The five dumbest things on Wall Street this week

By TheStreet.com

1. Searching for a clue

Yahoo! (YHOO, news, msgs) shares plunged 22% Wednesday on 10 times average daily volume after execs botched the second-quarter earnings call. Wednesday's free fall put the stock down 36% for the year.

Yahoo! is trying to soup up its search engine in hopes of closing the gap with Google (GOOG, news, msgs). This spring Yahoo! set plans for an ambitious upgrade. But on Tuesday, the timeline on what the company calls Project Panama was unceremoniously pushed back.

Worse, Yahoo! execs failed to persuade analysts they were being candid about reasons for the delay.

“Are you finding a lot of bugs in the system that's taking longer to fix?" one analyst asked late in Tuesday's conference call, which came after Yahoo! had already disappointed investors by posting soft second-quarter revenue and offering tepid full-year guidance. "It's still not clear to me why you need to push it out by a quarter."

"We gave you the best date we could in May, and we are giving you the best date we can now," huffed operating chief Dan Rosensweig. "We just learned more about the integration, the interdependencies and those things.

"So it's not about bugs or quality," Rosensweig added. "It's literally just what it takes to get it over the finish line. We want to do it right."

Dumb-o-Meter score: 91. In an interview with TheStreet.com, CEO Terry Semel claims that the project's leaders "are doing a brilliant job"

For more on Yahoo!’s dumbness, click here.

2. Delusions of grandeur

Nortel (NT, news, msgs) unveiled a grandiose strategic alliance with Microsoft (MSFT, news, msgs) this week. The pact aims to "break down today's device- and network-centric silos of communication," such as email and phones. The companies say the partnership "has the potential to ultimately transform businesses communications," if you can imagine. "This is a gutsy play for Nortel," Nortel chief Mike Zafirovski declares.

Basking in the glow of a stronger company is hardly a novel strategy. Last year struggling Sun Microsystems (SUNW, news, msgs) tried a similar ploy with Google, to little avail. Sun shares failed to hold early gains, finally nudging longtime chief Scott McNealy toward the exit.

And Sun looks downright luminous next to Nortel. While Nortel aims to wring $1 billion in revenue out of the Microsoft deal over four years, Nortel's core business is in steep decline. Sales have been hit by big phone company mergers, and cost-cutting is in the air again. Shares are off 33% this year.

By contrast, Microsoft made $13 billion in fiscal 2006. But who's counting? Not Zafirovski, who, incredibly cites a parallel between "Nortel's digital innovation and Microsoft's software on every desktop."

Dumb-o-Meter score: 90. Gutsy? No, that's just shameless.

For more on Nortel’s dumbness, click here.

3. Broadcom's broad brush

Broadcom (BRCM, news, msgs) conceded last Friday that it erred in how it booked employee stock options. The company plans a $750 million charge to fix the mistake. Broadcom is still looking into the matter but plans to restate financials for at least six years.

Regulators are investigating option backdating, which can give insiders an advantage by putting their supposedly market-priced options in the money.

The restatement news is jarring in light of Broadcom's soft-pedaling statement last month. The company said June 12 that it had decided to check its books "following various reports raising speculation about a few corporate stock option grants made to Broadcom employees in 2000 and 2002."

On July 21 CEO Scott McGregor said: "We want our shareholders and employees to know that we are working proactively and with the highest degree of integrity to put all questions concerning this topic behind us."

Dumb-o-Meter score: 85. In a month we've gone from "speculation about a few corporate stock option grants" to a $750 million charge. It's hard to see how that puts any questions to rest.

For more on Broadcom's dumbness, click here.

4. Openwave's washout

Wall Street has been wondering whether Openwave (OPWV, news, msgs) is fit enough to take on big rivals like Ericsson (ERIXF, news, msgs) -- concerns that weren't eased by a debacle Wednesday.

That afternoon, Openwave issued a press release innocently headlined, "Openwave Announces Fourth Quarter Fiscal 2006 Conference Call."

It's the kind of release that might easily get lost in the shuffle on a busy afternoon that also featured earnings reports from Apple Computer (AAPL, news, msgs), eBay (EBAY, news, msgs), Intel (INTC, news, msgs) and Motorola (MOT, news, msgs). But beyond noting the timing of the Aug. 3 call, Openwave's statement also notes the postponement of annual analyst day -- and warns of soft first-quarter revenue.

The warning, which knocked 14% off Openwave stock Thursday, came just two weeks after Openwave trimmed fourth-quarter guidance.

"While the results for the quarter are disappointing, overall the company has delivered a solid financial year," CEO David Peterschmidt said July 6. "We continue to see customer momentum worldwide and are confident in our strategy as we enter fiscal 2007."

Dumb-o-Meter score: 82. We're guessing Openwave is less confident in that strategy now.

For more on Openwave’s dumbness, click here.

5. Mudslingers' ball

Phoenix copper titan Phelps Dodge (PD, news, msgs) wants to buy Falconbridge (FAL, news, msgs) in a three-way cash-and-stock merger with Canada's Inco (N, news, msgs). But big Falconbridge shareholder Xstrata (XSRAF, news, msgs) has made a competing proposal similarly valued at around $17 billion.

The Inco bid "represents the most compelling offer for Falconbridge," Phelps Dodge chief Steven Whisler says. Nonsense, shoots back Xstrata chief Mick Davis. "It is now clear that on any valuation basis Xstrata's all-cash, fully-funded offer is superior to Inco's final offer," Davis says.

But try telling that to Inco CEO Scott Hand. Asked on Canadian TV for his take on Xstrata's offer, Toronto's Globe & Mail reports, Hand replies that it's "a dog biscuit."

Dumb-o-Meter score: 75. Even for the mining industry, that's quite a dig.

For more on the Phelps Dodge-Xstrata dumbness, click here.

© 2006 TheStreet.com, All Rights Reserved.

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