1. The Proof Is in the Pudding

Amazon.com ( AMZN) is getting its just desserts.

Shares of the Seattle-based online commerce giant hit a three-year low Wednesday after second-quarter earnings plunged 58% from a year ago .

Big selloffs are nothing new for Amazon, which at the height of the Internet bubble once fetched a split-adjusted $113 a share. But the latest swoon shows Wall Street isn't buying CEO Jeff Bezos' growth strategy.

One sore point is the Amazon Prime promotion that gives users a year of free shipping after they pay a one-time fee of $79. Analysts believe Amazon Prime is crushing profit margins by boosting shipping costs.

But Bezos stoutly defends Amazon Prime. "We see an increase in sales from those Amazon Prime members," he said on Tuesday's post-close conference call , "and it deepens our relationship with those customers."

Deeper still is Bezos' rationale for Amazon's recent push into the low-margin grocery business. With the stock down 44% this year, Amazon holders aren't eager to take on Wal-Mart ( WMT) on its home turf.

But Bezos touts Amazon's vast grocery selection and notes "extremely positive" consumer reaction, according to a transcript on seekingalpha.com .

"We don't just carry a few flavors of Jell-o," Bezos continues, hammering his point home. "We carry all 80."

Sweet dreams, Jeff.

Dumb-o-Meter score: 93. More clear reasoning: Amazon aims to find "elements that matter to customers that are durable in time, where we can build flywheels that we can continue to put energy into," Bezos explains on the call.

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

2. Dell Disappoints

Dell ( DELL) fans are growing disillusioned.

The Round Rock, Texas, personal computer company just socked investors with its second profit warning in two months. A big price war with Hewlett-Packard ( HPQ) is crushing earnings.

Dell has preannounced to the down side in three of the last four quarters. The forecasting follies prompted the company this spring to swear off earnings guidance. But Dell left itself a trapdoor, saying on May 18 that it expected second-quarter earnings "to be similar to its first-quarter results."

Two months later, Dell is backing off even that claim. It now projects a second-quarter profit of about 22 cents a share, down from 33 cents in the first quarter. The news sent Dell shares down 14% last Friday to a five-year low.

Even so, CEO Kevin Rollins remains upbeat.

"All of our initiatives are focused on providing the best value, experience and products to customers every day," he reassures shareholders in a statement. The effort, he promises, "will maximize shareholder value over the long term."

It certainly isn't maximizing shareholder value over the short term.

Dumb-o-Meter score: 90. "Dell is proving the worldwide applicability of its direct-business model," the company adds in a release on its annual meeting.

3. Falling Off the Map

Navteq ( NVT) is stumbling into the land of the lost.

The Chicago-based provider of digital map data got slammed this week after posting soggy second-quarter earnings. Navteq, which traffics in the navigation systems installed by big carmakers like Ford ( F) and GM ( GM), plunged 21% Thursday in heavy trading.

"We faced a number of challenges in the second quarter, including unfavorable car sales trends and delays in customer product launches," CEO Judson Green said in a statement Wednesday.

One challenge that Navteq's press release didn't address -- a $3.1 million deduction from second-quarter revenue -- seemed to stump analysts. On a post-close conference call, Green attributed the hit to a "delayed payment by a significant customer that is going through a restructuring."

Navteq didn't name the offender, saying only that the customer isn't one of its top 20 accounts. Navteq did go out of its way to present itself as a model of accounting propriety, though.

"I would say that some companies would not reduce the revenue in this case," finance chief David Mullen said on the call. "Our policy has always been to reduce revenue because we think that's probably a more conservative way to go."

While hearts everywhere must have soared at that sentiment, one analyst wasn't immediately won over. "I guess I'm not understanding why ... you would continue to do business with them if they haven't paid prior debt," Davenport analyst Bennett Notman said, according to the seekingalpha.com transcript.

"Well, we think they're a viable company," Green replied. "If they can raise some incremental capital, I think that, you know, they'll be in good shape."

Right now, that's a lot more than you can say for Navteq investors.

Dumb-o-Meter score: 85. Counting off the quarter's many accomplishments, Green adds, "We also released our first full-coverage map of Poland."

4. Radio Daze

The roof is caving in at RadioShack ( RSH).

The Fort Worth, Texas, consumer-electronics retailer rolled out its latest earnings debacle last Friday. The company swung to a second-quarter loss from a year-ago profit, stung by restructuring charges and flat sales.

RadioShack has been a mess for years. But even by those standards, the latest quarter was a monument to futility.

Cell-phone sales are generating windfall profits at players ranging from Cingular and Verizon Wireless to Motorola ( MOT). Nokia ( NOK) expects industrywide unit sales to rise 15% off last year's record pace.

Yet somehow, RadioShack managed to post a double-digit drop in postpaid wireless-handset unit sales in core stores during the second quarter.

"RadioShack's wireless tactics did not sufficiently deliver results in the face of changing competitive dynamics and maturing consumer demand," the company explains with typical understatement. "To exploit its unique position in the marketplace of wireless retailing, the company is evolving its approach in pricing, promotion, merchandising and the selling process."

Good idea. And just what is RadioShack doing to evolve its approach? Why, "During the second quarter, the company executed a number of tactics," RadioShack advises, "such as overnight replenishment and wireless mystery shops."

They're right about one thing: It's a mystery why anyone still shops at RadioShack.

Dumb-o-Meter score: 79. Mystery shopping entails doing undercover research and assembling "best practices information," a spokeswoman explains.

5. Encysive's Fullback Plunge

The longest yard is still ahead of Encysive ( ENCY).

The Houston-based biotech suffered another setback Monday at the hands of the Food and Drug Administration. Fans had been hoping the agency would approve Encysive's Thelin treatment for pulmonary arterial hypertension. But Encysive plunged 40% in a day for the second time this year after the FDA once again failed to sound the all-clear.

"We were quite in suspense yesterday and were very hopeful of an approval," CEO Bruce Given said on a conference call Tuesday morning. "Our reading of the letter is that we got very close."

Indeed, Encysive emphasizes its progress since the last FDA decision. "Of the substantive items raised in the March 24, 2006, approvable letter, one remains unresolved," the company said late Monday. Encysive says the FDA "acknowledged that the unresolved item is a matter of judgment" and "again offered the alternative of conducting additional clinical work."

But additional clinical work is just what Encysive has been trying to avoid, since it takes time and costs money. And while Wall Street would love to know just what the FDA's concerns are, Encysive declines to share the details.

Instead, Encysive fancies itself a bruising running back churning for the end zone -- with all the clear thinking that comes with that territory.

Though Encysive has now twice sought marketing approval and been turned back, Given insists the company is "first and goal on the 1-yard line."

Can't blame anyone for deciding to punt on this stock after that comment.

Dumb-o-Meter score: 75. Maybe the FDA was offsides the first two times?

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