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The Five Dumbest Things on Wall Street This Week

Still at issue is whether Google should let Geico rivals use the insurance company's name in the text of the ads that show up. Geico says no. Google says that it doesn't want advertisers to do that.

Coincidentally, Berkshire said Tuesday that Microsoft's (MSFT) Bill Gates was joining Berkshire's board.

Too bad for Geico that Gates didn't show up earlier, since the Master of Microsoft knows a little bit about courtroom warfare. A day late, a few billion dollars short.

3. We 'Half' Ways of Making You Talk

What's the true value of a merger of Sprint (FON) and Nextel (NXTL)?

We have no clue. And we believe that Sprint and Nextel don't have too good an idea, either.

Let us explain: Back when we first got into the financial reporting racket, a kindly man once sat us down to tell us a little secret.

The secret, he said, would come in handy anytime we learned that two companies had embarked on a venture in which they said they were splitting the proceeds on a 50/50 basis.

What's wrong with going in on something 50/50, we asked?

Nothing, really, he said. But when partners end up with a 50/50 split, he said, it's probably because they have no clear idea as to what the relative value of their contributions are to the joint venture. So they just split the take down the middle.

As a counter-example, he offered the situation of an actor and his agent. When an actor gets paid, his agent gets 10% of the money -- a reflection of the educated guess that when the agent negotiates a job and the actor takes it, the actor himself is contributing 90% of the value to the actor/agent partnership.

But 50/50? That means that neither party really knows what's worth what.

Which brings us back to Sprint Nextel. In announcing their "surprise" merger Wednesday, the parties were scrupulously even-handed in their description and execution of the deal.

Right Down the Middle
Sprint and Nextel go halfsies

The deal, they claimed, was that elusive creature known as a "merger of equals." By our calculations, however, it isn't: One the eve of the deal, Sprint's $37 billion market capitalization was about 11% larger than Nextel's, and Sprint's $50 billion enterprise value was 21% larger.

But nobody asked us. Shareholders from each company will end up owning roughly 50% of the merged company. The board will contain an equal number of representatives from Sprint and Nextel. There will be two co-lead independent directors -- one from each company. The company will have two headquarters -- one the former Sprint headquarters, the other, formerly Nextel's.

Now, we're sure the companies intend this arrangement to be a sign of how darn equal they are. But we look at it another way: Can't anybody around there make a decision? It's like asking a true/false question on a quiz and getting back the answer "All of the above."

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