The Five Dumbest Things on Wall Street This Week

1. Making Allowances at Disney

We at the Five Dumbest Things Research Lab guess that we're supposed to be outraged by Disney's ( DIS) disclosures to the Securities and Exchange Commission last Friday. But the whole affair seems pretty Mickey Mouse to us.

We're talking about the Friday afternoon amendment to Disney's annual report for the fiscal year ended Sept. 30, 2001. It turns out that three of the company's ostensibly independent directors had closer ties to Disney than previously let on -- namely, a child on Disney's payroll for at least part of the year.

Specifically, board member Reveta Bowers' son worked on Disney's Internet operations, Stanley Gold's daughter worked in consumer products, and Raymond Watson's son worked for the Disney Channel. The kids' compensation ranged from $82,000 to $153,000 for the year.

Well aware of where the wind is blowing, corporate image-wise, Disney is shocked and ashamed by the disclosures. "As a consequence of these relationships," says Disney, "the Board of Directors is currently reviewing appropriate steps to ensure ongoing compliance with applicable rules and corporate 'best practices' generally."

Thanks Mom and Dad!
Disney directors give kids jobs

Now hold on a minute. We don't know whether these kids got on the Disney payroll because mom or dad used some influence. But what if they did? There's supposed to be something wrong with that?

Heck, what's the point of being well-connected if you can't get your kid a job at a glamorous company where you have a high-powered role?

And this is the entertainment business, after all, where nepotism is a grand tradition.

Or maybe we're just being cynical. Maybe, in fact, it was on the merits alone that Sofia Coppola got her Screen Actors Guild card and Kelly Osbourne recorded "Papa Don't Preach" and Sean and Julian Lennon and Stella McCartney do whatever it is they do.

2. Layoffs? What Layoffs? Oh, Those Layoffs.

Over the past few months, everybody has known that IBM ( IBM) was cutting back. This week, we found out how much.

After playing it coy during second-quarter earnings season, Big Blue finally let it slip in its quarterly filing with the Securities and Exchange Commission. Turns out the company is cutting 14,213 positions from its services business. Add that to previously disclosed job cuts in the company's microelectronics business, and you get IBM laying off about 5% of its workforce.

Which reminds us of a joke: When an economist says that the level of employment in the economy is "acceptable," that means the economist still has his job.

3. Protesting Too Much

You would have thought AOL Time Warner ( AOL) had learned its lesson.

Here's the company that spent way too much time last year telling the world that it would generate $11 billion in earnings before interest, taxes, depreciation and amortization. Executives shrilly repeated that vow long after the investment community had given up the goal as a lost cause. Despite mounting evidence to the contrary, they hung onto that promise by their fingernails.

And then they said, "You know? We're not gonna make it."

Surprise, surprise.

So what happens after The Washington Post runs a story last month saying that some revenue recognized by America Online is a little hinky?

AOL Time Warner goes on full-court press with a denial, of course. All our accounting is appropriate and in accordance with generally accepted accounting principles, says the company. We've re-examined the revenue in question and everything is A-OK, says Dick Parsons the next week.

And that's where it lies until Wednesday, when AOL Time Warner says, "You know, we may have a little problem here with some drops in the revenue bucket. About $49 million worth."

Of course, AOL Time Warner isn't saying it was wrong before. Instead, it says Wednesday's disclosure is based on information that came to light within the past 10 days.

Somewhere in there, we're sure, AOL Time Warner is indulging in the fantasy that the good guys would have uncovered this questionable revenue even if The Washington Post hadn't published what AOL Time Warner had been implying was a piece of yellow journalism.

Yes, of course. And Kelly Osbourne would star in a rock video even if her dad were an accountant in Ohio.

4. French Vanilla

Looking for some last-minute summer reading togive you some insight into the world of business?Here's our advice: Dump that Jack Welch hagiographyyour kids bought you for Father's Day and read a fewvolumes of Curious George instead.

Yes, Curious George -- that mischievous monkey ofchildren's literature, the curious companion of TheMan With The Yellow Hat.

Granted, it is a little bizarre rereading CuriousGeorge's adventures as an adult, what with all theweird subtextual messages in the books. As in, don'tbe too curious about the world around you or you'llget into trouble. ("He was a good little monkey, buthe was always curious." But????) As in, if astranger kidnaps you from your jungle home and carriesyou off tied up in a sack, you'll end up happier.Lucky for us, we can't remember what we thought ofthis stuff when we were kids.

One of the other themes of the series is that whatseparates a kid (in this case, C.G.) from an adult(T.M.W.T.Y.H.) is that kids have short attentionspans. In a book about C.G.'s job, he goes fromspaghetti-stealing to dishwashing to window-cleaningto furniture painting within a few pages. Of course,adults stay the course: The firemen in the booksremain firemen, and T.M.W.T.Y.H. never wavers in hischoice of headgear.

No, adults make reasoned, thoughtful decisions andstick to them. Especially in the business world. Likewhen Vivendi Universal ( V)last year bought Houghton Mifflin, the publisher ofthe Curious George books. Buying Houghton Mifflin waspart of a grand, strategic plan.

Until, that is, Vivendi Universal earlier thisweek decided to sell Houghton Mifflin.

Yes, that's what separates man from beast: A longattention span.

5. Glad We Didn't Meet Ya

Some situations are so sensitive that they fairly demand anonymity. Police hotlines. Tips about Watergate. Gladstone Capital ( GLAD) press releases.

If you're not familiar with Gladstone, you're not alone. The company is a McLean, Va.-based business development outfit, which is to say it focuses on investing in other companies. Gladstone features a small staff -- six people, going by the latest count provided to Yahoo! Finance -- led by CEO David Gladstone and finance chief Harry Brill. You won't find the stock among the Nasdaq's most closely watched names, trading in the neighborhood of 63,000 shares daily.

To judge by those facts and its press-release output (five in the last three months), Gladstone prefers to keep a low profile. Nothing unusual there. But what is unusual is the company's practice, first noted by our colleague Herb Greenberg, of attributing the comments in those press releases to a company "spokesperson."

To wit, the company's third-quarter earnings release, published Wednesday morning by BusinessWire: "'Net operating income for the quarter ending June 30, 2002, was in line with our revised estimates for the year,' said a spokesperson for the company. 'The company is now earning more than we paid out in dividends for the quarter and we are hopeful that future quarters will show continued strength.'"

No question, that's good reading. Still, standard business-flacking practice would seem to call for an issuer either to refer to itself as a proper noun ("the Company"), or to attribute quoted material to a high-ranking officer. Gladstone's release followed neither example, though Brill and Gladstone are both listed as contacts along with the company's phone number.

In any case, Gladstone seems genuinely uninterested in the press release game -- could it be that it's the standard practice and not the nameless spokespersoning that's truly Dumb? Brill, the CFO, says the quote is either from him or Chairman Gladstone -- you choose. "It's normally just an insider, either myself or the CEO," the executive said in an interview. "It's somebody within the company who knows what they are talking about.

"I don't know why," he continued. "It's just the way we've always done it." has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from

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