Skip to main content

Bottled Up
Kent's innovative strategy

1. Coke and a Smile


(KO) - Get Coca-Cola Company Report

put a fresh face on its global ambitions this week.

The Atlanta-based seller of sugar water made Muhtar Kent president of Coca-Cola International. Starting next month, Kent will oversee four group executives responsible for Africa, Asia, the European Union and Latin America.

"Muhtar is a proven leader with a wealth of relevant experience and a record of achievement that speaks for itself," CEO Neville Isdell said. "He is the ideal person to assume this key position. In his new role, Muhtar will be working with me to further improve our system efforts in our international markets and to help accelerate the on-the-ground execution of our key priorities that are critical to building value for our shareowners."

When it comes to creating value for shareowners, one part of Kent's record seems particularly well-spoken.

It seems that in the fall of 1996, as a managing director of Coca-Cola Amatil-Europe, Kent sold short 100,000 shares of the bottler -- just before a profit warning clipped the stock. Kent said back then that he believed the sale was legal and that he hadn't been influenced by any information about Amatil's results.

Australian regulators didn't see it that way. So the next year, Kent settled an insider trading complaint with the Australian Securities Commission. Without admitting wrongdoing, Kent agreed to repay about $400,000 in profit from the transaction, plus $50,000 to help cover the cost of the investigation.

Kent resigned from Amatil in September 1997. "He thought it was in his and the company's best interests," his spokesman told Sydney's

Daily Telegraph

at the time.

Coke rehired Kent last year, after he spent more than four years leading Europe's Efes Beverage Group. Now Coke is standing by its man.

"This was neither an insider issue nor were any company rules violated," a Coke spokesman told

The Wall Street Journal

. "It basically was a situation where Muhtar was provided with incorrect financial advice. When he discovered it was incorrect he moved immediately to remedy the situation."

Scroll to Continue

TheStreet Recommends

You aren't alone if you find that explanation a little flat.

Image placeholder title

Dumb-o-Meter score: 93. So betting against your own stock isn't a widely admired financial strategy for top execs? Who knew.

To view Colin Barr's humorous video take on Coke, click here


Blues on the iPod
Apple's guidance sounds sad

2. Thrill of Victory

It was such a tough week for tech stocks that even


(AAPL) - Get Apple Inc. Report

lost some of its shine.

Investors came out of Monday's holiday in a good mood. The Nasdaq was up 5% in the first two weeks of the year and looked like it would keep rising. Old dependables such as Yahoo! (YHOO) , Intel (INTC) - Get Intel Corporation Report and eBay (EBAY) - Get eBay Inc. Report were on deck to post what was expected to shape up as a strong round of quarterly earnings.

But late Tuesday the mood dimmed as first Intel and then Yahoo! posted soft fourth quarters and wan outlooks. When trading resumed in the morning, Intel dropped 11% and Yahoo! slid 12%. eBay added to the gloom late Wednesday by failing to raise its 2006 forecast.

But the real sour note came from Apple, the red-hot iPod pusher whose stock has more than doubled over the last year.

As expected, Apple reported an

impressive first quarter, selling 14 million iPods and launching an Intel-powered Macintosh ahead of schedule. But the company dealt avid fans an unexpected setback by

predicting a weak second quarter. Apple said it expects a 42-cent pro forma profit on sales of $4.3 billion. While those numbers would mark the company's second-best quarter ever, Wall Street grumbled that the projections fall shy of the expected 48-cent profit and $4.6 billion in sales.

Making matters worse, the shortfall came just a week after Apple wowed investors with its iPod-powered

first-quarter sales blowout.

"We are thrilled to report the best quarter in Apple's history," CEO Steve Jobs crowed in Wednesday's postclose press release, ahead of Thursday's 4% selloff.

Obviously, everyone wasn't equally thrilled.

Image placeholder title

Dumb-o-Meter score: 90. Maybe Jobs was too busy working on a possible Disney (DIS) - Get Walt Disney Company Report-Pixar (PIXR) linkup to notice.

J&J's Chronic Heartburn
Its Guidant story goes on and on

3. Torn Jersey

Johnson & Johnson

(JNJ) - Get Johnson & Johnson Report

is starting to sound like a sore loser.

The Band-Aid maker got into another scrape over Guidant (GDT) this week. Just months after slashing its bid for Guidant by some 16%, J&J gave in to pressure and raised its offer -- only to have Guidant embrace the ever-escalating alternative presented by Boston Scientific (BSX) - Get Boston Scientific Corporation Report.

There has been a bit of back-and-forth here. Way back in December 2004, J&J agreed to pay $25.4 billion, or $76 a share, to acquire Indianapolis-based Guidant. But the intervening months brought a host of legal problems for Guidant, pushing its shares down and famously causing J&J to consider its alternatives. After some legal wrangling, the sides settled on a deal worth around $21 billion, or $64 a share.

Then Boston Scientific threw its hat in the ring, causing J&J to boost its bid not once but twice. At each turn, J&J indicated it believed its deal offered full and fair compensation to Guidant shareholders, regardless of the relative terms.

In this latest round of the Guidant auction, J&J and Guidant worked up to a deal at $71 after Boston Scientific dangled $73. "The companies are eager to close and begin to implement the integration plans they have been developing throughout the past year," J&J said impatiently in a Friday afternoon press release.

But Boston Scientific wasn't done, unveiling an $80-a-share bid that even the antsy Guidant board embraced. Guidant declared the Boston Scientific bid superior to the $71-a-share J&J pact, giving Johnson & Johnson five days to up the ante again.

For its part, J&J didn't sound too excited to be back in the game. "Johnson & Johnson considers the proposal from Boston Scientific to be a highly dilutive and leveraged transaction based on extremely aggressive business projections and, as such, one that will not provide $80 per share in value to Guidant shareholders," the New Brunswick, N.J., company said. "The company will consider its alternatives under the existing merger agreement with Guidant."

Now where have we heard that one before.

Image placeholder title

Dumb-o-Meter score: 88. What next, raise the merger price back to $76?

4. Central Planning

Devising catchy names isn't a core strength at some companies, it seems.

In Chicago,


(MCD) - Get McDonald's Corporation Report

faced off again this week with activist hedge fund Pershing Square Capital. Pershing's manager, Bill Ackman, wants McDonald's to sell off 1,000 of its roughly 8,000 company-operated restaurants to franchisees and use the funds to boost expansion in China and Russia. He thinks the moves will goose the stock.

The burger chain, which previously

fended off an Ackman-authored proposal to boost returns by selling two-thirds of its restaurants and taking on nearly $10 billion in debt, offered its appreciation for Ackman's efforts but said it would stay the course. Management, McDonald's pointed out, has its own designs in mind.

"We remain committed to our 'Plan to Win,' to ensuring alignment with our franchisees and suppliers, to building and delivering value for shareholders, and to growing our business by being better, not just bigger," the company said.

McDonald's isn't the only company that's charting an awkwardly named strategic course.


(F) - Get Ford Motor Company Report

, of course, unveiled its Way Forward restructuring back in October, though little progress has been apparent.

One outfit that hasn't just been sitting around is furniture maker

Ethan Allen

(ETH) - Get Ethan Allen Interiors Inc. Report

, whose shares soared this week after stronger-than-expected quarterly results.

And what's behind the rebound at the Danbury, Conn., retailer? CEO Farooq Kathwari notes an innovative concept that has galvanized workers.

"Delivered sales and earnings for the quarter were favorably impacted by the continued implementation of one of our strategic plans, referred to as 'Mission Possible,' the objective of which is to reduce the lead time associated with the delivery of our products to the consumer," Kathwari said in unveiling Wednesday's

earnings blowout.

Plan to Win? Mission Possible? Good thing that CEOs get judged on results and not originality.

Image placeholder title

Dumb-o-Meter score: 75. We're waiting to see someone roll out a Plan to Tie.

5. Modern Dance

Some of this employee-benefit tap dancing is starting to get old.

Big companies are rushing to get a grip on costs.


(AA) - Get Alcoa Corporation Report

said this week that it would phase out regular pensions for new hires, starting in March.


(IBM) - Get International Business Machines Corporation Report

said it would freeze its defined-benefit pension at the end of next year in favor of a 401(k) savings plan. A few big airlines have jettisoned their pension plans through bankruptcy.

The shift to so-called defined-contribution plans like 401(k)s is understandable for employers, if hardly palatable for workers. The newer plans aim in part to avoid the retiree-cost overhang that is weighing so heavily on old-line manufacturers such as


(GM) - Get General Motors Company Report

and Ford. Proponents say workers get more say on how their funds are invested, along with account portability when they change jobs.

That said, there's no getting around the fact that workers giving up defined-contribution pension plans often end up getting less than they were expecting. And that's where

Wolverine Tube


comes in.

Wolverine said Friday that it is freezing its pension plan at the end of next month, in favor of a 401(k). Wolverine's new plan appears to be in line with those of many other companies, featuring automatic 3% contributions, employee matching and so-called success sharing.

But rather than leaving readers to ponder the facts, Wolverine attempts a bit of salesmanship. Yes, it may look like the Huntsville, Ala., metals company is freezing its pension plans. But Wolverine assures us it is "modernizing" them.

"The modernization of our retirement benefit plans will allow the employees more control over their financial futures," CEO Chip Manning says in a release titled "Wolverine Tube to Modernize Its Retirement Benefit Plans" that goes on to lay out plan "enhancements." Oh, and the company says it expects to save $24 million over five years.

Well, it sounds like they enhanced it for someone, anyway.

Image placeholder title

Dumb-o-Meter score: 70. What a howl in Huntsville.

In our ongoing 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.

Got your own idea for the dumbest thing of the week?

Let us know.

Want to get your Five Dumbest in the mail? It's easy. Just become a TSC member -- it's free -- and you'll receive the Five Dumbest in our Before the Bell email newsletter every Friday. The rest of the week, before each trading day, Before the Bell gives you a comprehensive look at the stocks expected to move the market, plus access to a sampling of our premium content from RealMoney. Click here to sign up for Before the Bell!