The Five Dumbest Things on Wall Street This Week

The Check's in the Mail
The really big check, that is

1. 'Weill, Weil, Gotshal & Manges' Has a Nice Ring to It

On Thursday, Citigroup ( C) recorded a staggering $4.95 billion charge to help extricate itself from bubble-era legal problems related to Enron and WorldCom.

Wow. Some companies aspire to $4.95 billion in income. Others aim for $4.95 billion in revenue. But for Citigroup, it's just a legal expense. A footnote. Unbelievable.

So here's our unsolicited advice for acquisition-crazed Chairman Sandy Weill: Forget about buying up all those banks you covet. The next time the company's money is burning a hole in your pocket, do yourself a favor and buy a law firm.

2. A Tip of the Red Hat

At Red Hat ( RHAT), the hits just keep on coming.

Or, more accurately, the body blows.

It started a month ago, when the market reacted nervously to the totally innocuous news that CFO Kevin Thompson was resigning. The company said Thompson was merely pursuing "other interests," but the market was suspicious: Given the rough patch the software business is in, investors like to see sudden movements in the executive suite as much as highway patrolmen like to see them at traffic stops.

Things got worse a few days later when Red Hat missed first-quarter revenue estimates.

Fast forward to this Tuesday, when Red Hat said its auditors, PricewaterhouseCoopers, had objected to a revenue recognition policy Red Hat has employed for the past five years.

More alarming than the revelation of the now-discredited policy -- after all, who among us hasn't slid revenue forward 20 days every now and then? -- are some other disclosures the company made in the course of explaining the revenue problem to analysts.

First, though the company started out saying that PwC had brought the revenue problem to its attention on June 16, Red Hat said on the call that in fact, the problem had previously surfaced at some time in the distant past. "While prior discussions about the method had occured early on," said one executive, "it has only been since the discussions that commenced on the 16th that we understood the need to make this correction." For some reason, we don't find that comment reassuring.

Second, Red Hat also told analysts it's in conversations with the Securities and Exchange Commission about something that may result in additional changes to its annual report for the year ended Feb. 29.

News of the restatement and the possible additional disclosures sent Red Hat's stock dropping 23% Tuesday, on astounding volume.

Investors seem to expect the worst from Red Hat. And on that front, the company sure doesn't disappoint.

3. The Mouth of the Southwest

Speaking of executive departures, Southwest Airlines ( LUV) CEO Jim Parker, an 18-year veteran of the carrier, announced Thursday that he is retiring from his post, and from the company's board, "for personal reasons."

The decision just happened to come as the longtime Wall Street airline favorite posted an unusual quarterly earnings shortfall.

The airline industry, remember, is about as nerve-calming to investors as the software business. So would all you executives quit departing for personal reasons, or any reasons at all? We know this is just innocent behavior here, but you're making us nervous.

4. A Brain-Busting Work of Staggering Length

We always knew Google was useful for searching the vast reaches of the Internet. But we didn't know we would need a search engine to cut through some of the huge sentences in its regulatory documents.

Prospectuses are notorious for their impenetrable language. Still, sifting through Google's Second Amended and Restated Certificate of Incorporation, we found it wasn't just filled with the usual gobbledygook. It's full of extraordinary gobbledygook.

At the center of it all, we found one mind-boggling sentence -- an utterly incomprehensible string of descriptions, conjectures and exceptions that lasted for 594 words.

One sentence! 594 words! Why, we've heard graduation speeches shorter than that.

Google Boggles
Try this in the search field

We won't print it all here, this sentence appearing under the heading of Special Mandatory Conversion, but just so you know: Between the first capital letter and the final period we found four mentions of "original issue price," six ifs, seven convertibles, 11 equity financings, 17 suches, 24 preferreds and 32 series.

That's why Google has to raise $2.7 billion from an IPO, we guess: to hire enough lawyers to explain what it all means.

5. Do You Want the Bad News First or the Good News Last?

Wireless and satellite manufacturer EMS Technologies ( ELMG) sure knows how to look on the sunny side.

The company preannounced an earnings disappointment Tuesday evening, sending its stock down 9.5%.

But it wasn't all bad news coming out of EMS. Nosirree.

As the company explained Tuesday night, "Our discontinued operations -- Space & Technology/Montreal -- are showing real improvement in their financial results." Says the company, "We believe that the division's more stable financial situation and promising new opportunities for its unique capabilities will enhance the business prospects currently being evaluated by potential purchasers of these discontinued operations."

Gosh, we can't express how happy we are for EMS. The businesses it's getting rid of are doing so well. Well, HOW ABOUT SHUTTING UP ABOUT THE BUSINESS YOU'RE DISCONTINUING AND GET BACK TO WORK ON ALL THOSE BUSINESSES YOU'RE SUPPOSED TO BE CONTINUING!

Sorry. We know that was uncalled for. We just had to get that out of our system.

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