Somebody tell Warren Buffett to check his trade confirmations because apparently he purchased $10.7 billion worth of the wrong company. Berkshire's ( BRK-B) Chairman told CNBC Monday that he bought a 5.5% stake in IBM ( IBM) because it has smart employees and sticky customers. Well, judging from what we saw in Illinois this week, the so-called Oracle of Omaha may have been thinking of Cray ( CRAY) while buying shares of Big Blue. You see, notwithstanding Buffett's on-air assertion that "if you're with IBM, you stay with them," the University of Illinois said Monday that Seattle-based Cray will take over construction of the stalled $300 million Blue Waters supercomputer after IBM bowed out three months ago over cost and technical concerns. Cray says it plans to have the project, which is being financed by the National Science Foundation (NSF), up and running next year despite the delays caused by IBM's inability to get the job done. "We clearly had to do it real quickly," said Thom Dunning, the director of the school's National Center for Supercomputing Applications. "NSF's goal was to keep the project on track as much as it possibly could be." Shares of Cray jumped almost 9% on the deal. Hey Warren, you like atoms? Well, Cray got IBM's business. How about them atoms? Cray CEO Peter Ungaro said the cost and financing of the project will basically stay the same with the NSF ponying up more than $200 million and the remaining $100 million coming from the university and the state of Illinois. As for Cray, it will pocket $188 million for the job, which equals about half of its total revenue from the last 12 months. Of course, that tally is relatively tiny compared with the $106 billion in sales IBM has rung up over the past year, so we can probably assume that the folks at IBM were pretty content to cut bait and move on. That said, once Cray gets this baby up to speed, the supercomputer will be used for a lot of different cool things, like studying how tornadoes are formed and how viruses invade cells. Oh yeah, and with the ability to do one quadrillion machine operations per second, Blue Waters will just kick Watson's ass in Jeopardy!
4. Ralph Stings 'FBI'
You know, it's somewhat ironic that insiders refer to Furniture Brands International ( FBN) by its acronym FBI, because it's almost criminal what CEO Ralph Scozzafava has been getting away with lately. Shares of the St. Louis-based company sank 11.5% Monday to just over a $1, bringing its year-to-date loss to 77%. The only ostensible news we could see for the furniture-maker's latest shellacking was the hiring of former La-Z-Boy ( LZB) hot-shot Mark Wiltshire to the newly created post of "Special Markets President" where he will oversee international sales, as well as the company's Creative Interiors and Home Builders divisions. "Mark's wealth of experience in the furniture industry and knowledge of international business will help us continue to expand our international efforts," said Scozzafava in a statement. Um, we're sure Mark's a swell guy and can probably sell a mean bedroom set, but in our admittedly Dumb opinion, FBI's biggest problem is not on the foreign front. It's right here at home and specifically in the company's corner office. You see, the last thing FBI needs is a pricey new executive to solve its problems. No, what it needs is one less old one. Yeah, we're talking about you, Ralphie-boy. And your massive pay package. Earlier this month, FBI, which is home to classic American brands like Thomasville and Lane, announced that its third-quarter loss ballooned to $24.5 million from $2.1 million last year. The top line also moved in the wrong direction, with sales falling to $258 million from $272 million a year ago. As a result, Scozzafava slashed about 3.5% of the company's work force, or about 300 jobs, in a bid to save the company $30 million annually. "Our focus has been, and will continue to be, on controlling our controllables," said Scozzafava about the firings. Well, if he wants to be a control freak and get a handle on FBI's expenses, then the smartest place for him to start chopping would be his own compensation. FBI has lost money for four years in a row, yet Scozzafava still saw his pay package rise to $6.6 million last year, mostly due to a ridiculous $4 million retention bonus approved by the company's board in 2008 back before the housing bubble burst. Sadder still, if things get so bad that Scozzafava is forced to sell the company, then he could very well walk away with severance totaling $9.5 million. Another cost-cutting option, of course, would be for Scozzafava to simply leave the company. And once he's gone, FBI could even bring back some of those workers they just canned with the savings from his monstrous salary. Yep, he could just grab a reclining chair from the warehouse, kick back and call it a career. That shouldn't be too hard for him. It's not like he's been much of a stand-up guy anyway.
3. Geron's Bluto Moment
You think John "Bluto" Blutarsky from Animal House had it bad? He saw only seven years of college go down the drain. Biotech bust Geron ( GERN) squandered 21 years of shareholder hopes, dreams and dollars on a wasted education. Shares of Geron fell 21% to $1.74 Tuesday as a result of its decision to shut down its embryonic stem cell research program in order to focus on its experimental cancer drugs. John Scarlett, Geron's newly appointed CEO, insisted in interviews Monday that the company's decision to exit the stem cell business was not an indictment of the entire field but was more a company-specific business decision. Frankly, Scarlett, we don't give a damn how you spin it, but Geron will always be an embryonic stem cell company. For more than two decades, Geron has been sucking money from investors' wallets like a Hoover vacuum with the sole intent of turning embryonic stem cells into new tissue or organs. And now you want to drop it like a bad habit? And after all that preaching about how this technology will help paraplegics walk, cure diseases like diabetes and Parkinson's and prevent heart attacks -- not to mention an accumulated deficit of nearly $700 million -- now you want to try something new? No way, dude! You can't simply change your major like an aimless college student trying to delay graduation. Your parents -- or in this case, your shareholders and investors -- deserve better. Not that they have seen much of a return on their money so far. To date, only four paralyzed patients have received injections of embryonic stem cell-derived nerve cells into their spinal cords. And while no safety problems have been reported, Scarlett admitted that there were "no signs" the stem cell therapy was helping patients either. Still, that's no reason to abandon hope and to change course after all these years of trying. Remember, Bluto spent all those years in a filthy, idiotic fraternity and then went on to become a member of the U.S. Senate. Wait, maybe that's not the best analogy. But you know what we mean.
2. Qatar Like a Knife
Fine. We admit it. We insult a lot of CEOs here at The Five Dumbest Lab and sometimes we say not-so-nice things about major corporations. Sorry, but that's our job, and if you don't like it, then sue us because we don't want to hear your stupid. Um, wait a second. You know what? Scratch that last part. There's no need for anybody to sue anybody. But it is worth noting that we are not the only ones out there publicly demeaning publicly traded companies. Just check out what Qatar Airways CEO Akbar al-Baker said this week about airplane-maker Airbus ( EADSY.PK) at the Dubai Air Show. The Doha-based airline chief was expected to make an announcement on Tuesday regarding the purchase of an additional five A380s and approximately 50 of the A320 neo, which is the revamped version of Airbus' smallest-range aircraft. Unfortunately for Airbus, al-Baker did not step up to the microphone to offer details of the deal as many anticipated but heckled his supplier instead. "We have reached an impasse with them. We thought that we will conclude our agreement and make a very large announcement today. Unfortunately, I feel that Airbus is still learning how to make airplanes," said al-Baker. Snap! And you all thought we were nasty. That guy may live in a desert, but that's just cold. And when the press asked him to explain his answer, al-Baker once again pulled no punches, saying, "That was a statement in very clear English, and you should understand what I mean." Double snap! First he slams one of the world's biggest airplane manufacturers and then the international press? Talk about a pro! We have a lot to learn from this al-Baker guy. Nevertheless, in the end, whatever problem that existed was resolved and al-Baker ended up buying the Airbus planes, which boast a book value, before discounts, of $6.4 billion. Additionally, he said he would purchase two Boeing ( BA) 777 freighters for good measure. Even more important than those multibillion-dollar purchases, however, is the esteem he earned from The Five Dumbest Lab with his outburst. Because you can't buy our respect with all the money in the world. ... Um ... Wait a second.
1. Capitol Missteps
Imagine they did a roll call on Capitol Hill and 535 Raj Rajaratnams stood up. Seriously, just picture it in your mind's eye, 435 Rajaratnams in the House and another 100 in the Senate all sworn in and geared up to govern the United States of America. Having trouble visualizing it? Can't envision such a sinister scene playing out on such hallowed ground? Too farfetched for you? Well, as we learned from 60 Minutes Sunday night, that scenario is actually possible under the current rules governing Congress. And while we are not saying every member of Congress is trading on inside information in the darkness of the Capitol's cloak rooms, we do believe that those loopholes allowing such activity need to be sewn shut. Sadly, and quite stupidly, that's not the focus in Washington right now. In the immediate wake of the report, it's all about damage control, finger-pointing and other inane political exercises. Or, in other words, business as usual. House Minority Leader Nancy Pelosi's office, for example, is accusing Steve Kroft and Co. of omitting key information about her profitable trades in Visa ( V) in March 2008, which came at the exact time she was voting on a bill to limit credit card fees. Pelosi spokesman Drew Hammill called the report "a right-wing smear" based on a new book by conservative author Peter Schweizer of the Hoover Institution. To which we say: Stop acting like a princess, Nancy! (Thanks Herman Cain.) It's not all about you. The report also hammered your friends across the aisle, including House Speaker John Boehner (R-Ohio), and House Financial Services chairman Spencer Bachus (R-Ala.), who apparently was using his 2008 briefings with Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson as daytrading fodder. The bright side to all this bad news is that the 60 Minutes report has reinvigorated the movement to ban congressional insider trading. Earlier this week, Rep. Louise Slaughter (D-N.Y.) reintroduced the Stop Trading on Congressional Knowledge Act, or STOCK, which was first brought forth in 2006. As to whether this new commotion will help pass Slaughter's old bill and stop the Rajaratnams in Congress, honestly, we don't know. But we guarantee that the next senator or representative caught trading on insider information will be slaughtered in his or her next election. Heck, we don't even have to put that one up for a vote.