The Five Dumbest Things on Wall Street This Week

George Mannes

Merck, Heal Thyself

1. Leaving Your Merck

As pharmaceutical giant Merck (MRK Quote) learned this week, sometimes defensive medicine is just a waste of time.

On Sept. 30, to refresh your memory, Merck pulled its blockbuster drug Vioxx from the market on the basis of evidence that the painkiller increased the risk of cardiac illness.

In the years leading up to the recall, Merck had publicly insisted that no link existed between Vioxx usage and increased risk of heart attacks. The about-face precipitated a 27% free-fall in the stock.

Sensing that more bad news was in the air, Merck issued a press release last Friday alerting investors that certain Merck documents related to pending Vioxx litigation -- including documents under court orders prohibiting disclosure -- had been made public.

"Past experience of other companies," said Merck, "suggests that documents will be presented out of context. ... As such, the documents, the surrounding events and the business practices of Merck may well be misinterpreted in any reporting."

Merck's shares fell slightly on the company's brief announcement, ending the day down 1%, and perhaps the company thought it had inoculated itself against the shock of additional bad news.

It didn't. On Monday, The Wall Street Journal wrote a 3,500-word story based on the documents -- a detailed article that, rather than simply presenting documents out of context -- used additional reporting to persuasively portray a Merck that fought vigorously to stamp out any suggestion that Vioxx could be linked to heart problems.

Shares fell $4.51, or 14%, over the next two days.

The problem for Merck wasn't that the documents were presented out of context. It was that they were presented in context all too well.

2. Oops, They Did It Again

Remember that Julia Roberts movie called Runaway Bride? The one where she kept getting engaged, only to ditch each groom at the altar?

Well, we've just found Julia's Wall Street counterpart: computer services company EDS (EDS Quote).

See, on Oct. 18, EDS announced it would hold an earnings call at 5 p.m. Eastern time Oct. 25.

Never a Bride

But at 4:42 pm Oct. 25 -- that would be about 18 minutes before the ceremony was to begin -- EDS got cold feet. Something to do with a possible impairment of assets.

No, it wouldn't be releasing earnings that day. Instead, it would postpone the conference call to this Wednesday, Nov. 3, at 5 p.m. No big deal, right?

Wrong. Once Wednesday evening rolled around -- this time, 54 minutes before the conference call was slated to begin -- the company backed out again. That asset impairment charge still hadn't been finished. And something else had come up, too -- something about "certain issues related to quarterly bonus plan accruals."

Perhaps having learned a lesson here, EDS declined to set a date for its next earnings release, other than to say it likely won't deliver it by the usual deadline.

Yes, EDS has always struck us as a promising company. Let's just hope they can stop promising and start delivering.

Nothing to Fear but...

3. A Roosevelt by Any Other Name Would Smell as Sweet

Speaking of last-minute goodbyes, Conrad Black knows when he's not welcome. Sort of.

Black, you may remember, controls Hollinger (HLGUF Quote), a company which in turn controls publisher Hollinger International (HLR Quote).

This past Tuesday, the Canadian press baron, who has been accused of looting $400 million from Hollinger International, was facing a court hearing on the subject of kicking him out of Hollinger, the parent company.

Just as the hearing began, however, Black resigned.

Nyah, nyah! You can't fire me, 'cause I quit.

Of course, it isn't that simple. Lord Black still controls 78% of Hollinger and is trying to take the company private.

Black is also a guy who evidently believes history will prove him the aggrieved hero in all this.

As the sharp-eared Toronto Star sagely noted, in a speech last week about Franklin Delano Roosevelt -- on whose memorabilia Black has been accused of inappropriately spending company money -- Black noted that it took nearly 60 years to "liberate FDR from the clutches of his idolaters, his detractors, and even his mere chroniclers."

As for rescuing Lord Black from the clutches of his own detractors, we suspect another 60 years will be necessary.

4. Disney Is Sick Ovitz All

So you're the CEO of a major corporation. You're about to hire a new president from outside the company -- a guy who could conceivably succeed your CEO at a place where succession planning is a major concern -- since the last president died recently in a helicopter crash.

Do you conduct formal board meetings before you hire the guy?

And let's say you decide to get rid of that new president one year later. Does the board meet on the subject before your CEO grants the president a no-fault termination, one now valued at $140 million?

Well, as we learned this week, if you're a member of Disney's (DIS Quote) board in the mid-1990s, the answer is no. When Michael Eisner hired and fired Michael Ovitz, that's pretty much how things went.

What a Michael Mouse way to run a business, is all we can say.

5. The Sign of the Ford

We wish we could feel as encouraged as the folks at Ford (F Quote).

Issuing its monthly sales numbers on Wednesday, the carmaker quoted a marketing exec as saying, "We're very encouraged by the early dealer and consumer response to our new products."

But we note that overall October unit sales were down 5% year over year. This after they were down 4% in September. And down 13% in August. And down 4% in July.

You see a pattern here?

Market share has been improving over the past few months, says Ford. But year over year, market share is in decline.

"We have our sights set on stronger retail sales in the months ahead," says Ford.

That's good, because they sure aren't in the months behind.

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