5 Dumbest Things on Wall Street: Jan. 8

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Like Pizza for Chocolate

Kraft (Stock Quote: KFT) is being anything but crafty in its latest maneuver to buy Cadbury. But don't take our word for it, just ring up Warren Buffett.

In yet another twist to the long running saga, Kraft announced this week its plan to sell its North American frozen pizza business to Nestle for $3.7 billion. Kraft said it plans to use the proceeds to raise the cash share of its $16.4 billion bid for British candy maker Cadbury.

Boy, those two companies must have bonded over some late night pizza negotiations, because Nestle also conveniently declared it is not interested in acquiring Cadbury on Tuesday. That leaves Hershey without a potential partner and Kraft CEO Irene Rosenfeld with a Jan. 19 deadline to raise her bid.

But she better not up it a single penny (or pence), warns Buffett, CEO of Kraft's single largest shareholder Berkshire Hathaway. Berkshire announced Tuesday morning that it voted against Kraft's proposal to issue shares to finance part of the bid, saying it was worried it gave Kraft a "blank check" to raise the price even higher. Buffett previously has said Kraft's prior offers were adequate for Cadbury.

"We are listening to shareholders," said Kraft spokesman Michael Mitchell. "Buffett is certainly one of the most respected investors in the world, and we take his opinion seriously."

As for Cadbury, they aren't listening at all. The company dismissed Kraft's latest offer Tuesday, labeling it "derisory."

We here at the Five Dumbest Lab advise Rosenfeld not to further irritate the Oracle of Omaha. Buffett can live without the deal getting done. If Kraft walks away with nothing after all this high-profile bungling, however, then it will most likely be Goodnight Irene.

 

Dumb-o-meter score: 75 -- This chocolate merger has been anything but sweet for Kraft's Rosenfeld.

 

 

Beazer's New Glut

A glut of unsold homes drove shares of Beazer (Stock Quote: BZH) as low as 24 cents a share last year. Now the homebuilder is trying to drown itself in a sea of stock.

Beazer's stock price collapsed by nearly 12% to just under $5 on Wednesday morning, a day after the company stated its plans to offer 18 million common shares. Beazer investors afraid of massive dilution ran for the exits as a secondary offering of that size would boost the total outstanding shares in Beazer by approximately 45%.

Certainly not the best way to start the new year, now is it guys?

Beazer actually tried to mix in a little good news to numb the pain of its secondary offering announcement in the form of an upbeat fourth quarter outlook. Beazer said new orders were up close to 37% in its latest quarter, while closings were up 8%, with the biggest gains being made in new orders in the western U.S., and in closings in the eastern U.S.

Alas, traders focused on the piles of stock Beazer will soon be puking onto the market, as opposed to its positive news.

A once-proud homebuilder once again sent to the doghouse.

 

Dumb-o-meter score: 80 -- Beazer needs to learn: Prices tend to rise when demand exceeds supply. Not the reverse.

 

 

Google's Nexus Nonsense

Google (Stock Quote: GOOG) is looking to ring up big sales with its new Nexus One "superphone." Sadly, the company's first call may be to its attorneys.

According to The Wall Street Journal, the family members of science-fiction author Philip K. Dick are charging that the name of Google's phone infringes on Mr. Dick's best-selling 1968 novel, "Do Androids Dream of Electric Sheep?" The book later served as the basis for the 1982 cult film "Blade Runner," which followed a bounty hunter played by Harrison Ford chasing androids called "Nexus-6 models."

"Our legal team is dealing head-on with this," said Isa Dick Hackett, a daughter of Mr. Dick and the CEO of Electric Shepherd Productions, an arm of the Dick estate devoted to adapting the late author's works.

Hackett says Google never contacted her over the phone's name and contends that the phone and the book are linked by the fact that the Nexus One runs Google's Android operating system. "It's not lost on the people who are somewhat familiar with this novel," said Hackett.

Honestly, the whole idea of a lawsuit is such a joke that it sounds like it's coming from a completely different Hackett, namely the late nightclub comic Buddy Hackett. (Although, his delivery would have been much, much dirtier.) There are plenty of well-known products named Nexus in the market including a shampoo (Nexxus) and legal search directory (LexisNexis) just to name a few off the top of our heads. And while the spellings may be different, neither of them bring to mind Mr. Dick's novel.

We here at the Five Dumbest Lab suggest Hackett call off the lawyers and let the whole thing drop. She can use an Apple (Stock Quote: AAPL) iPhone if it makes her feel better. That will really show Google she means business.

Dumb-o-meter score: 85 -- To paraphrase Shakespeare: The first thing we do, let's kill all the Electric Sheep lawsuits.

 

 

Levin's Guilt Trip

Pack your bags, all you failed CEOs out there. Jerry Levin wants to take you on a guilt trip.

Levin, who disastrously sold Time Warner (Stock Quote: TWX) for inflated AOL shares a decade ago, marked the anniversary of the devastating $164 billion deal with a call for today's disgraced corporate titans to join him in accepting responsibility for their own debacles. The former Time Warner CEO issued this request, as well as a long-awaited apology to devastated shareholders, in a CNBC appearance on Monday.

"I presided over the worst deal of the century, apparently, and I guess it's time for those who are involved in companies to stand up and say: you know what, I'm solely responsible for it," said Levin, who now runs a new age healing center in California with his wife.

Levin went on to say that Citigroup (Stock Quote: C), AIG (Stock Quote: AIG) and General Electric were all felled by the same conglomerate problems as Time Warner and added that he would like to "hear publicly from Lehman Brothers, Bear Stearns, Merrill Lynch, on and on."

Oh come on Jerry! Time Warner shareholders have been waiting all these years for a decent mea culpa and you give them that load of rubbish?

To our ears, it sounds like misery loves company, and were it not for the collapse of some prominent financial institutions, then you would never have stepped up at all.

 

Dumb-o-meter score: 90 -- We suggest Levin spend more time meditating or hibernating at his pricey spa instead of calling out other CEOs for their own "meanness and greed."

 

 

Dubai's Dubious Tower

When Dubai renamed the world's tallest skyscraper after the ruler of neighboring Abu Dhabi, it was the least they could do.

We're not kidding. It really was the least they could do.

Sheikh Mohammed bin Rashid al-Maktoum, Dubai's ruler, opened the city-state's new $1.5 billion tower for business on Monday in a flashy ceremony complete with skydivers, traditional dancers and fireworks. Originally named the "Burj Dubai," the monumental structure was rechristened the "Burj Khalifa" in a surprise move to honor Khalifa Bin Zayed, the president of the United Arab Emirates and monarch of Abu Dhabi.

So what did Khalifa do to merit his name on the plaque at the bottom of the 2,717-foot tall edifice?

What do you think? He bailed out Dubai big time.

Last month, Khalifa ponied up $10 billion to Dubai's creditors to save its government-controlled holding company Dubai World from defaulting on a stack of IOUs that could reach the top of the Burj itself. Fueled by cheap money and delusions of grandeur, Dubai World went on a building spree during the past decade with opulent construction projects including the Palm Jumeirah and the World archipelagos, man-made islands built for the super-rich. Dubai World is also a lead investor in MGM's $8.6 billion CityCenter, another white elephant with tenuous prospects, stuck in the desert kingdom of Las Vegas.

It is still undetermined whether oil-rich Abu Dhabi will guarantee the remainder of Dubai's $80 billion debt load, a fact that continues to keep the global financial markets on edge. However, if he does make the commitment to bail out the prodigal emirate, we suggest Sheikh Khalifa receive in return a little more than his name on a building, even if it is 160 stories high.

We say: Goodbye, Dubai. Hello, Khalifaville.

 

Dumb-o-meter score: 95 -- Ironically, there is debtor's prison in Dubai. Luckily, they now have a building big enough to hold a whole country full of deadbeats.

 

 

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