1. Up to No Google
For a long time now, we at the Five Dumbest Things Research Lab have resisted one of Wall Street's most popular guessing games: When will
This week, our resistance finally crumbles.
Now, just hold on a second while we climb out onto this tree limb here.
OK, here goes: Google will file an S-1 IPO registration statement with the
Securities and Exchange Commission
within 30 days.
Now what is it on which we base our fearless prediction?
Is it inside information?
What about all those stories that have circulated recently about Google auditioning investment bankers? Does that have something to do with it?
Maybe. But that's not conclusive proof in our minds.
No, the deciding factor is some haphazard evidence of Google's sudden reticence.
Exhibit A is an unsolicited note we received from a Google spokesman last week, wondering whether we had time to meet with a Google executive we'll call Blah Blah.
Are you around the week of November 3 to have a quick update meetingover coffee? I would like to introduce you to Blah Blah, Google'sVP of Bloopty-Bloop.
I am aiming for Monday, November 3? Please let me know if you areavailable.
Hope all is well.
We don't often receive nice invitations to meet with Google executives, so this one got our attention. So we graciously accepted.
Exactly one week later, however, we received this note:
We had a change in schedules and unfortunately Blah Blah and I are notgoing to be able to meet you on Monday, November 3. I apologize for thechange in plans.
We will look to schedule this again sometime in the future.
Hmm. There's not much to go on here, but we'll run with it anyway.
First, notice that the cancellation comes in the form of a distant-sounding email, not the apologetic phone call that Miss Manners would recommend under such circumstances. Second, the previous hint of a week of availability has vanished. All of a sudden, it's all about making a particular day. And third, note the vagueness of the excuse, and the absence of any effort to reschedule. (When we made a follow-up phone call, all we got from the spokesman was a passing reference to changes in travel plans.)
Exhibit B: Google's presence at
Ad:Tech, or lack thereof. Ad:Tech, now the top trade show for Internet advertising, kicks off Nov. 3 with a panel discussion featuring all the key players in search engine advertising. Except for Google. The company participated in a similar discussion at Ad:Tech in New York last summer, and a similar discussion at Ad:Tech in San Francisco earlier this year. So arguably the hottest company in what is arguably the hottest area of online advertising isn't sending a bigwig to impress potential clients? Are they backing out of this to avoid talking with people? (The spokesman says no Google executive was ever slated to be on the panel.)
All of a sudden we're getting sweaty flashbacks to 1999, when privately held companies that had been hounding us for press coverage suddenly turned shy and unavailable. The reason always turned out to be that they had entered their self-imposed 30-day "quiet period" before making their IPO filings.
We realize the evidence is a little thin, but we're getting that quiet-period vibe anyway. When we asked the spokesman whether Google is getting ready to file, he said, of course, that he had no comment.
So go ahead. In 30 days, feel free to call us fools. But until we're proved wrong, we feel like the smartest guys in the world.
2. Putnam on the Ritz
As we discovered this week from
Putnam Investment Management
, timing is everything. Market-timing, that is.
As you're no doubt aware, the Securities and Exchange Commission and the Commonwealth of Massachusetts
have accused Putnam of securities fraud. The charges stem from allegations that Putnam permitted its own fund managers to market-time investments in Putnam funds -- trading in and out of these funds to take advantage of short-term market movements, in contravention of Putnam's publicly stated policies.
We find many Dumb things here. There's the allegation that Putnam knew about this activity in 2000, made a half-hearted and unsuccessful effort to stop it, then ignored the issue for the past three years.
Furthermore, there's the problem that once again, we investors are forced to confront the fact that, thanks to allegations of market-timing and/or late trading at various funds, the mutual fund industry is losing its hard-won image as the Mom & Apple Pie of the investment world. As was the case with the IPO market during the dot-com bull market, it's looking like there are two sets of rules on Wall Street -- the rules for the insiders and wealthy investors on one side, and the rules for you, the little guy, on the other.
But our favorite Dumb thing in the Putnam affair comes from Exhibit 12 of Massachusetts' complaint: a 3 1/2-year-old memo reporting on a January 2000 meeting between a Putnam executive and Omid Kamshad, a Putnam managing director apparently then suspected of market-timed trading in Putnam accounts.
"We specifically discussed the movement of balances into and out of the Worldwide Equity Portfolio," says the memo. "Omid's quick reaction was that he was not 'market timing' as he held positions for 2-3 days."
Ah. Two or three days. Like Warren Buffett, this guy is simply another fan of buy and hold.
3. I'm All Lost in the Super Martha
As Martha Stewart has often pointed out, the little details mean a lot.
That's true whether you're throwing a party or making a Halloween costume.
And, as we learned Thursday from
Martha Stewart Living Omnimedia
, it's true when you file your financial statements, too.
See, as discovered by
ace managing editor Chris Nagi, Martha Stewart Living issued a financial results press release with the tiniest of errors -- a misplaced letter.
Unfortunately for everyone involved, it was a $100 million mistake.
Here's how it worked: In an income statement for the third quarter ended Sept. 30, MSL included a line item, among operating expenses, for "Production, distribution and editorial."
Except it didn't say exactly that. The line item actually read, "Production, distribution and editoria," dropping the "l" at the end of "editorial."
And where did that lowercase l go? Why, it went to the front of the next column in the income statement table. And there, looking like the digit "1" instead of the letter "l," it had momentous effect on the number for third-quarter production, distribution and editorial costs. The right number, $31.2 million, turned into a wrong number: $131.2 million -- quite an increase from the 2002 third-quarter figure of $38.9 million.
Martha's $100 Million Error
After Nagi brought the error to MSO's attention, the company corrected the mistake in a reissued press release later Thursday morning. A Martha Stewart representative blamed the mistake on the press release wire that issued the release, PR Newswire.
We assume we would have figured out the right number eventually. After all, in what universe do editorial budgets at established companies more than triple year over year? Not any universe we're familiar with. That was the obvious tip-off.
4. I'm Your No. 1 Fannie Mae
Of course, a $100 million error is bush league when you're
. On Wednesday, the mortgage giant disclosed it made a few "computational errors" in the third-quarter financial release it issued two weeks earlier.
One effect of these errors, says Fannie Mae, was
the understatement of stockholders' equity by $1.13 billion, or more than 6%.
We at the lab, of all people, understand that people make mistakes. But for some reason, we thought that Fannie Mae was different. As ace
senior columnist Peter Eavis points out, it wasn't too long ago that Fannie Mae CEO Franklin Raines was talking about the fine job his company was doing, compared with the lesser mortgage giant
, in accounting for financial arcana along the lines of the unrealized gains on securities and accumulated other comprehensive income that appear to be at issue here.
We offer this exchange from a June 30
interview with Raines:
- Business Week: Because of similarities between Fannie and Freddie, you are tarred by the same brush. Is this fair?
Raines: As President Kennedy said, life is unfair, so we just have to get used to that. I don't know that much about how Freddie operates. But when it came to accounting for our derivatives, we spent millions of dollars on internal systems
and we maintain strict control over what kind of derivatives can be used and our accounting for them. Everyone who has looked at it, from our external auditors to our regulators, found that we are doing this in a state-of-the-art way. We are compulsive about managing risk.
Oh well. Better to be compulsive late than compulsive never.
5. One of the Five Dumbest Things in Sandton This Week
Finally, only two months ago, we pointed out
the Dumbness of changing your company's name to something that requires a pronunciation guide.
Well, it didn't take long for someone out there to completely ignore our advice.
This week, reader Kevin Horne pointed out to us that
, a U.K.-based tech firm, is changing its name to
. We quote the lead-off sentence in the relevant press release: "Logical today announced that it is marking its evolution into an integration solutions player by changing its name to Logicalis (la-ji-cal-es)."
How many times do we have to tell you people? If the first thing you have to do with your new name is explain how to pronounce it, does it not occur to you that you might be waving a red flag?
Where's the Logic?
What's worse, we can't even figure out what that Logicalis' phonetic spelling is supposed to be spelling out. Is it "logical-us"? Is it "lah-ji-CAIL-iss"?
We called up Logical's U.S. offices to find out. "Lah-ji-CAIL-iss," explained a spokeswoman.
And why are they doing this anyway? Apparently, Logical -- a subsidiary of
, which is traded on the Johannesburg stock exchange -- used to be a systems integrator. But now it's an integration solutions player.
Anyway, the "is" in "Logicalis" is intended to abbreviate and reflect the integration solutions nature of the company.
If you must know, we're rooting for the Dublin-based
to change its name to Jefferson Smurfitis. No longer would we imagine it as a packaging firm run by little blue Irishmen. Instead, we'd imagine it as a disease that turns people into little blue Irishmen with a vintage Saturday morning cartoon show.