Overstock Falls Short

After a good start to the year, the CEO said, Overstock "discovered that some of our systems were more shopworn than we had anticipated, and went on a crash program to replace them. Unfortunately, I underspec'ed them and underestimated the time it would take to complete them by a large factor. Meanwhile, the systems they were replacing were increasingly unstable, so that our ships were burned behind us and we had to march forward.

"While we have staunched the bleeding, I anticipate it will take six to nine months to rehabilitate the patient and get him running again," Byrne said. "During this time that we are hardening our new systems, we will reduce growth to industry rates."

Byrne told investors to "expect slower growth from us in 2006, but also expect us to end 2006 as a stronger and more focused company."

That may be easier said than done as large bricks-and-mortar stores including Wal-Mart(WMT Quote) continue to gain strength online. Last week, online giant Amazon.com(AMZN Quote) reported a disappointing fourth-quarter profit.

Byrne's taste for media attention came to the fore last summer when Overstock sued Rocker Partners, which owns 8% of TheStreet.com Inc. (TSCM Quote), publisher of this Web site.

Overstock accused Rocker Partners of spearheading a campaign to drive down the company's share price by helping to promulgate tainted stock research and manipulating various press organs (including, at times, this one) and other entities. The suit named David Rocker, his fund and various employees, as well as Gradient Analytics, a research outfit Overstock implied was in league with the short-sellers.

The suit alleged unfair business practices and negligence and claimed that Gradient's research reports were "simply platforms for the Rocker defendants to pursue its investment agenda of having Overstock's share price being kept as low as possible."

In a subsequent conference call and two CNBC interviews, Byrne claimed a short-selling conspiracy had been carried out against his company at the behest of "one of the master criminals of the 1980s" who was "supposed to end up with our company." He declined to name the figure but likened him to the "Sith Lord" of Star Wars renown.

Rocker and Gradient have denied wrongdoing. The matter is being investigated by the Securities and Exchange Commission.