FIVE MAD BUSINESS BLUNDERS

Blunderer 1: Seattle Computer Products
Blunder 1: Sale of the DOS operating system

Back in 1980, Tim Paterson, a 24-year-old programmer at Seattle Computer Products, spent four months writing the 86-DOS operating system. Meanwhile, Bill Gates was on a hunt for operating software that Microsoft could license to IBM; Big Blue had the money and factories to build computers, but not the operating system to run them. Gates bought the DOS system for a pittance: $50,000. When Seattle Computer figured out what it had let slip through its fingers, it accused Microsoft of swindling the company by not revealing that IBM was its customer; Microsoft settled by compensating Seattle Computer an additional $1 million in 1986. Big deal--the market for the rest of Microsoft's cool software had been born, and there was no looking back. Arguably, this key deal ultimately propelled Microsoft to software domination--and its current $253 billion valuation.

Size Of Blunder: $253 billion


Blunderer 2: Time Warner Shareholders
Blunder 2: The merger of AOL and Time Warner

On Feb. 11, 2000, Internet portal America Online, then valued at $108 billion, swallowed media stalwart Time-Warner (worth $111 billion) for $164 billion in an all-stock deal. AOL owned 55% of the new, combined company; Time-Warner, 45%. Then came the tech wreck of 2001, followed by the rise of stiff competitors Yahoo! and Google. As cultures clashed and the stock price tanked, the company in 2002 reported a one-time write-off of $99 billion--at the time, the largest corporate loss ever reported. At its nadir, the firm boasted a meager market cap of $48 billion--$171 billion less than at the time of the merger. Time Warner is now worth about $53 billion.

Size Of Blunder: $196 billion


Blunderer 3: Xerox
Blunder 3: Inability to capitalize real big ideas

In the early 1970s, Xerox developed world-changing computer technology, including the mouse and the graphical user interface. (Modern GUIs include Microsoft Windows and Mac OS X.) One of the devices was called the Xerox Alto, a desktop personal computer that Xerox never bothered to market. (Who would want something like that?) A decade later, several Apple employees, including Steve Jobs, visited the Xerox PARC research and development facility for three days in exchange for $1 million in Apple's still-privately held stock. That educational field trip was well worth the price of admission (Apple stock now worth $3.5 billion), given that it helped Jobs build a company now worth $110 billion. In the late 1980s, Xerox sued Apple for using GUI technology in its Macintosh computer, but the case was dismissed--the statute of limitations on the dispute had passed.

Size Of Blunder: $107 billion



Blunderer 4: Enron Executives
Blunder 4: Greed and deception

The now infamous Houston-based energy company created offshore entities to hide huge losses--maneuvers that even a careful read of its opaque financial statements could hardly detect. Analysts turned sour on the company in the summer of 2001; Enron filed for bankruptcy before year's end. From its peak market cap of $78 billion, the equity is now worthless, and key executives--including Chief Operating Officer Jeffrey Skilling and Chief Financial Officer Andrew Fastow, are doing jail time on charges including securities fraud and insider trading.

Size Of Blunder: $93 billion



Blunderer 5: The World's Central Banks
Blunder 5: Global economic upheaval

U.S. Federal Reserve Chairman Ben Bernanke and his counterparts across the globe have the power to jump-start or derail entire economies by cranking the credit spigot open or closed. Rubert Mundell, winner of the 1999 Nobel Prize in economics, has argued that "bungled monetary policy in the 1920s and 1930s caused chronic deflation [falling prices] and destabilized the world," writes author Charles Wheelan in his book Naked Economics. Mundell's argument: "'Had the price of gold been raised in the late 1920s, or, alternatively, had the major central banks pursued policies of price stability instead of adhering to the gold standard, there would have been no Great Depression, no Nazi revolution, and no World War II.'" Those are fighting words--let's hope Bernanke and company don't earn a spot on this list.

Size Of Blunder: Our calculator just broke. phew!!!!!!!!!!!!!!!