Boeing, Boeing, Gone
Boeing pushed back the initial test flight of its long-awaited 787 Dreamliner for the fifth time on Tuesday, citing a need to reinforce part of the aircraft. The flight was originally scheduled for late 2007, but production problems, a labor strike, and, if you ask us, really bad karma have caused repeated delays.
Boeing shares sank over 6% on the latest postponement, dragging down Dreamliner suppliers Spirit Aerosystems Holdings (Stock Quote: SPR) (SPR) - Get Report , Goodrich (GR) and Rockwell Collins (COL) (Stock Quote: COL) along with it.
Boeing said a revised schedule for the flight, as well as first deliveries to customers, will not be announced for several weeks.
Our advice? Don't hold your breath waiting for this jumbo jetliner turned running joke.
Customers had expected to get the first of the new jets in the first quarter of 2010, almost two years behind the original schedule. All Nippon Airways was at the head of the line back in 2004, ordering 50 Dreamliners that have yet to be delivered. And at this point it would be hard to blame them, or any other Boeing customer for cutting bait. So far this year, Boeing has seen a net 45 cancellations for the 787. (This number doesn't include Qantas, which late Thursday said it has canceled orders for 15 Boeing 787 Dreamliners and delayed the delivery of another 15). In early June, Boeing claimed it had more than 50 customers who have placed orders for more than 850 of the airplanes.
Scott Carson, president and chief executive of Boeing's commercial airplane division, said the reinforcement problem has been solved, and that such modifications were not uncommon in the development of new airplanes.
Then again, Carson also told us back in December 2007 that there will be no further delays in Dreamliner development. He broke that promise a month later in January 2008 when Boeing announced a three-month delay in the project. When those three months expired in April 2008, the company asked for six more months. And so on. And so on.
If this keeps up, by the time Boeing finishes this plane we won't need Dreamliners anymore. Scotty will be able to beam us up instead.
Dumb-o-meter score: 95 -- We've long since hit the snooze button on the Dreamliner.
Medarex's Quick Study
You know the old saying, "three's a trend"? Well, not for Medarex (MEDX) (Stock Quote: MEDX). They only need two.
The biotech company's stock rocketed higher Monday after it was reported that two men saw their tumors shrink dramatically in a study of its experimental prostate cancer drug. Shares of Princeton, N.J.-based Medarex opened at $8.88 Monday morning, over 20% higher than their Friday closing price of $7.36. The stock finished the session at $8.28, a 12.5% jump, even as the S&P 500 and the Nasdaq respectively shed almost 3%.
The news was first released Friday in the online research magazine issued by the Mayo Clinic of Rochester, Minn., which is co-sponsoring a study of Medarex's antibody-based drug Ipilimumab. Medarex took the news and ran with it, posting a press release Monday about the article on its Web site, prompting the stock's surge.
What Medarex neglected to say, however, is what happened to the other 106 people participating in the trial. Forgive us for being petty, but it seems like pretty pertinent information.
We here at the Five Dumbest Lab (no relation to the Mayo Clinic in case you were wondering) are immensely pleased that the two cancer patients involved in the study have, according to the press release, "resumed their regular lives." But researchers normally do not make public data until a study has been concluded and all the data painstakingly analyzed.
Furthermore, studies typically contrast patients getting a new treatment with a different group receiving a standard treatment or a placebo. In this case, the press release said nothing about how this study was conducted.
We just hope these "preliminary" results turn permanent and the treatment offers lasting relief to the folks who need it -- and we don't mean the shareholders who were treated to a temporary spike courtesy of an irresponsible press release.
Dumb-o-meter score: 90 -- The Mayo Clinic's next study? Figuring out how to pronounce Ipilimumab.
Altria's Smoke Screen
Cigarette-maker Altria Group released a statement Monday praising President Obama's signing of legislation giving the Food and Drug Administration regulatory authority over tobacco products as "an important and historic achievement." The Family Smoking Prevention and Tobacco Control Act allows the FDA to reduce the amount of addiction-causing nicotine in tobacco products and block often deceptive labels such "low tar" and "light." Tobacco companies also will be required to cover their cartons with large graphic warnings.
"The decades-long effort to protect our children from the harmful effects of tobacco has emerged victorious," Obama said at a signing ceremony in the White House Rose Garden. The president, a smoker himself, later said he protects his immediate family from the sin sticks by not lighting up "in front of my kids."
No problem Mr. President, your secret from Sasha and Malia is safe with us and your other 300 million constituents. Just don't hide your smokes in Bo's doghouse and they'll never know.
Pointing out hypocrisy in the White House is not our mission, however. It's our job to uncover insincerity on Wall Street, and in this case it's Altria holding the proverbial smoking gun. There's a reason why the maker of Marlboro, Parliament and Virginia Slims backed the legislation while its much smaller competitors Reynolds Tobacco (RAI) and Lorillard Tobacco (LO) sensibly lined up against the restrictions.
Why would Altria support a law antithetical to its own interests, you ask? Easy, because it increases the advantage of the industry's Goliaths over its Davids.
By placing fees on tobacco makers, the legislation cuts into profits of smaller sellers much more than a behemoth like Philip Morris, Altria's domestic cigarette manufacturing company, which, by the way, controls more than 50% of the U.S. cigarette market. Sterner advertising rules would also prevent lesser-known brands from gaining market share by curtailing marketing campaigns.
"We believe a comprehensive regulatory framework, implemented thoughtfully, can provide significant benefits to adult consumers," said Michael E. Szymanczyk, Altria's chairman and CEO on Monday.
No need for the smoke screen, Mike. We know it benefits Altria too.
Dumb-o-meter score: 85 -- Luckily we don't suffer from second-hand stupidity. .
Farewell Nortel. We hate to see you -- but not your overpaid CEO -- go.
The 127-year-old Canadian telecommunications company and one-time global powerhouse has chosen to sell itself off in pieces rather than rise from bankruptcy as a restructured company. Nokia Siemens Networks said Saturday it will buy the most lucrative part of Nortel's carrier networks division in a $650 million deal. The asset sale to the Finnish-German joint venture, which is subject to an auction if a higher bid emerges, is just the latest in a slew of liquidations at the humbled equipment maker.
Nortel CEO Mike Zafirovski said an interview with the Associated Press that the company is in advanced discussions with multiple companies for each one of its remaining assets. If the company is successful in getting decent prices for its parts, said Zafirovski, then Nortel as we know it "will no longer be here in the future."
To be honest, it's been a while since we've noticed the company anyway unless it's on the losing side of a battle with Cisco (CSCO) - Get Report (Stock Quote: CSCO) or Alcatel-Lucent (ALU) (Stock Quote: ALU).
Nortel, which lost $507 million in the first quarter, still employs more than 25,000 people around the world. That's a sizable amount, but well below the nearly 100,000 workers it boasted back during the Internet boom. Nortel accounted for nearly a third of the market value on the entire Toronto Stock Exchange at one point in 2000. In a dramatic fall from grace, Nortel said Saturday it will ask to have its shares delisted in Toronto.
"This is not the path which we worked so hard to get to," added the CEO who sought bankruptcy protection in January.
Clearly not. And it's also not what Nortel shareholders had in mind in October 2005 when they forked over $11.5 million to Zafirovski's former employer Motorola (MOT) (Stock Quote: MOT) to settle a lawsuit that allowed him to come aboard. The company justified the expense because of Zafirovski's role in turning around Motorola's handset business.
It all worked out much better for Zafirovski than Nortel. He earned a base salary of about $1.2 million in 2007 plus a boatload of perks and options, even though the company lost nearly $1 billion for the year and its shares fell 55%.
Motorola and Zafirovski will live to see another day. Nortel, however, is no more.
Dumb-o-meter score: 75 -- Don't blame Canada. Blame Zafirovski.
Bye, Bye Bernie
Bernard Madoff believes Judge Denny Chin should go easy on him. We believe he's out of his mind.
In a letter to U.S. District Judge Denny Chin released Monday, Madoff's attorney Ira Sorkin cites "death threats" and "anti-Semitic e-mails" as reasons for leniency when the Ponzi schemer is sentenced Monday. Madoff has already admitted to stealing tens of billions from his clients, friends and family, not to mention Holocaust survivors, charities and colleges.
The tone of the victim statements "suggests a desire for a type of mob vengeance that, if countenanced here, would negate and render meaningless the role of the court," according to Sorkin.
Madoff faces up to 150 years in prison after pleading guilty on March 12 to 11 felony counts including securities fraud and perjury. Sorkin's letter says 12 years in prison, slightly less than his life expectancy, will be sufficient punishment for the 71-year old swindler who "will speak to the shame he has felt and to the pain he has caused" this coming Monday.
Bernie feels bad? Oh man, he's breaking our hearts. You know what? They should let him go right now. He's learned his lesson and obviously shows remorse.
Sorkin, who at one time was a Madoff investor, said a sentence of a dozen years in prison would acknowledge Madoff's voluntary surrender (c'mon, the jig was up), full acceptance of responsibility (yeah right), meaningful cooperation efforts (are you serious? where's the money and the accomplices?) and the nonviolent nature of his crime (tell it to the family of Rene-Thierry Magon de la Villehuchet who committed suicide after losing more than a billion of his investors' bucks to Madoff).
"A prison term of 12 years -- just short of an effective life sentence -- will sufficiently address the goals of deterrence, protecting the public and promoting respect for the law," Sorkin wrote.
We object counselor. Our respect for the law will only increase with the length of time Bernie spends behind bars.
Dumb-o-meter score: 70 -- Mercy for Madoff? Mercy me!