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. World of pink slips
There's apparently not enough work to go around at Activision Blizzard's (NAS: ATVI) Blizzard Entertainment. The game studio behind the World of Warcraft franchise will be laying off 600 of its employees.
The writing has been on the virtual wall for some time. Blizzard's marquee franchise peaked at 12 million gamers a little over a year ago, and now Blizzard is serving up its virtual battle-scape to 10.2 million players.
Layoffs are sometimes necessary, but they often send the wrong message. What do you think this move telegraphs to the 10.2 million gamers who are still playing? Activision Blizzard claims that the pink slips won't touch the actual World of Warcraft team, though 60 of the 600 cuts will likely be related to the game development process.
Activision Blizzard hasn't had a problem pulling the plug on a franchise that is on the decline. Some will argue that it killed off Guitar Hero before the coda sign. Scaling back on its staff may become a self-fulfilling prophecy.
2. Much Tudou about nothing
At least one Chinese company doesn't understand the scalable nature of cyberspace.
Revenue at the fast-growing video-sharing website may have notched a 70% gain, but how is that any good if revenue costs soar 119%? Bandwidth, content, and mobile video service costs each more than doubled during the quarter.
Analysts weren't expecting Tudou to turn a profit until 2014 before this week's horrendous report. Until the company can get its overhead in line, this video-sharing service will continue to be a misery-sharing service.
3. More big trouble in bigger China
Tudou wasn't the only Chinese Internet company to pull up lame.
Longtime dot-com darling SINA (NAS: SINA) put out mixed financials in its latest quarter. SINA's adjusted top line grew by a softer-than-expected 23%, and its adjusted profit was cut by more than half to $0.21 a share.
If analysts thought that SINA's top-line spurt was weak, they're going to hate the current quarter. SINA's outlook calls for adjusted revenue to grow by just 6% to 9% during the first quarter.
What gives? Investors have come to expect smashed margins as SINA invests in growing its popular Weibo micro-blogging website in China. However, is the bottom-line damage worth it for top-line growth that is decelerating at this pace?
4. Slow time at the Apollo
There's always something ironic about a for-profit post-secondary educator that has to hose down its outlook. How is it expected to teach, when it has failed to learn? How is it expected to prepare students for a future that it can't even pave for itself?
Apollo Group (NAS: APOL) took a hit after revising its guidance lower. Enrollments that were expected to grow are now targeted to decrease. The midpoint of its operating profit forecast is also trending lower.
Apollo is the company behind The University of Phoenix's virtual campus. It just got schooled.
5. Crack attack
Research In Motion (NAS: RIMM) had a rare victory this week. A six-year-old trademark application filed by BlackBerry enthusiast website CrackBerry to use its name was denied on the basis that it could be confused with RIM's BlackBerry trademark.
CrackBerry.com was hoping to trademark its name for online services, computer services, marketing services, and apparel.
Maybe this would have been a novel idea when the application was filed in 2006 and 2007 -- when BlackBerry was all the rage -- but who would dare use the CrackBerry moniker now when the smartphone maker is slipping in popularity? A CrackBerry hoodie, anyone?
Don't you hate it when crack cocaine becomes the standard pet name for a trendy product or service? Hey, Blizzard! Remember when folks used to call your flagship game WarCrack?
Those were the days.
At the time thisarticle was published 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 the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Motley Fool owns shares of Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard.Motley Fool newsletter serviceshave recommended buying shares of Sina and Activision Blizzard.Motley Fool newsletter serviceshave recommended creating a synthetic long position in Activision Blizzard. 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.
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