay off, but now Barnes & Noble is giving them a cliffhanger.
4. Living la Vita loca
Things continue to get worse for Sony (NYS: SNE) and its doomed PS Vita. After 320,000 of the portable gaming units were sold in its first two days on the Japanese market and just 72,000 units the week after that, less than 43,000 PS Vita systems were sold in the third week.
Sony's plans to roll out the system shortly in the U.S. seems doomed from the start. If the PS Vita is a flop in its home market, it's going to have to consider some dramatic price cuts if it wants to stand a shot with jaded stateside audiences.
5. Time warn her
Time Warner (NYS: TWX) turned heads when it suckered two of the three largest DVD rental operators to hold back on offering its new DVDs during the first four weeks on the market. Now the media giant is getting all three disc specialists to give retail sales an eight-week head start.
When Time Warner introduced its tiered release policy two years ago, it justified the move by explaining that 75% of new releases' sales occur during the first 28 days on the market. Getting cheap DVD renters to hold back -- in exchange for cheap bulk pricing -- seemed like a win-win-lose deal. The studio would drum up more sales. The DVD rental companies would generate healthier margins. Couch potatoes got dissed.
Where's the logic in stretching that window out to 56 days? Are folks still not buying discs? Well, maybe that has nothing to do with the rental market. Shame on you, Time Warner. And shame on you, DVD rental companies, for playing along.
At the time this article was published The Motley Fool owns shares of Yahoo!.Motley Fool newsletter serviceshave recommended buying shares of Yahoo!. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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