Five dumbest things on Wall Street this week

By TheStreet.com

"TheStreet.com" examines the dumb things on Wall Street and in corporate America. Using its 100-point-scale Dumb-o-Meter, "TheStreet.com" scores corporate foibles.

1. Under the hood

General Motors (GM, news, msgs) held its annual meeting Tuesday, where CEO Rick Wagoner offered his latest turnaround update.

"We recorded our first profitable quarter in a year and a half," Wagoner says, as revenue hit a record $52 billion. "These were important milestones in our turnaround plan."

Back in April, GM reported a preliminary adjusted first-quarter loss of $529 million. That all changed in May, though, after GM revised its health care accounting, which cut its North America loss in half and its overall auto-unit loss by two-thirds. Instead of a sixth straight quarterly loss, GM ended up showing a first-quarter profit of $445 million.

"We have absolute clarity about the road ahead," Wagoner told shareholders, "and I have no doubt that we will succeed."

Dumb-o-Meter score: 90. "Accounting mechanics," as one analysts dubbed GM’s move, doesn't sound like the basis for sustained profitability or such clarity to us.

For more on GM’s dumbness, click here.

2. Nothing succeeds like succession

Two big decisions came out of Cisco's (CSCO, news, msgs) board meeting Wednesday. The company added $5 billion to its stock buyback plan and unveiled its board succession plan.

Wall Street likes buybacks, but it believes management planning is important, too. The consequences of failing to plan ahead were underlined this week by the unexpected death of L-3 Communications’ (LLL, news, msgs) CEO Frank Lanza.

So what's Cisco's plan? Why, it’s handing CEO John Chambers even more responsibility. He'll take the chairman's title from John Morgridge, who is retiring.

With any luck, Cisco will never find itself in L-3's shoes. But Chambers will move on some day, presumably. So who might take his place?

"As part of ongoing leadership development at Cisco, we groom multiple candidates for all leadership positions,” a Cisco spokeswoman writes via email. “It's also important to note that John recently re-committed to the board a minimum of three to five years with Cisco."

Dumb-o-Meter score: 88. Sorry, but that hardly sounds like a plan for surefire success.

For more on Cisco’s dumbness, click here.

3. Where the firms have no name

Morgan Stanley (MS, news, msgs) turned the tables on Joe Perella this week.

The brokerage firm has suffered its share of management defections, thanks in no small part to 1980s merger whiz Perella. Last spring, for instance, some top bankers fled Morgan in a revolt that brought down former CEO Phil Purcell. The heaviest blow was Perella's April 2005 resignation.

Early this year, another exodus ensued when Perella started making plans for his own firm. Perella managed to poach Morgan Stanley hard-hitters including Titus Leung and Dietrich Becker. But maybe his biggest splash came with the addition of Morgan's former co-head of global capital markets, Jon Anda.

Five months later, Morgan announced Anda is returning as vice chairman for institutional securities.

"I am thrilled to be back at Morgan Stanley," Anda says, "a firm with a great heritage, terrific talent and a bright future."

Dumb-o-Meter score: 85. "We look forward to working with him at whatever firm he joins," Perella declares.

For more on the Morgan-Perella dumbness, click here.

4. Tribune's liquid diet

Two weeks ago the Chicago-based newspaper giant Tribune (TRB, news, msgs) said it would borrow some money to buy back a huge hunk of stock. Tribune also set plans to sell assets and cut more costs in a bid to boost its flagging shares, which are down more than 25% over five years.

The moves "reflect our strong belief that Tribune's current share price does not adequately reflect the fundamental value and long-term earnings prospects of the company's businesses," CEO Dennis FitzSimons said in a May 30 press statement. "They also allow us to optimize our capital structure while maintaining financial flexibility."

That sounds optimal and is good use of genuine Wall Street gibberish.

But this week a filing showed that three directors opposed FitzSimons' plan when it came up for a vote. “The Wall Street Journal” reports that the Tribune board has been considering a possible spinoff of broadcast assets, too.

The developments left Tribune defending a buyback plan that, surprisingly, seems to be in the best interests even of shareholders who don't want to be shareholders anymore. "This tender offer allows the company to return value to shareholders who may be seeking some liquidity," Tribune explains, using a favorite euphemism for selling.

Dumb-o-Meter score: 82. We can't imagine anyone views Tribune as a "source of funds" -- another Wall Street term for selling.

For more on Tribune’s dumbness, click here.

5. Mad at the market

Matria Healthcare (MATR, news, msgs) shares plunged 18% Thursday after the disease-management company slashed 2006 revenue guidance by $26 million.

The setback marks the second time in two months that Matria has offered disappointing guidance. But CEO Pete Petit says the drop-off in business isn't Matria's fault. And who is to blame? Why, it's those scoundrels in the market.

"The market's reaction to our acquisition of CorSolutions appears to be a general delay in awarding new employer business to Matria," Petit says in a press release. "As a result, we have lost some revenue momentum that cannot be recovered during 2006, but has slipped into 2007."

It's not clear how the market can withhold new employer business from anyone, but Petit adds: "To mitigate this concern going forward, we are helping our prospective clients understand the company's significant capacity to absorb new growth.”

Dumb-o-Meter score: 78. We're sure that will do the trick.

For more on Matria’s dumbness, click here.

© 2006 TheStreet.com, All Rights Reserved.

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