The Five Dumbest Things on Wall Street This Week.html

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Subject: The Five Dumbest Things on Wall Street This Week.html
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GE] [IMAGE] [IMAGE] [IMAGE] =09[IMAGE]=09=09=09Markets : The Five Du=
mbest Things on Wall Street This Week [IMAGE] [IMAGE] [IMAGE] The Five =
Dumbest Things on Wall Street This Week [IMAGE] By K.C. Swanson Staff Rep=
orter 10/19/2001 06:59 AM EDT 1. Bayer Fighting the Bears? One beneficia=
ry of the anthrax scare has been Bayer AG (BAYZY :OTC BB ADR - news - com=
mentary - research - analysis) , the German chemical maker, which has =
seen its share price gain 10.4% since the terrorist attacks. But investors=
bidding up the stock might be getting ahead of themselves. Bayer makes=
Cipro, a leading treatment for anthrax. But while the demand for Cipro is =
high, sales from the drug are only a small portion of the company's overal=
l revenue, which totaled 30.9 billion euros last year (and, according to a=
nalysts, will increase even more this year, due to its acquisition of Aven=
tis CropScience, a crop protection and production company). To put the dema=
nd for Cipro in context, J.P. Morgan expects U.S. sales of the drug to be =
approximately 1.2 billion euros for 2001. [IMAGE] [IMAGE]border=3D0 hei=
ght=3D"280" width=3D"336"< [IMAGE] Even emergency purchases of Cipro pr=
obably won't add that much to Bayer's overall revenues. The president has =
asked for $643 million for antibiotics to combat bioterrorist attacks. Whi=
le it's possible that sum will be increased, not all the money would be sp=
ent on Cipro. Besides, it's not even clear that Bayer will remain the on=
ly producer of Cipro. Though the company holds the patent for the drug, th=
ere's some pressure in Congress for the government to purchase a generic v=
ersion from other manufacturers. On another front, Bayer is currently b=
attling a class-action lawsuit related to an anti-cholesterol drug implica=
ted in a number of deaths. It was forced to withdraw the drug from the mar=
ket. Bayer may offer protection against anthrax, but that doesn't mean i=
t's a refuge for investors. 2. Losses at Twice the Price You know thin=
gs are bad for a company when its losses per share are double the price of=
the shares themselves. That's the case for i2 Technologies (ITWO :Nasdaq =
- news - commentary - research - analysis) , the supply-chain softwa=
re maker. After market close on Tuesday, the company posted losses under =
generally accepted accounting principles that amounted to $5.5 billion, or=
$13.25 per share, for the latest quarter, including all charges. In ot=
her words, i2's losses were more than twice the value of its share price, =
which closed at $5.69 before the announcement. Much of the huge writedow=
n reflects amortized goodwill from the purchase of Aspect Development in M=
arch 2000. To be fair, investors in companies that have made big acquisi=
tions like i2 typically focus on pro forma earnings, which exclude charges=
and extraordinary items. By that measure, i2's losses didn't look quite so=
bad: The company met analysts' consensus expectations with a loss of $55.=
3 million, or 13 cents per share. Still, investors met i2's earnings wi=
th disapproval, knocking the stock down 25% the day after they were report=
ed. 3. Microsoft's Bag of Tricks In times like these, there's comfort i=
n knowing business goes on as usual at many U.S. companies. Just like the =
old days, Microsoft (MSFT :Nasdaq - news - commentary - research - a=
nalysis) is in the hot seat for its sharklike behavior toward a competito=
r. It stands accused of sending 3,000 fake cereal boxes emblazoned with =
the words "Microsoft Server Crunch" to customers of rival server software =
maker Novell. The boxes, according to Novell, contained "a number of false=
and misleading statements" intended as putdowns of Novell products. Amo=
ng the attempted insults were some not-so-clever plays on packaged food. F=
or example, in a reference to Novell's flagship software product, a line o=
n the Microsoft boxes read: "What's the expiration date on that NetWare pla=
tform?" (A round of applause, please, for those gut-splittingly funny engi=
neers.) The boxes also said Novell is shifting its focus from software t=
o consulting services, which Novell says isn't true. Microsoft spokesman=
Jim Desler said the cereal boxes were primarily intended to advertise Mic=
rosoft services, not to slight Novell. "It was all in the theme of a mock =
cereal box," he said. "It was a modest campaign." In response to Novell=
's complaints, he says Microsoft sent out a letter in September to recipie=
nts of the boxes to clarify some of its statements, and it's just agreed t=
o send another letter to appease the company. For the record, Novell said =
it's not calling off its lawsuit for unspecified money damages. 4. AMD'=
s Feisty Pledge CEOs don't get their jobs by being eloquent, and it probab=
ly would be too much to expect them to sound statesmanlike. But sometimes =
their oratorical rough edges cross the line into embarrassing. Case in p=
oint: Comments from Jerry Sanders, the CEO of Advanced Micro Devices (AMD :=
NYSE - news - commentary - research - analysis) , which earlier thi=
s week reported a loss for the first time in almost three years. The compa=
ny, facing harsh pricing competition from Intel (INTC :Nasdaq - news - c=
ommentary - research - analysis) , said its revenue was down 22% from =
a year ago and it expects a likely operating loss for the fourth quarter. =
Given recent declines in consumer confidence, the downturn is likely to =
be extended by several quarters, Sanders admitted. But in a conference cal=
l, he indulged in some spirited fist-shaking. Citing the company's so-calle=
d "Hammer" architecture for processors, Sanders declared, "We feel that wh=
en the upturn comes, we're going to kick ---." Does this guy carry aroun=
d a surfboard in his car or what? Mr. Sanders, meet Mr. Reeves . OK, so=
we actually kind of admire Sanders' never-capitulate spirit. But his comm=
ent seems a little redundant, because just about everybody will look bette=
r when the economy turns around. Because that may not be anytime soon, wha=
t matters is how companies weather the interim -- feisty pledges notwithst=
anding. 5. Enron's Rabbit-From-a-Hat Style Analysts have complained for=
some time about Enron's (ENE :NYSE - news - commentary - research -=
analysis) rabbit-from-a-hat style accounting, with which the company pro=
duced results that wowed investors without making it quite clear where they=
came from. Now that its business has taken a sour turn, that tendency has=
gotten even more unsettling. To cap off its disappointing earnings resu=
lts this week -- Enron posted a steep loss after taking a $1.01 billion ch=
arge -- the company let drop that its shareholder equity had decreased by =
$1.2 billion. In a conference call, CEO Kenneth Lay attributed the reduc=
tion in equity to the "removal of an obligation to issue a number of shares=
." According to a report in The Wall Street Journal, Enron repurchased 55 =
million shares issued through a series of transactions involving LJM Capit=
al, a partnership that until recently was headed up by Enron's CFO. TSC'=
s Peter Eavis has written that it appears Enron lent LJM money to buy Enr=
on stock. Ironically, the company boasted in its earnings release this w=
eek that it had expanded reporting of its financial results, presumably to=
quiet its accounting critics. Enron's transactions have been so labyri=
nthine that it's hard to identify exactly if or how they were inappropriate=
. But the latest revelation, to say the least, does nothing to bolster the=
company's credibility. Enron, whose CEO resigned unexpectedly in August, h=
ad seen its stock fall 59% for the year leading up to its latest earnings =
release. Since then, it's dropped another 12.6% Read our conflicts and=
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