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. I think Icahn
Carl Icahn didn’t become a billionaire by making dumb mistakes, but his move to rattle the cage at Dell Inc. (NASDAQ:DELL) has all the makings of a disaster.
Dell received a $24.2 billion offer to take the company private last month, but Icahn feels that the buyout price of $13.65 a share is too low.
What’s his plan? Well, no one has offered to top the $24.2 billion offer, but Icahn is proposing — if the deal doesn’t pass — for Dell Inc. (NASDAQ:DELL) to pay a special dividend of $9 a share. Dell Inc. (NASDAQ:DELL) obviously doesn’t have that kind of money, so it would have to take on new debt to make it happen.
Dell’s behind the times, and it’s too late in a world that has eased up on PCs over the past two years. Analysts see revenue slipping again this year, with profitability taking an even bigger hit. Taking on more debt is the last thing that Dell Inc. (NASDAQ:DELL) needs right now.
2. Fumbling away an opportunity
DIRECTV (NASDAQ:DTV) may not realize that its exclusive deal with the NFL to air every regular season game in its entirety is perhaps the only reason why it’s able to command such a lofty premium over rival satellite television and most cable providers.
Speaking at Deutsche Bank Media, Internet & Telecom Conference in Florida this week, DIRECTV (NASDAQ:DTV) CFO Pat Doyle — as retold in Hollywood Reporter — said that the company is weighing changes to its NFL Sunday Ticket when it comes up for renewal.
The NFL is likely to command a princely ransom when the current deal expires in 2015, and Doyle said that the satellite television giant is considering striking a cheaper non-exclusive deal with the football league or dropping the package altogether.
Yikes. Maybe Doyle is merely negotiating in public, but at a time when live sports programming is about the only thing keeping many homes from cutting the cord with pay TV providers, it would be a devastating blow for DIRECTV (NASDAQ:DTV) to lose the one thing that sets it apart from everybody else.
3. Letting the bed bugs bite
In a week when the market was rallying to fresh all-time heights, shares of Select Comfort Corp. (NASDAQ:SCSS) hit a new 52-week low after posting a disappointing sales update.
The company behind the Sleep Number air-chambered mattress warned that sales have been soft since the beginning of last month. Unlike its beds, there’s little that Select Comfort can do to adjust that firmness.
“We believe this is a short-term issue associated with accelerated changes made to our media-buying strategy, and we are making the necessary corrections to both media buying and near-term expenses,” Select Comfort’s CEO said.
You don’t buy that? Well, Wall Street didn’t buy it either.