Skip to main content

The Five Dumbest Things on Wall Street This Week

Bud's taste; Qwest's plan B; Able's unable; batting an Eyetech; JDSU's cash.
  • Author:
  • Publish date:

Woke up this mornin', got myself a B to E...

1. Serious Suds



can't quite finger what ails it.

The maker of Budweiser and Bud Light isn't exactly staggering. The company still expects to hit its year-end earnings target. But sales aren't quite hopping, either, so execs at the St. Louis-based brewery are pondering bigger questions.

President August Busch IV (pictured right) admitted as much at Wednesday's investor conference. Busch told Wall Street that the company is heading into the second half of the year with renewed focus on its marketing priorities.

That sounds like a good idea, but we have to admit we were a little surprised to learn what the priorities actually were.

"First, while beer is America's favorite beverage with 58% of overall alcohol servings, we must continue to improve the image and desirability of beer," Busch said in a morning press release. "Second, we must keep beer fun and social. Third, we must grow beer occasions and, fourth, we must continue to improve our retail execution."

That last priority, retail execution, we get. That's where people come into the store and you try to make sure they leave with a case or two of

Budweiser Select or

B-to-the-E, whatever that is.

But improving beer's image? Keeping it "fun and social"? Trying to "grow beer occasions"?

Sounds like it might be time to cut someone off.

New and Notebaert-Worthy
The sum of Qwest's parts

2. Junkyard Doggie Bag



couldn't wrangle an invite to dinner, but it still wouldn't mind picking up some of the leftovers.

The Denver-based telco officially pulled the plug on its $9.7 billion bid for MCIundefined at Tuesday's annual shareholder meeting. The decision came after Virginia-based MCI spent three months repeatedly snubbing superior bids from Qwest in favor of a linkup with Verizon (VZ) . Qwest chief Dick Notebaert had painted the MCI deal as a way to compete with bigger competitors and restart a flagging stock.

Notebaert told shareholders Tuesday that the company would shift its focus to picking up smaller long-distance assets. He pointed to possible opportunities in the divestitures that regulators may force in the Verizon-MCI and SBCundefined-AT&T (T) deals.

"We are going to do the same thing, but just in parts," Notebaert said, the

Denver Post

reported. He said the strategy shift amounts to the difference between "buying the car and buying the parts and building the car."

We knew Qwest was scrappy. We just didn't expect to see it combing through the junkyard so soon.

3. Total Recall

Few companies have ever been as misnamed as

Able Laboratories



Judging by recent developments, the labs at the Cranbury, N.J., generic drugmaker don't appear to be the least bit able. The product recall department, on the other hand, has been working overtime.

Able Labs shares plunged onto investors' radar screens last Thursday with a dizzying

77% one-day drop. The free fall came after the company withdrew financial guidance and announced the departure of its CEO. Able said it had "identified apparent departures from standard operating procedures with respect to certain laboratory testing practices" that would force the recall of some drugs.

Able has been down this road before, having recalled generic versions of the antibiotic Flagyl, the antihistamine/antiemetic Phenergan and the antiemetic Compazine during the quarter ended March 31. On Thursday, it said, "As a result of these observations, the company will be recalling additional products in the future."

That turned out to be an understatement. On Monday, a day after the stock staged a mild relief rally, Able

dropped an additional 25% after the company expanded the recall to cover all its products.

Now, Able doesn't know what to do. "The Company does not, at this time, know what further actions it may have to take or what actions the FDA and other government officials may undertake," Able said in Monday's press bulletin. "This disruption in business is expected to have a material adverse effect on the Company's business and results of operations."

Yes, with all its products pulled from the market, even Able's recall division is going to have its problems.

4. Eye Bath

This week left



looking all wet.

The New York-based drug company saw its shares plunge 46% Tuesday after the prospects for its Macugen drug were

thrown into deep shadow. The selloff was prompted by a better-than-expected showing from a rival treatment,




Both drugs treat an eye disease called wet age-related macular degeneration, which slowly robs victims of their central vision. Macugen was approved for U.S. sales after tests showed it slowed patients' vision loss. But

results released this week seemed to show that Lucentis worked better. In many cases it actually improved many people's vision, Genentech said.

Eyetech responded gamely. CEO David Guyer told investors at a conference that "the news from Genentech is not complete," and added that it's "inappropriate" to compare the companies' data. Eyetech held a conference call Thursday to repeat that it stood behind Macugen, in case anyone had missed the news the first time.

Still, it seems that ThinkEquity Partners analyst Andrew McDonald summed it up best in a Tuesday report. "Lucentis gives Macugen a black eye," he wrote. No kidding.

JD$ Uniphase
Liking that Acterna action

5. Happy Couple

A fistful of cash can make even

JDS Uniphase


look OK.

Optical component maker JDS this week agreed to pay $760 million in cash and stock for Acterna, a closely held network-testing outfit. JDS didn't hide its motives, saying the deal would "accelerate JDS Uniphase's path to profitability" and be "immediately financially accretive."

Of course, adding to JDS' sorry financials shouldn't be hard. For its latest year ended last June 30, San Jose, Calif.-based JDS lost $118 million, while sales declined to $635 million from $675 million a year earlier. For the most recent quarter, the news didn't get much better, as JDS posted a $38 million loss.

So what's in it for profitable and growth-minded Acterna? Well, joining up with JDS (headed by CEO Kevin Kennedy, at right) will bring Acterna a list of complementary customers, says a spokesman.

But don't forget JDS' healthy bank balance, listed by Yahoo! Finance at $1.38 billion as of last quarter. That's a nice chunk of cash. Recall too that Acterna emerged last year from bankruptcy after a telecom bubble-induced trip through Chapter 11.

Indeed, an Acterna spokesman, Jim Monroe, cites "access to capital" as one incentive for the Germantown, Md., company to make the deal. He says the deal will help Acterna to "make investments in new growth opportunities and expand our business."

Sounds like a perfect match.

To check out Colin Barr's video presentation of The Five Dumbest Things on Wall Street, click here.

Want to get your Five Dumbest in the mail? Sign up for a free Five Dumbest email alert by becoming a TSC member; the email contains the Five Dumbest article for that week, plus other select stories. And as a TSC member, you'll gain access to a sampling of our premium RealMoney content. Click here to sign up!