Five Dumbest Things: Quiz Answers

Thanks to all for taking part in our first-quarter review.

Author:: Colin Barr
Publish date:: Apr 6, 2007 11:56 AM EDT

Thanks to all for reviewing Wall Street's losing ways in The Five Dumbest Things First-Quarter Quiz.

We had four winners: Bob Donnelly, David Henke, Tony Prestridge and Marji Wright. They get copies of Jim Cramer's new book,

Mad Money: Watch TV, Get Rich

Here are the answers. Thanks to all for playing!

1. Match the mortgage company with its first-quarter news highlight.

Fremont General

(FMT)

NovaStar

(NFI)

Accredited Home Lending

(LEND) - Get Report

IndyMac

(NDE)


1. Answers: I. C. Regulators told the company it had to get out of the subprime business. Fremont shares soared after the company hinted it wouldn't have a problem finding a buyer. II. B. NovaStar shares plunged 38% in a day after the company admitted that souring subprime loans would lead to a steep quarterly loss. III. A. Accredited shares soared 22% on news of the deal, which helped it to meet margin calls. IV. D. IndyMac said the so-called irrational panic makes it "virtually impossible to predict short-term loan production and sales volumes or earnings with any reasonable precision until things settle down."

Citi

ended 2006 with investors demanding aggressive action to boost the stock. How did CEO Chuck Prince respond?


2. Answer: D. Citi also shuffled top management, moving the unloved Sallie Krawcheck back to the money management business. Oddly, none of these masterstrokes made any apparent progress in reducing investor dissatisfaction.

3. Match the bold

Vonage

(VG) - Get Report

statement with the milestone in its patent dispute with

Verizon

(VZ) - Get Report


3. Answers: I. D. Vonage made the "delighted" statement in response to a federal jury verdict reached March 8. II. A. CEO Mike Snyder made the "not going out of business" claim March 9, a day after the infringement finding. III. B. Shares plunged 26% to a new low of $2.98 in spite of Snyder's insistence that "our fight is far from over." IV. C.Snyder warned investors against "counting Vonage out" March 26.

Sirius

(SIRI) - Get Report

and

(XMSR)

agreed in February to merge in a $4.6 billion stock swap. Assuming the deal passes muster with regulators, Sirius chief Mel Karmazin will become CEO of the combined company. What plans do the companies have for XM chief Hugh Panero?


4. Answer: D. Gary Parsons, currently chairman of XM, will become chairman of the combined company. Panero, whose leadership of the Washington, D.C., company came under fire last year, will be free to get on with his life's work.

5. Despite recent customer-service issues,

JetBlue

(JBLU) - Get Report

says in promotional material that it "is focused on creating a new airline category." Which category is that?


5. Answer: A. The claim is starting to sound a little thin, given the company's weather-driven need to cancel a thousand flights over the week of Valentine's Day. CEO David Neeleman subsequently emerged as Mr. Contrition on the "Today" show, the "Late Show," the front page of The New York Times, in various newspaper interviews and on a teleconference with more than 100 reporters.

6. Which mortgage company has billed itself, despite the recent suspension of its

New York Stock Exchange

listing, as "a new shade of blue chip"?

Impac Mortgage

(IMH) - Get Report

New Century Financial

(NEWC)

HomeBanc

(HMB)

HSBC

(HBC)


6. Answer: B. The Big Board yanked its listing March 13, barely a week after the company disclosed its accounting and securities trading were under investigation by the Justice Department. The stock lost more than 85% of its value in its last week of NYSE trading. New Century did recently pull down a page on its Web site explaining its claim to be a new shade of blue chip. Where the company once said it was "committed to acting with integrity, forging relationships with partners based on trust and living up to our promises," the Web site now says: New Century Mortgage Corporation and Home123 Corporation are unable to continue the origination or funding of mortgage loans, and no new loans are being accepted.

7. Match the comment with the communications executive trying to save his hide through mass firings.

Nortel

(NT)

Motorola

(MOT)

Alcatel-Lucent

(ALU)

Sprint

(S) - Get Report


7. Answers: I. B. Zander pledged to get back in the saddle with a Jan. 19 plan to fire 3,500 middle managers. But he got thrown off again in March with a big earnings shortfall. II. A. Zafirovski made the claim as the company set plans Feb. 7 to cut 2,900 jobs. Less than a month later, Nortel said it would restate earnings for a fourth time. III. C. What Russo meant was that Alcatel-Lucent will cut 12,500 jobs, not the 9,000 it originally targeted. IV. D. Forsee offered up that explanation Jan. 8, when he said Sprint would go ahead and cut 5,000 jobs in an effort to offset the free fall in its postpaid subscriber base.

Blockbuster

(BBI) - Get Report

and its CEO John Antioco recently settled their differences over the board's decision to invoke "negative discretion" on his 2006 bonus. How was the dispute resolved?


8. Answer: C. Antioco had said his contract called for him to get $7.6 million in bonuses for last year, but the board said it would pay just $2.3 million, citing its right to change bonuses at its whim. The dispute ended March 20 with an agreement under which Antioco will get a $3 million bonus figure and leave by the end of 2007. He'll also get $5 million in severance by year-end -- down from the $13.5 million he was due at termination under his previous contract.

9. Match the company being acquired in a leveraged buyout with a statement from its going-private press release.

ServiceMaster

(SVM) - Get Report

TXU

(TXU)

Affiliated Computer

(ACS)

Claire's Stores

(CLE)


9. Answers: I. A. CEO J. Patrick Spainhour made the statement when ServiceMaster agreed March 19 to sell itself to Clayton Dubilier & Rice for $4.8 billion. II. D. Rich Friedman, global head of Goldman Sachs' Merchant Banking Division, said so Feb. 25, when TXU unveiled a $32 billion buyout by private equity firms Kohlberg Kravis Roberts and Texas Pacific Group. III. C. So said Founder Darwin Deason back on March 20, when Affiliated set a $5.9 billion deal with Deason and hedge fund Cerberus Capital. IV. B. CEO sisters Bonnie and Marla Schaefer, the daughters of the company's founder, made the comment March 20 when Apollo agreed to buy Claire's, a retailer.

10.

H&R Block

(HRB) - Get Report

recently made a move that it said would ensure that "tax time may never be the same."

What was the move?


10. Answer: D. The company is trying to sell Option One, a subprime lender, and recently "conducted a rigorous review" that resulted in a small writedown. But Block said it still expects to get $1.3 billion when it sells the unit, thanks to "the actions we have taken beginning last summer and continuing in the current industry environment." Block promised that its Second Life island will feature "digital tax professionals sharing free advice, providing access to the latest tax preparation products, and hosting tax-related events."

To watch Colin Barr's video take of this column, click here

In our

award-winning effort to enrich the reader experience, the Five Dumbest Things Lab now scores each item using our proprietary Dumb-o-Meter. This cutting-edge technology employs a finely calibrated, 100-point scale measuring sheer Dumbness, as calculated via a closely guarded secret formula.

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