1. Nascar and Normalcy

Americans love their cars, we're often told at the Five Dumbest Things research lab. When we're driving, we love the speed and the power. When we're buying, we love the new car smell and the installment debt. Most of all, it's frequently remarked, we love what owning a car gives us: freedom.

So you can imagine our excitement when we learned that our next-door neighbor, the New York Stock Exchange, would be hosting a new listing, Action Performance ( ATN), this week. For those of you who don't follow the Nascar circuit as we do, Action Performance is a Phoenix-based company that sells licensed car-racing souvenirs, like miniature die-cast metal cars and Jeff Gordon T-shirts.

Needless to say, we were revved up for Action Performance's move to the NYSE from the Nasdaq on Wednesday morning. For openers, CEO Fred W. Wagenhals rang the opening bell, an honor the NYSE says is "accorded to heads of state, heads of listed companies, NYSE members celebrating their retirement and participants in New York City celebrations."

Outside were festivities including the Dale Earnhardt Legendary Trackside Trailer, displaying memorabilia from the late Nascar star's career, and appearances by racing greats Rusty Wallace and Darrell Waltrip. The company even provided an actual racing-car engine, better to periodically deafen onlookers.

"This celebration marks one of the first events allowed to take place outside of the stock exchange since September 11th," Action Performance's press release marking the occasion declared. "The event marks not only Action's move to the NYSE but also a return to normalcy in America."

Just one small problem. Broad Street, the one that runs in front of the exchange and the one on which Action Performance set up its dazzling display, has been closed to traffic in the name of security ever since Sept. 11. Members of the public are now routed by barricades onto the sidewalk along the street's eastern edge, which is to say that no one without an NYSE identification badge can get within 40 feet of the actual showcases.

Can't Get Near the Action
Kiss those miniature car views goodbye
Source: NYSE

Dumbfounded, our research team tried to storm the show before being turned back. "How are you supposed to look at the miniature cars?" one member of the Five Dumbest Things research team cried out upon being turned away from the Dale Earnhardt trailer. "You can look at them from afar," a security guard replied evenly. Beyond the gray steel fencing, one smock-clad trader examined the toys.

Jennifer Hastings, a public relations executive at Action Performance, acknowledges the toys are "obviously small, handheld items," and expressed a tinge of regret.

"We wanted people to come and look at the things and be interested, but we were unable to do so because of NYSE and New York City codes," says Hastings. Nevertheless, she adds, the show "generated enthusiasm for Nascar in New York City."

That's how much this freedom-loving city loves its cars.

2. Ride the Horse That Brung Ya

Much has been made of the Enron scandal in these pages and elsewhere, what with the shredded documents and destroyed 401(k) accounts, and poor Ken Lay facing the prospect of life without multiple homes in Aspen, Colo. But from our perspective here in the lab, all that muck has served only to obscure the deeply principled nature of corporate America.

Take Dow Chemical, the Midland, Mich., conglomerate that down through the years has brought us such unalloyed goods as Scrubbing Bubbles and Dow Corning, now bankrupt. Just this week the chemical maker introduced a companywide legal and ethics policy intended to "enhance Dow's reputation as a corporate role model for legal and ethical conduct."

Of course, legal and ethical conduct isn't its own reward, as some of you might assume. No, sir. Indeed, "There's also a compelling business reason for these actions," Dow says. "The return on investment for this kind of education, we believe, is going to be enormous."

Horse B-lee-P

Having set the bar sufficiently high, we now turn to our Corporate Citizen of the Week, British Petroleum. This week the company changed the name of its major Gulf of Mexico oil discovery, in what it said was deference to the Lakota Nation's preferences.

The project had been named Crazy Horse, after the warrior and spiritual leader who led the Lakota victory over U.S. forces at Little Big Horn in 1876. The Lakota tradition holds it sacrilegious to use the name outside of a spiritual context, BP said.

"The religious community and other socially concerned investors have for years been working to educate companies to be sensitive to 'what's in a name,' " BP noted. "BP's decision sets an example for other companies to follow."

Fair enough. Sufficiently abashed, BP execs apparently set out to find a name that bore no chance of raising claims of sacrilege -- or any other objections, for that matter. A name that, in combining simple words that conjure up clear but apparently unrelated images, calls to mind the great corporate word play of our time: names such as Verizon, Cinergy, Novartis.

To their credit, the name they came up with certainly doesn't seem likely to offend anyone.

The new name is Thunder Horse.

Why? "Thunder Horse represents an overall image similar to the previous project name, in keeping with the already established theme," the company explained in a press release Wednesday. "Additionally, thunder is generally regarded as a natural manifestation of power, similar to the strong reservoirs this project encompasses. The new name and image are strong and memorable, as is the oilfield we are in the midst of developing."

Coming soon to an oilfield near you: Memorable Horse.

3. The Mouse That Roared

At this point it should be abundantly clear that these core values take the highest priority at big companies, regardless of that Enron blip. If all we have to worry about is whether Corporate America cares, we'll have no problems.

Shareholders' loyalties, on the other hand, aren't always as easy to figure. Take Disney, for instance. In the wake of that Enron nonsense that media types are always going on about, Disney offered shareholders a chance to vote on a proposal that would prohibit the company from using its outside independent accountants for other services, such as consulting. (As background you'll recall that some people, for whatever reason, thought that Enron's decision to employ its auditor Arthur Andersen for nonaudit work -- and to pay it millions of dollars in fees for that work, far more than it shelled out on auditing business -- raised the possibility, however tiny, of a conflict of interest that might compromise Andersen's independence.)

On its face the proposal looked like a slam-dunk. Disney backed it, saying that "it's become more important than ever to make sure that our shareholders -- and the market as a whole -- have full confidence in our financial reports, including the integrity of our auditing process." Various shareholder-advocate groups and legislators weighed in as well, saying that companies like Disney were doing the right thing (as no doubt mandated in their Statement of Core Values) by separating auditing and consulting functions.

But don't forget that many Disney shareholders are Americans, and that (as noted above) Americans are a freedom-loving people. In fact, the way Disney shareholders voted suggests that many of them prefer freedom -- in this case, the freedom to continue policies that brought on the greatest bout of national hand-wringing since Fawn Hall revealed Oliver North had a paper shredder in her office -- to financial transparency. As it turns out, shareholders voted the proposal down resoundingly, 648 million to 473 million. Touche, Enron bashers.

Fortunately, the Magic Kingdom isn't a democracy. Mickey Mouse overrode the shareholders and adopted the policy anyway.

4. Short Circuiting

Sometimes, the ups and downs of the stock market make no sense even to those of us here in the lab. You wouldn't think, for instance, that a rumor that drove a stock down two straight days would suddenly turn around and send the stock higher the third day.

And yet that's just what happened at Circuit City this week, and our friends the analysts on Wall Street had a strange, if somehow credible, explanation for it. The issue is a long-awaited store-remodeling campaign that the home electronics retailer is starting up and how it might affect earnings. Circuit City, for its part, hasn't commented on the remodelings or how it might account for any remodeling costs.

Circuit City Silliness

But Tuesday, as Circuit City shares plunged by double-digits percentagewise for the second straight day, Gerard Klauer Mattison analyst Scott Ciccarelli suggested that the program would likely fall prey to the time-honored, construction-industry tradition of cost overruns. He said the remodeling costs could double his previous estimates, a notion that investors associated with "lower profits" as they rushed to sell the stock.

Sounds bad. But suddenly, in the nick of time, Merrill Lynch analyst Peter Caruso rushed to the rescue of electronics-retailing investors everywhere. His Wednesday morning report noted marketwide concerns about "a heavy remodel campaign which would eat into expected profits." Still sounds bad. Fortunately, Caruso had a way around this looming problem that, apparently, other investors hadn't considered.

Writing the costs off as a one-time charge.

Yes, it's an extraordinary advance in the fresh field of financial reporting -- so fresh that doing so is considered standard operating procedure by retail analysts. It seems the novelty of the treatment, or some other factor, kept Caruso from returning our calls. Fortunately, quoting the text of his note will allow us to share with you some details of this most unusual concept.

"If a company is going to undertake a major remodeling campaign, they usually take a charge to account for all extraordinary costs related to the remodel," Caruso wrote in the note, which raised his rating to strong buy from buy. "Investors price and value retail stocks based on what is happening to operating earnings and we think will exclude the cost of a major remodeling campaign if and when it comes."

Caruso's observations, while laudably straightforward, do raise the question (once again) of whether any of the investors who bought the stock on his recommendation have heard of that nasty Enron business. If rising costs are a problem, as the stock's fall suggested, how does accounting for them as a charge change the picture?

It might be time to remodel those earnings models.

5. Free Fall, Redefined

The utter breakdown of the telecommunications-equipment industry has been well chronicled by TheStreet.com's ace telecom reporter, Scott Moritz. As investors know all too well, visions of ever-expanding new networks have given way to stumbling customers hoarding scarce cash. Revenue at the big networking shops has fallen by 50% and more; few CEOs are willing to project any financial guidance more than a quarter in advance.

But even by the standards of this wretched sector, Ciena suffered an unusually harsh blow Thursday: Its second-quarter revenue forecast fell nearly 10% -- during its postearnings conference call.

At 8:21 a.m. EST Ciena's first-quarter results were reported in an earnings posting on Business Wire, a press release service on the Internet. The release said the company expected to report second-quarter revenue of $110 million, well short of what analysts expected and barely a quarter of the year-ago figure.

But wait, it gets worse. Shortly after 9, on the company's conference call with analysts and investors, Ciena CEO Gary Smith noted that second-quarter revenue would be around $100 million. Listeners, clinging desperately to the far-richer $110 million guidance contained in the press release, scratched their heads. Is business so bad that Ciena's customers are leaving it even as we speak?

Apparently not, judging by what Ciena says, though the company concedes the situation was, shall we say, dynamic. At 9:07, Ciena issued a revised press release, recording for the record the corrected (lower) figure. If investors had been unhappy and befuddled, now they were just unhappy.

So was someone confused about which second-quarter revenue target Ciena was actually going to announce? "It was a moving target," says a Ciena spokesman. Business Wire says it followed Ciena's instructions.

Ciena investors can be forgiven for wondering just how fast the target will be moving next quarter.

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