1. Searching for a Clue

Something is definitely bugging Yahoo! ( YHOO) investors.

Shares of the Sunnyvale, Calif., Internet giant plunged 22% Wednesday on 10 times average daily volume after execs botched the second-quarter earnings call. Wednesday's free fall put the stock down 36% for the year.

Yahoo! is trying to soup up its search engine in hopes of closing the gap with Google ( GOOG). This spring, Yahoo! set plans for an ambitious upgrade. But on Tuesday, the timeline on what the company calls Project Panama was unceremoniously pushed back.

"We think it is prudent to add some extra time to our original estimates for the commercial launch," CEO Terry Semel said on Tuesday's call, according to a transcript posted on seekingalpha.com .

Semel's prudent retreat came after Yahoo! had already disappointed investors by posting soft second-quarter revenue and offering tepid full-year guidance. But worst of all, Yahoo! execs failed to persuade analysts they were being candid.

"Are you finding a lot of bugs in the system that's taking longer to fix?" one analyst asked late in Tuesday's conference call. "It's still not clear to me why you need to push it out by a quarter."

"We gave you the best date we could in May, and we are giving you the best date we can now," huffed operating chief Dan Rosensweig. "We just learned more about the integration, the interdependencies and those things.

"So it's not about bugs or quality," Rosensweig added. "It's literally just what it takes to get it over the finish line. We want to do it right."

That would make for a nice change.

Dumb-o-Meter score: 91. Semel claims in an interview with TheStreet.com that the project's leaders "are doing a brilliant job."

To view Colin Barr's interview about the Five Dumbest this week, please click here .

2. Delusions of Grandeur

Nortel ( NT) brings us another profile in courage this week.

The money-losing Toronto telephone-equipment supplier unveiled a grandiose strategic alliance with Microsoft ( MSFT).

The pact aims to "break down today's device- and network-centric silos of communication," such as email and phones. The companies say the unified communications partnership "has the potential to ultimately transform businesses communications," if you can imagine.

"This is a gutsy play for Nortel," Nortel chief Mike Zafirovski declares.

But basking in the glow of a stronger company is hardly a novel strategy. Last year, struggling Sun Microsystems ( SUNW) tried a similar ploy with Google, to little avail. Sun shares failed to hold early gains, finally nudging longtime chief Scott McNealy toward the exit .

And Sun looks downright luminous next to Nortel. While Nortel aims to wring $1 billion in revenue out of the Microsoft deal over four years, its core business is in steep decline. Sales have been hit by big phone-company mergers, and cost-cutting is in the air again. Shares are off 33% this year.

By contrast, Microsoft -- for all its flaws -- made $12.6 billion in fiscal 2006. But who's counting? Not Zafirovski, who is busy emphasizing the partners' supposed similarities.

"Nortel and Microsoft have each led fundamental transformations in their own market," he brazenly asserts. Incredibly enough, he cites a parallel between "Nortel's digital innovation and Microsoft's software on every desktop."

Gutsy? No, that's just shameless.

Dumb-o-Meter score: 90. Perhaps Nortel's most notable innovation of late is its groundbreaking triple restatement .

3. Broadcom's Broad Brush

Broadcom ( BRCM) is putting a happy face on its accounting problems.

The Irvine, Calif., communications chipmaker conceded last Friday that it erred in how it booked employee stock options . The company plans a $750 million charge to fix the mistake. Broadcom is still looking into the matter, but plans to restate financials for at least six years.

The issue, Broadcom says, is that stock-option grants "had not been completed as of the original accounting measurement dates." Regulators are investigating option backdating, which can give insiders an advantage by putting their supposedly market-priced options in the money.

Of course, Broadcom is no stranger to perceived pay excess. Co-founders Henry Samueli and Henry T. Nicholas III have been huge sellers of Broadcom stock: Nicholas cashed in $509 million worth in a 15-month period ending in December 2000, and Samueli has sold 900,000 shares this year through a trust. Broadcom also repriced some employee options in 2003. "Together, we all win as Broadcom is able to retain and motivate our most important asset, our employees," the company claimed at the time .

Even so, the restatement news is jarring in light of Broadcom's soft-pedaling statement last month. The company said June 12 that it had decided to check its books "following various reports raising speculation about a few corporate stock-option grants made to Broadcom employees in 2000 and 2002."

Added CEO Scott McGregor, "We want our shareholders and employees to know that we are working proactively and with the highest degree of integrity to put all questions concerning this topic behind us."

So in a month we've gone from "speculation about a few corporate stock-option grants" to a $750 million charge?

It's hard to see how that puts any questions to rest.

Dumb-o-Meter score: 85. "Approximately 95% of the total stock options and restricted stock units ... have gone to employees of the company other than executive officers," the company claims, striking a Robin Hood pose of sorts.

4. Openwave's Washout

How quickly the momentum has ebbed at Openwave ( OPWV).

Shares in the Redwood City, Calif., communications-software shop have plummeted 71% in three months. Wall Street has been wondering whether Openwave is fit enough to take on big rivals like Ericsson ( ERICY) -- concerns that weren't eased by a debacle Wednesday.

That afternoon, just as tech investors were being deluged with earnings reports from Apple ( AAPL), eBay ( EBAY), Intel ( INTC) and Motorola ( MOT), Openwave issued a press release innocently headlined, "Openwave Announces Fourth Quarter Fiscal 2006 Conference Call."

It's the kind of release that might easily get lost in the shuffle on a busy afternoon. But beyond noting the timing of the Aug. 3 call, Openwave's statement also notes the postponement of annual analyst day -- and warns of soft first-quarter revenue.

"The company is currently completing its annual operating plan for fiscal 2007 and will present key aspects of the plan at the rescheduled analyst day," Openwave says. It then adds tersely, "Openwave expects fiscal Q1 2007 revenues will be flat to modestly below the prior quarter."

The warning, which knocked 14% off Openwave stock Thursday, came just two weeks after Openwave trimmed fourth-quarter guidance.

"While the results for the quarter are disappointing, overall the company has delivered a solid financial year," CEO David Peterschmidt said July 6. "We continue to see customer momentum worldwide and are confident in our strategy as we enter fiscal 2007."

We're guessing Openwave is less confident in that strategy now.

Dumb-o-Meter score: 82. We'll make a note to check back in another two weeks.

5. Mudslingers' Ball

Mud is flying in the bidding war for Toronto miner Falconbridge ( FAL).

Phoenix copper titan Phelps Dodge ( PD) wants to buy Falconbridge in a three-way cash-and-stock merger with Canada's Inco ( N). But big Falconbridge shareholder Xstrata has made a competing proposal similarly valued at around $17 billion.

The Inco bid "represents the most compelling offer for Falconbridge," Phelps Dodge chief Steven Whisler says. Nonsense, shoots back Xstrata chief Mick Davis. "It is now clear that on any valuation basis Xstrata's all-cash, fully-funded offer is superior to Inco's final offer," Davis says.

Adding to the muddle, some big Phelps Dodge shareholders have criticized Phelps' $40 billion buyout plan . They contend the miner is taking on too much debt and should instead return capital to shareholders.

No. 2 holder Atticus opposes the three-way merger, telling Bloomberg it "would be surprised if other shareholders didn't reach the same conclusion."

But try telling that to Inco CEO Scott Hand. Asked on Canadian TV for his take on Xstrata's offer, Toronto's Globe & Mail reports, Hand replies that it's "a dog biscuit."

Even for the mining industry, that's quite a dig.

Dumb-o-Meter score: 75. "It is time for Falconbridge shareholders to decide what is truly in their best interests," Whisler declares darkly in a Wednesday statement.
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