Miss, Apprentice
Show not warranting the hype

1. Let's Make a Deal

They really drive a hard bargain at Martha Stewart Living Omnimedia ( MSO).

The lifestyle outfit got hammered Thursday after its latest pathetic quarterly performance . The publishing and merchandising company posted a third-quarter loss of $26 million on revenue of $40 million, and told analysts it expects, at best, a break-even fourth quarter.

But that's not the worst of it. No, Martha Stewart Living revealed that the latest-quarter loss included an $11 million charge related to the vesting of certain warrants granted in connection with the airing of NBC's The Apprentice: Martha Stewart.

That may strike you as strange, given that the New York company has repeatedly described the Apprentice spinoff as "a show in which we have no economic interest." Instead, the show -- whose ratings haven't been up to snuff -- "provides great promotional value," the company claims.

Hmm, so Martha Stewart puts on a prime-time network reality show, and Martha Stewart Living gets no claim on the revenue -- but it does get to foot the bill for some stock handed out to entertainment business grandees?

Stock warrants, $11 million. Publicity on a show no one is watching? Priceless.

Dumb-o-Meter score: 91. We've got a bridge we can sell CEO Susan Lyne if she's interested.

To view Colin Barr's humorous video take on creative math with Martha, click here .

No Can-Do Cendant
CEO takes stock of company setup

2. Portrait of the Artist

Cendant ( CD) chief Henry Silverman has had it up to here with the barbarians on Wall Street.

Silverman is the architect of the acquisition spree that put the Orbitz travel site, the Avis rent-a-car agency and the Century 21 real estate brokerage under one oddly named roof. Yet despite the broad brush on the acquisition canvas, Cendant shares have wallowed between $10 and $25 for more than seven years.

So this week, Silverman unveiled a new blueprint that would split up the New York company. "This is an artistic success but a commercial failure," Silverman lamented about Cendant's current setup, which under his plan would give way to four separate public companies -- none of them named Cendant -- by next summer.

"The company is by any measure a success," Silverman claimed. "Yet our board and advisers believe the market has not realized the value."

Unlike the philistines in the market, though, Silverman has been realizing Cendant's value. Why, judging by Cendant's latest proxy statement, he managed to take home more than $48 million between 2002 and 2004, even as the stock posted just modest gains. The big dollar signs have made Silverman a choice target for critics of lush executive pay.

No more, though. This week, Silverman, a big holder of Cendant shares and options, said he would exercise some options to increase his stock holdings. He also said he'd take another look at his salary, stopping just short of taking a vow of poverty. Cendant's shares fell 13% during the week to a 52-week low.

"I'm basically going to work for nothing," Silverman told The Wall Street Journal in an interview. "I'm going to work for no compensation going forward because I want to take the compensation issue off the table."

That's noble, but Wall Street has no time for starving-artist types.

Dumb-o-Meter score: 88. Silverman believes so deeply in the Cendant value proposition that he appears to have done a cashless option exercise to pick up those shares this week.

Do Tell, Ma Bell
What's in a name if the revenue falls?

3. Brand Flakes

For the first time in recent memory, AT&T ( T) is shaping up as part of the solution, not part of the problem.

The New Jersey telco is in the midst of being acquired by its San Antonio-based offspring, SBC ( SBC). After practically inventing the telecom business, AT&T was driven into SBC's arms earlier this year by a series of strategic missteps that left Ma Bell with its good name, a cash-cow long-distance business and little else.

But what a name it is. This week SBC said it would drop its own alphabet soup-inspired title in favor of the AT&T name after their merger closes. It spared no praise of the mighty Ma Bell brand.

"The AT&T name has a proud and storied heritage, as well as unparalleled recognition around the globe among both businesses and consumers," said SBC chief Ed Whitacre. "The AT&T brand reflects what customers are looking for in a provider. They want the latest technology and services, but they also want reliability, quality and trustworthiness."

Of course, its earnings report last Friday reflected a few other things as well. Revenue fell 13% from a year ago, driven by the continued erosion of the company's long-distance business. Business revenue dropped 9.5% and consumer revenue dropped 24%.

Not to worry. "The brand we associate with the invention of the telecommunications industry is the brand that will soon represent the reinvention of communications and entertainment," Whitacre said. "The combination of SBC and AT&T will bring together the right assets and the right strategy to be a very strong competitor in this new IP-based services market, and we fully intend to make the most of this once-in-a-century opportunity."

So we see.

Dumb-o-Meter score: 85. The very reinvention of communications and entertainment? Too bad it only happens once a century.

4. Spring Chickens

If it's a double talk you're looking for, Federated Department Stores ( FD) answered the call this week.

The Cincinnati department store giant said it would phase out three customer service operations to cut costs. The credit-card call centers -- in Lorain and Parma, Ohio, and Houston -- employ 1,175 people, Federated says. Federated said the centers were acquired in its recent merger with rival May.

Hinting that the call-center jobs would soon be lost, Federated said in a Tuesday afternoon press release that "executives at these facilities will be asked to express their interest in relocating to other ... operations with open positions." But Federated quickly added, "The company reiterated its pledge to May Company associates that there will be no workforce reductions or job eliminations as a result of the merger prior to March 1, 2006." The release speaks repeatedly of "consolidation" but makes no other mention of layoffs or job cuts.

Of course, Federated has been making the March 1 pledge ever since it completed the $17 billion May acquisition in August. And while workers surely appreciate keeping their jobs through the busy holiday season, when Federated brings in the lion's share of its profit, it's hard to see how the moratorium has any bearing on a plan to close businesses starting next spring. Spring, after all, doesn't start till March 20.

Asked to clarify, a spokesman says Federated expects to start layoffs in Ohio and Texas "starting in April."

Next time, Federated has a tough decision to announce, maybe it can lay off the mealy-mouth routine.

Dumb-o-Meter score: 80. One-day sale in the obfuscation department!

Step On It, Chiron
Flu-vaccine production in the shop

5. Lemon Song

Buckle your seatbelts. After a year in the shop, Chiron ( CHIR) is ready to put it in gear.

The Emeryville, Calif., biotech revved up its latest disappointment this week, posting weaker-than-expected third-quarter earnings. The company earned 38 cents a share on sales of $480 million, while Wall Street was looking for a 45-cent-a-share profit on sales of $508 million.

The news comes as Chiron's vaccine-making operation continues to spin its wheels. After getting a vaccine plant shut down last year for safety issues, the company has cut its dose-output forecast three times. Where Chiron once was expected to churn out 50 million doses of Fluvirin, now it expects to make barely a third of that total. CEO Howard Pien blames new procedures at the company's rehabilitated Liverpool, England, plant and promises further vaccine-output updates soon.

With all that sputtering and misfiring, Chiron sounds like an old junker. But on Tuesday's postclose conference call, Pien had something far sportier in mind, as TheStreet.com's Bob Steyer reported.

"It is like breaking in a new Maserati," Pien said. "You don't step on the gas too hard for the first 1,000 miles."

Well, you know what they say about exotic foreign cars: always in the shop.

Dumb-o-Meter score: 70. Of course, you can hardly expect the guy to compare his company to a Chevy Vega or something more apt.
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