No 'Lockup' on MSO Future
Stock boosted by diva's TV plan

1. Someone From NBC Is in the Kitchen With Martha

We appreciate that Martha Stewart is paying her debt to society. But it sure looks like the founder of Martha Stewart Living Omnimedia ( MSO) will come out ahead on the deal.

On Wednesday, MSO announced that Stewart will star in a new TV show starting in the fall of 2005. The show will be produced by reality TV maven Mark Burnett and distributed by General Electric's ( GE) NBC Universal.

Shares in MSO, which traded at $16.59 before Stewart reported to prison Oct. 8, continued their upward climb Thursday, jumping $1.48 to close at $25.91.

Wow. We know Martha reported to jail before necessary so she could be done serving time next March. But given the stock's performance while she's been behind bars in West Virginia, she should beg the U.S. attorney to extend her sentence. Add a few more months to her jail term, and MSO will be hotter than Travelzoo ( TZOO).

2. Get Well Soon

You know, we're beginning to feel sorry for the folks at Merck ( MRK).

We don't know what damage Vioxx may have caused people who took the drug. We don't know what decision-makers at Merck knew about Vioxx's dangers before it ended up withdrawing the drug.

But we do know that Merck is in a heap of legal trouble, and it will be for a long time.

We do know that if you type Vioxx into Yahoo! or Google, you'll be overwhelmed with advertisements for lawyers who'll help you sue the company.

We do know that Merck's board said Tuesday that a special board committee will be studying the Vioxx affair, and to figure out how to respond to Vioxx-related shareholder litigation.

And we do know that Merck said this week it couldn't begin to estimate the number that is key to valuing the company going forward: the legal liabilities the company faces from all of its unhappy shareholders and dissatisfied Vioxx customers.

Perhaps you've heard General Motors ( GM) described as a finance company with an auto manufacturer attached.

Well, for the next few years, Merck is a lawsuit with a pharmaceutical company attached.

Vying For Vioxx Plaintiffs
Merck's legal morass

3. At 18 Miles You Hit the Wal-Mart

What do we talk about when we talk about Wal-Mart's ( WMT) problems? Maybe the wrong thing.

For the past week or two, we at the research lab have been talking about Wal-Mart's problems as a pricing issue. On the one hand, we hear, Wal-Mart has cut its prices so low that the strategy has had counterproductive, diminishing returns. On the other hand, Wal-Mart didn't cut prices enough on items it could have used to generate traffic to the store over Thanksgiving weekend.

Wall to Wal-Marts
If you build it, not on top of each other...

But this week we read a Goldman Sachs research report that gave us pause. Forget pricing, argued analyst George Strachan, who reduced his rating on Wal-Mart from outperform to neutral. (Goldman has done banking for Wal-Mart in the past 12 months.) The real issue is self-cannibalization. Wal-Mart's same-store sales are weak, Strachan argues, because Wal-Mart is building new stores so close to old stores. It isn't Target ( TGT), say, that's necessarily stealing sales from Wal-Mart; it's Wal-Mart.

Now, we don't know for sure that self-cannibalization is the key to Wal-Mart's malaise. But because everything written in recent weeks indicates the problem is pricing, we're tempted to believe it's something else.

4. Some Vivendi Universal Truths About the Music Business

Here at the research lab, we like to acknowledge not only Dumbness on Wall Street, but the executives who are open enough to acknowledge that such Dumbness exists -- especially in their personal history.

Which is why this week we give a big shout-out to Edgar Bronfman Jr., the CEO of Warner Music Group.

Speaking at the UBS Media Week Conference this week , Bronfman had occasion to mention Vivendi Universal ( V) -- the money pit in which Bronfman and other investors lost billions.

Just as he mentioned Vivendi Universal in his speech, Bronfman, as far as we can tell, accidentally hit his microphone, creating a burst of static as disruptive as the noise that Jewish children make on the holiday of Purim when the name of Haman, the villain of the Book of Esther, is spoken.

Remarking on the noise, Bronfman said, "That's probably what it deserves -- the Vivendi Universal merger."

Bronfman also wins extra points for the high-finance vocabulary lesson in his answer to a question about whether Time Warner ( TWX) made a mistake by selling him Warner Music Group rather than continuing to operate the record company itself.

Bronfman said Monday that Time Warner CEO Dick Parsons had intelligently hedged his bets on the WMG sale by giving himself a chance to capitalize on any postdeal improvements at WMG -- specifically, by retaining an option to buy back a minority stake in WMG. That way, if it turns out that Time Warner wildly underestimated WMG's prospects, Parsons wouldn't look like a complete idiot for giving away the store.

That history lesson explains the sophisticated terminology Bronfman used to describe the buyback option. He called it "schmuck insurance."

5. Barbarians at the Colgate-Palmolive

And this week's award for Exquisitely Bad Timing goes to ... Colgate-Palmolive ( CL).

On Tuesday, the consumer products giant said it would do what a lot of companies are doing these days: lay people off. Some 4,400 workers will be hitting the road over the next four years.

But that wasn't the only reason C-P was in the news that day. Also on Tuesday, The Associated Press reported that 800 top executives at C-P can receive anywhere from $2,000 to $11,500 a year for -- well, for nearly anything they want, as far as we can tell.

Fishing equipment. Baseball tickets for the family. Racquetball club memberships. Swimming pool maintenance. It's all covered. After all, as the AP quotes a C-P Securities and Exchange Commission filing, "routine household chores can consume precious personal and family time."

A C-P spokesman told the AP that the "fair and modest" program "puts Colgate well below the median for perquisite programs among a very large comparative group."

Well, that's reassuring. We're sure that the 4,400 soon-to-be-ex-Colgate-Palmolive employees are reassured by the company's equitable distribution of sacrifice, as well as its concern for top execs' precious personal and family time. We know we are.
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