The Five Dumbest Things on Wall Street This Week

1. Three Cheers for ... Charles Wang?

Dumbest kudos to the drones who gave chairman and founder Charles Wang a standing ovation at the annual meeting of Computer Associates(CA Quote) Wednesday. Wang got another partial ovation when he announced that the company had defeated the proxy bid launched by dissident shareholder Sam Wyly. (Welcome, new members of the Stockholm Syndrome club. The muggings will commence after your complimentary breakfast.)

Wang and Chief Executive Sanjay Kumar faced hardly any criticism during the Q&A portion of the meeting. Many used the opportunity to thank management and ramble incoherently.

Remember, Wang's the same guy who backed a compensation package in stock then valued at $1.1 billion for a three-person management team -- including himself -- in 1998. He also helped lead the company as it caught flak for its accounting practices and consistently underperformed its peers. In the five-year period since 1996, the stock has declined 9% -- the S&P 500 rose 75% in that time frame.

Granted, Wyly, who sought to unseat Wang and install his own four-member board of directors, isn't perfect: There's been criticism about governance practices at some of the companies he's run. But that shouldn't obscure the larger issue: Management at Computer Associates has acted with hubris for too long, failing to respond to legitimate shareholder worries. Wang deserves something, but it certainly isn't applause.

2. FreeMarkets: From $14 to $90

File this under the "What Were They Thinking?" category: On Tuesday, Wedbush Morgan Securities issued a note reiterating a "strong buy" on FreeMarkets(FMKT Quote). OK, we're with you so far.

Then, things start getting weird: In the note, the shop also maintains a $90 12-month price target and leads off its research with this morsel: Sharp Increase in Short Interest Noted. Wedbush prominently mentions that the recent run-up in short interest "increases the potential that FreeMarkets shares can rebound strongly and rapidly on potential short covering on any positive news."

Sure, a short squeeze can add to a stock's upside surge. But the company's stock finished trading Thursday at $14 and change. FreeMarkets would have to rise about 542% to get to the $90 target.

We called Wedbush Morgan to determine exactly how short interest might lead to an out-of-this-world return. We put the question to Edward Woo, senior research associate, because lead analyst George Santana was on vacation: Why does FreeMarkets have a $90 target? The answer: "I don't know."

"Well, we debated changing the price target," Woo said. He said that they have maintained a $90 price target on the stock since October 2000 -- the stock ended that month a shade under $50 -- and that in no way relates to the recent surge in short interest.

Let's just say we're going to skip the firm's hot tip this time.

3. Oracle's Blind Spot on Gartner

Oracle's(ORCL Quote) spat with research house Gartner Group seems irrational at best, paranoid at worst. Early this week, Oracle posted a release on its Web site that said a report from Gartner betrayed a "bias" against the database-software company.

Peggy O'Neill, a senior director of market research and analyst relations at Oracle, said a "quick analysis" had showed that Oracle received negative reports from Gartner 23% of the time, while IBM(IBM Quote) received negative coverage 8% of the time. "That's a pretty big difference," she said. While acknowledging "we might deserve that," she said there might also be "a problem with the way Gartner perceives us."

Betsy Burton, author of the Gartner report, pointed to "significant missteps" in Oracle's strategy, though she concluded that the company deserved a positive rating. Other analysts also have lately sounded less than enamored of Oracle, whose stock has dropped 54% this year (just for comparison's sake, IBM's is up 23% so far in 2001).

Oracle was miffed that Gartner refused to make changes in its report at its request, The Wall Street Journal reported Tuesday. The research group said analysts often show companies advance copies of research and often incorporate clarifications -- if they're deemed valid.

A search on Oracle's site Thursday didn't turn up the release, but it did dig up earlier notes on rosier Gartner reports: headlines such as "Gartner's Dataquest Says Oracle is No. 1 Database Software Leader" and "Gartner Issues Negative Ariba Report."

4. Bungle at StockJungle

One of the more bone-headed ideas to gain ascendance in the late '90s was the notion that any momentum-loving newbie with a 56k modem could run money as well as folks well-versed in balance sheets and the link between risk and return. That belief reached its apotheosis with StockJungle.com's (SJCIX Quote)Community Intelligence fund, which bought stocks based on emailed advice from amateurs. The fund shut its doors this week after less than two years of existence. Its performance over the past year -- down 54% -- landed it in the bottom 7% of large-cap funds.

But that shouldn't come as a shock, given the fund's stock-picking MO. Would you pay for advice from "analysts" with email handles like "VooDoo," "Lawnpro," and "Fatso?"

The democratic approach worked fine when the bull market was on a tear. According to Morningstar, the fund gained 60% from December 1999 to March 2000 -- not surprising, given that it had 80% of its assets in tech stocks. But the fund suffered heavy redemptions after the market hit a wall, with assets dropping from $7.4 million in August 2000 to $1.5 million at the end of July 2001, according to Financial Research.

Investors want to know who's making decisions about their money, and they don't want it to be sorcerers or lawn-mower jockeys. The only surprise is that it took two years for StockJungle.com to figure that out.

5. Little Orphan Agere

This week's credit downgrade of Agere to junk status, only five months after the company was partly spun off from Lucent(LU Quote), underscores the disastrous timing of its IPO. Pushed out of the nest early at the behest of Lucent's bankers, the company has stumbled, a Little Match Girl in a world grown cold for optical-equipment makers.

The problem isn't that Agere's a poorly run company, it's that it started out with a slap on the back and not much else, at perhaps the worst imaginable time given its business. In the downgrade, Standard & Poor's focused on "ongoing weak markets for communications semiconductors and optical communications components" rather than problems related to bad management at Agere.

When the company debuted in March, the telecom-equipment sector already was ailing from a combination of service-provider spending cuts and an inventory glut. But Lucent -- which still owns 58% of the company -- backed the deal in a desperate bid for money, though Agere's offering was priced at less than half initial expectations. Within months, the new company had been forced to chop about a third of its payroll.

If there were ever any doubts about how ill-timed Agere's IPO was, this week cleared them up. Thanks again, Lucent. With parents like this, who needs enemies?

Dancin' Ballmer Does It Again

We thought last week's column would feature the last of our stories about Steve Ballmer's antics. We were wrong. Yet another unsettling clip has surfaced, once again showing the khaki-clad Microsoft funk daddy in full-on, corporate cheerleader mode (no disrespect to those cheerleaders who might object to the comparison).

Check out the hip gyrations -- no shortage of rhythm there. Above the waist, a perspiring Ballmer claps his hands evangelist-style, shouting, "Developers! Developers! Developers! Developers!" -- well, you get the idea -- before wrapping up with a few of his hallmark ooga-booga arm thrusts. (Is that an electrified fence containing him?)

A Microsoft spokesperson was not able to identify the place and time of the event, but offered this official response: "This footage demonstrates what anyone who has met or seen Steve in person already knows -- that his exuberance and passion for our company and industry is one of the things that makes him such an effective leader for Microsoft."

For the record, Ballmer's presided over a 43.7% year-to-date return for Microsoft stock. We give him credit, but that doesn't excuse all the pelvic swiveling.