The Five Dumbest Things on Wall Street This Week

Carb-Barb Redux

1. On the Carb Side

Now that New York City Mayor Michael Bloomberg has apologized to the widow of diet guru Robert Atkins, you probably thought you had read the last about that brouhaha.

Not quite.

Yes, we were amused by Mayor Bloomberg's version of the Atkins diet -- namely, take a bite of the food served at a Dr. Atkins party, then spit it out into your napkin when no one's watching.

But we were more amused to see this crack example of content-targeted advertising on the CNN.com Web site. (Thank you, Joan Griffin, for pointing this out.)

After all, what better endorsement of Dr. Atkins' low-carb diet could there be than the New York City mayor's suspicions, rehashed in the story, that the doctor's dietary practices led to his death?

A CNN.com spokesman says it isn't a contextually placed ad, but was just a random occurrence. Ah, the joy of random events.

2. Don't Say We Didn't Time Warner You

Speaking of copyrighted material published by a unit of the world's largest media conglomerate...

We were somewhat alarmed to hear comments made by Time Warner ( TWX) CEO Dick Parsons at a meeting with analysts this Wednesday.

Specifically, we're a little jittery about Parsons' discussion of a joint effort between Time Warner and Microsoft ( MSFT) -- the world's largest and most powerful software company, in case you'd forgotten -- that may affect a teeny tiny portion of your life in the future.

And what's that teeny tiny thing this Microsoft/Time Warner collaboration may affect?

You've Been Warnered Before...
...about file sharing

Well, nothing more than How Much Freedom You'll Have to Listen To or Watch Any and All Music or Video That Passes Through Your Computer at Some Point in the Future.

That's what.

It all started when Blaylock & Partners analyst John Tinker asked for an update on one of the upshots of a legal settlement announced last year between Microsoft and Time Warner -- the companies' agreement to cooperate on systems for secure dissemination of entertainment and information.

In response, entertainment and networks group Chairman Jeff Bewkes made a dry, executivespeak response about an option to use -- at preagreed terms and prices -- features, segments or a full chain of a digital rights management. He talked about their "very collaborative relationship" and the "more than several working groups" that were trying to address the issues.

Nothing sinister there. But then Parsons chimed in.

First he talked about the creative products at the center of Time Warner's business. Then he talked about the need to protect them from theft. He suggested that Bewkes had understated the number of working groups assigned to the effort: "It must be up to 11 now," said Parsons. "We're actually working very closely with them."

"Because at the end of the day ... a large part of the answer has to be in the operating system," said Parsons. "It has to be what you can play back. Because no one has figured out how you can knock down file sharing." None of the computer electronics manufacturers, he explained, would agree to anything that "requires them to put out a machine that is less robust and less capable than the current machines they put out."

"So I think file sharing per se is going to be with us a long time," said Parsons. "What you can then gain access to -- what you can replay -- will be determined in large part by encryption systems and operating systems that recognize them.

"And so our belief is that Microsoft in particular has to be a huge part of the solution. We, as the largest content creator in the world, have to be a huge part of the solution."

Finally, making a joking reference to Time Warner General Counsel Paul T. Cappuccio, Parsons said he thought that the most important part of the Microsoft settlement wasn't the $750 million Time Warner had received, but rather "the creation of a working relationship that would enable us to actually begin to get our hands around what I think is the most inimical problem facing our business."

We don't want to be paranoid here, but as far as we can tell, what's going on is that representatives of the nation's largest media and entertainment conglomerate and representatives of the company that sits on virtually every computer desktop in the country are gathering together to figure out what Americans will or won't be able to access on their computer -- what we'll be able to replay.

We can hardly wait until they iron out all the details and show a unified front on Capitol Hill to present their solution to all that's wrong with copyright enforcement in America. Maybe all of us who'll be asked to use that system will have a chance to say what we think of it then.

We called up the Electronic Frontier Foundation, a cyber-liberties nonprofit group, to see what they thought of Time Warner's and Microsoft's huge role in the copyright solution.

In a certain way, says EFF Senior Staff Attorney Fred von Lohmann, Parsons' comments reflect nothing new. For at least a year now, he says, it's been clear that the entertainment industry "would really like to be able to not just control what you do with their own protected files, but also control what you do with any file obtained from any source. ... The basic goal for entertainment companies has been to somehow get computers to only play authorized, authenticated content."

What's new, von Lohmann said, was that Parsons appeared to be so upfront about this.

"I'm not surprised by that description of what they would like computers to be like," said von Lohmann. "I am a little surprised that they said so quite so publicly."

Arnold 'Partner'
Legal greens fees?

3. No, It's the Other Guy Who'll Be Playing Golf Now

And the winner of this week's award for Best Mistake in a Press Release goes to Bear Stearns ( BSC), which confirmed our theory that somewhere out there, a lawyer is playing golf while billing his client $350 an hour.

In Thursday's announcement of who will succeed Mark E. Lehman as general counsel, Bear Stearns reported the hiring of Michael Solender, who previously was a partner at the esteemed law firm Arnold & Porter.

Except that's not exactly what Bear Stearns said. In fact, the firm noted that Solender had been a partner at "Arnold & Palmer" -- confusing the 57-year-old law firm with the 74-year-old golfer.

Of course, as much as we loathe playing golf, at least it's not as unpleasant as practicing law. So maybe we should let Solender have his fun.

4. A Comedy of Arrows

We at the Five Dumbest Things Research Lab know better than to try to run a publicly traded company.

Which is part of the reason why we politely request company presidents not to try to write witty market commentary.

OK, we'll settle for just one president: Patrick Byrne, head of online closeout retailer Overstock.com ( OSTK).

Overwritten
Let alone, Overstock.com

When Overstock.com reported results this week, Byrne wrote a chatty letter discussing the company's results.

He called the letter a use of a "more colloquial style."

We call it a mess.

One thing they taught us in the journalism racket is that sports metaphors get tiresome pretty quickly, unless you're working in the sports section.

Forget those metaphors about a company being on the ropes. Or some new venture being a Hail Mary pass (a metaphor wrapped in a metaphor there). Or some sort of horse race between two competing technologies.

So what does Byrne do in his letter? Why, he employs not one sports metaphor, not two sports metaphors, but three of them.

Running a business is like shooting an arrow. The fourth quarter was a boxing match. And as Team Overstock's player/coach, Byrne is occasionally required to bench, trade or cut his teammates.

Yo, Patrick! Writingwise, it's time for you to head to the showers!


5. Another Dog of a Press Release

Speaking of questionable writing in company earnings announcements, this week's Get To The Point Already Award goes to Sirius Satellite Radio ( SIRI).

Now, let's say you saw a press release entitled "Sirius Satellite Radio Announces Fourth Quarter and Year-End 2003 Financial and Operating Results" -- the title of a press release that Sirius indeed released this week.

Wouldn't you expect to read something in there about the company's financial results?

Well, so would we. But you have to dig pretty deep into the press release to find it.

You have to read past the part about subscriber numbers. You have to read past the part about the retail aftermarket channel. You have to make it past the "four feature-laden transportable Plug-&-Play receivers," the boating and trucking partnerships, the agreement with Penske Automotive Group, the National Football League deal, the backwards-compatible traffic solution, the Dolby Pro Logic II surround sound and the small translator module.

In fact, you've got to read past 17 paragraphs until you get to the real story: That the company, which has a market capitalization approaching $3 billion, reported $5 million in revenue last quarter. $5 million! In revenue!

The net loss, of course, was much more impressive: $148 million.

That's what we at the lab refer to, sports metaphorwise, as an air ball.

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