This Week's 5 Dumbest Stock Moves

December 25, 2009 - 0 comments

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. When two takes aren't enough

Take-Two Interactive (Nasdaq: TTWO)
is once again talking down its guidance, though at least this time it
has a scapegoat. Take-Two is selling its Jack of All Games
distributorship business and naturally lowering the already bleak
outlook it provided to investors earlier this month.

There may not be a lot that's sexy about distribution or the
creation of in-store promotional displays, but Take-Two is in no
position to be shrinking after warning investors to expect a loss in
fiscal 2010.

Naturally, this move may also lead one to consider whether things
are even worse at Take-Two, and it's simply taking the opportunity of
the sale to rework its targets even lower.

2. Google can't win 'em all
Yelp has apparently walked away from a Google (Nasdaq: GOOG)
buyout offer of more than $500 million, according to TechCrunch -- the
same blog that broke the story about the deal negotiations.

Google will be fine. It continues to pad its war chest, now at $22
billion and counting. One has to wonder what Yelp was thinking, though.

For every Facebook that turns down a dot-com suitor and winds up
growing in prominence (and value), you have countless shells of online
darlings that should have swallowed a little pride.

Yelp clearly has a hot hand at the moment. It's a popular community
site, loaded with reviews of restaurants and other local businesses.
However, online success can be a revolving door. Perhaps more
importantly, if Google was willing to spend $500 million on Yelp, its
interest is a good indicator that Google will enter this market -- and
pose a competitive threat to Yelp.

3. From buffet to Buffett

Steak n Shake (NYSE: SNS) has big plans.
A 1-for-20 reverse stock split went into effect on Monday morning, even
though the company's stock was trading in the double digits before it
decided to swap out every 20 shares for a single share at 20 times the
price. Why not go with a 1-for-6,000 reverse to truly catch up to Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) organic and hard-earned share price?

Then it truly showed its Warren Buffett ambitions when it announced
its intentions to acquire a small Michigan-based insurer on Monday
night.

"Simply because profits are generated in the restaurant business
doesn't mean the money must be reinvested there," the company's
chairman wrote earlier this month in his annual letter to shareholders.

He's right, but at what point does diversification fall into the realm that Peter Lynch coined as diworsification?
Just because Buffett successfully transformed his company into a
diversified holding company with a strong insurer base, that doesn't
mean we can all be Buffett.

4. More subtraction by subtraction at Yahoo!

Yahoo! (Nasdaq: YHOO)
still doesn't get it. The fading online giant is apparently ready to
shut down MyBlogLog next month, according to ReadWriteWeb. It's been
nearly three years since Yahoo! acquired the innovative site, which
lends a social bent by allowing users to set up blogging communities
and linking to registered blog visitors' own community pages.

Yahoo! needs to get its cost structure in line with its rivals, but
getting rid of the sticky apps is only going to alienate its loyal
users.

When will the Yahooligans learn?

5. Microsoft can't win 'em all

Microsoft (Nasdaq: MSFT) is gaining market share in search and Windows 7 is a hit, but the world's largest software company can still be taken down a peg or two in court.

Mr. Softy was denied an appeal in its legal defeat of a case
pertaining to i4i, a seldom-used feature in Word 2007 and Office 2007.
The company won't be able to sell Office come Jan. 11 unless it removes
the feature.

This may not seem like a big deal, since Microsoft is readying the
move to its Office 2010 suite, which does not have the feature, and
developers have also had several months to remove it. Microsoft also
has enough cash in the bank to pay out the judgment. However, even with
enough money to hire the best lawyers, Microsoft was still smacked down
by a wee entity.

Maybe it's time to punch in "David vs. Goliath" in Bing.

Let's beat the Dumb Drum:

Last week's boneheads.
The previous week's dumb moves.
Last year's silliest CEO quotes.