Chinese Take-Out GamersNEW YORK ( TheStreet) Watch out Don Corleone. The Chinese government is trying to whack you. China is banning Web sites from advertising games that glamorize violence such as Electronic Arts' ( ERTS) bestseller The Godfather, according to a notice posted on the Culture Ministry Web site on Monday. Details were not given as to how the law would be enforced. Nevertheless, the notice specifically called for law enforcement agencies to severely punish any sites that "undermine morality and Chinese traditional culture." The government is ramping up its censorship campaign against "spiritual pollution" in order to ensure stability ahead of the 60th anniversary of communist rule on Oct. 1. Apparently, this includes video games that promote drug use, obscenities, gambling or crimes such as rape, vandalism and theft. "Such online games promote the glorification of mafia life ... and are a serious threat to the moral standards of society causing vulnerable young people to be adversely affected," said a report from the Culture Ministry carried on the Xinhua news agency. Wait a darn minute here! Are they saying Take-Two's ( TTWO) Grand Theft Auto franchise is anything but wholesome, clean family entertainment? How dare they? China has the world's largest population of Internet users, more than 298 million, so American video-game makers are willing to swallow a whole lot of censorship in order to sell units. Activision Blizzard ( ATVI), for example, is partially relaunching its massively popular online game "World of Warcraft" in China this week after switching network operators and tweaking some content to appease Chinese censors. Blizzard previously changed skeleton characters to characters with normal human bodies at the request of the government. "These games encourage people to deceive, loot and kill, and glorify gangsters' lives. It has a bad influence on youngsters," the notice said. And blocking online videos of the Tiananmen Square massacre sends a positive message? Yeah, right. Dumb-o-meter score: 95 -- China needs to stop playing games with free speech.
Palm Loses GripPalm ( PALM) successfully scaled the wall of worry. Now it needs to get a grip on reality. The newly resuscitated smartphone maker, whose shares are up nearly 400% this year, was shocked to learn that Best Buy ( BBY), the last real electronics retailer standing, spent last weekend practically giving away the Palm Pre, the company's last hope for survival. The Palm Pre generally retails for $199, but more than a few customers were treated to new ones for $99 after a slip-up in Best Buy's computer system. The confusion started when a picture of an in-store banner promoting a week-long special of a $99 Pre with a two-year contract was mistakenly posted online. A Best Buy marketing manager tried to fix the problem by announcing the error on his Twitter page, but by then it was too late. Somehow the half-price deal was programmed into vendor systems and -- faster than you can say "blown profit margin" -- stores nationwide began selling the phone at the lower price. And that wasn't the only bizarre behavior affecting Palm last week. It also had to deal with Bono gone bonkers. As reported in the New York Post a week ago, U2 front man Bono has been out pitching for Palm's archrival Research In Motion ( RIMM) in commercials for its BlackBerry smartphones. The TV spots for BlackBerry are linked to the release of U2's latest album, No Line on the Horizon. Bono could sing the praises of BlackBerry all he wants if not for one major problem: He's a major investor in Palm through the private-equity firm Elevation Partners. And as the Post points out, Bono's conflicted role could create a wave of lawsuits by other Palm investors who have bet big on the Pre. Not to mention its one-product parent. Dumb-o-meter score: 90 -- You too can get a half-priced Pre at Best Buy! And so can U2.
Bartz's BoatloadsYahoo! ( YHOO) CEO Carol Bartz guaranteed "boatloads of value" from its brand-new search deal with Microsoft ( MSFT). Disappointed Yahoo! shareholders, however, want the "boatloads of money" she promised in May. In a desperate measure to stem the growing power of Google ( GOOG), Microsoft and Yahoo! finally agreed to combine forces Wednesday. The two have been dancing around the subject since 2005, yet it took Bartz just six months to ink an agreement that both her predecessors, Terry Semel and Yahoo co-founder Jerry Yang, spent years avoiding. Unfortunately for Yahoo! shareholders, this great conciliation between the Internet powers -- following years of frustration and aggravation -- has not removed the one constant from this drawn out affair: deprivation. Yahoo! stock dropped 12% to around $15 on news of the accord as shareholders grew dismayed over the lack of an upfront payment. Wait. Let us clarify that. We should say those remaining shareholders that did not already throw in the towel last year when Yahoo! rejected Microsoft's $47.5 billion buyout offer. Yahoo's market value currently stands at about $22 billion. Bartz, nevertheless, says now is absolutely the wrong time to give up on Yahoo! and accuses the naysayers of being too ticked off to read the fine print. In return for giving its search engine over to Microsoft's Bing, Yahoo! will pocket 88% of the revenue from all ads that run alongside search requests on its site for the first five years of the deal. Yahoo! estimates the deal will boost its annual operating profit by $500 million, while saving it nearly $200 million on annual capital expenditures. "I think the market hasn't figured out that there's not much I can do with an upfront payment," said Bartz in a Wednesday interview. "What am I going to do with it? Collect interest on it every year? That doesn't help me." That's an eye-opener even for us. We've been at this for a long time and we've never heard a CEO speak so disdainfully about the market's collective wisdom, or being on the receiving end of a lump of cash. And we've certainly never encountered a CEO who couldn't figure out to do with a bundle of money suddenly thrown at her feet. Bartz's bet may end up paying off in the long run. But right now her investors are clearly saying that a boatload of cash in hand is worth two in the bush. Dumb-o-meter score: 85 -- Bartz's ship better come in. Or else she'll be walking the plank.
No Slack for PennyMacInvestors that bought shares of PennyMac Mortgage Investment Trust ( PMT) at Thursday's IPO price immediately lost money. Like you should have expected anything different from these jokers? PennyMac Mortgage, which buys distressed home loans and is run by a host of former Countrywide Financial bigshots, sold 16 million shares at $20 each to raise $320 million in an initial public offering this week, $80 million less than projected. The newly issued stock opened at $19 on the New York Stock Exchange, breaking syndicate on its very first day as a publicly traded real estate investment trust. Bank of America's ( BAC) Merrill Lynch division helped lead the deal along with Credit Suisse ( CS) and Deutsche Bank ( DB). Bank of America bought home-loan originator Countrywide, whose co-founder Angelo Mozilo was sued by the Securities and Exchange Commission for concealing financial data from investors back in January 2008 for $4.1 billion. Countrywide's stock plummeted in value as a result of the credit crisis it helped create by selling subprime mortgages. Now those very same people who brought you the housing boom are trying to cleanup from the bust by purchasing loans from bad banks and redoing the terms. Come on, all together now: What a country! And the real Friends of Angelo are out in full force at PennyMac, too. The company's chief executive officer is Stanford L. Kurland, the former president and chief operating officer of Countrywide. Joining Kurland's executive squad are 10 other Countrywide alums, whose subprime loans, by the way, have suffered from a 39% delinquency rate, according to data compiled by Bloomberg. PennyMac plans to charge a management fee equal to 1.5% of shareholders' equity plus an incentive fee that's one-fifth of profits above a certain level, says Bloomberg. In other words, it's a high-profile hedge fund run by Countrywide's finest, so there's a good chance they will make a ton of dough. PennyMac investors, on the other hand, have no such guarantee. Dumb-o-meter score: 80 -- A PennyMac for your thoughts? No thanks.