Video Communications Division, or VID business, for $38 million. Since then short-sellers have been badgering the company, which manufactures video post-production products, to divulge how fast the biz is growing and what it's worth. Pinnacle, say the shorts, has been very elusive. Enter Pinnacle's latest 10-Q, which included this ditty: "Historical statements of operations for VID were never prepared by HP due to the de minimus nature of the VID business in proportion to HP as a whole." The result, Pinnacle says, is that it "would need to make assumptions based on current and forward-looking estimates. Such estimates could bear little relation to historical reality and could be misleading. Therefore, disclosure of such pro-forma condensed statements of operations have been omitted."
So, wait: Pinnacle bought a company but didn't know what it bought? Didn't it do due-diligence? Didn't it review the numbers? Will somebody please explain this? Pinnacle CEO Mark Sanders tried. He told my sidekick,
, that the VID biz at HP was simply too small. "He adds," says Martinez, "that the HP folks knew it was a valuable biz, even if they were not going to do something with it. Hence, they sold it for $38 million."
How could HP not have known what the biz was generating? "They may have known," Sanders said, "but basically
HP treated it as a product line." HP's thinking, Sanders continued, was that it would sell Pinnacle the VID biz, "'but do not ask us
HP to do a ton of analysis.'"
Why, of course, now
makes sense! Or does it? And if it does, why didn't Pinnacle just use
explanation in the "Q"? (Not that doing so would really have changed the curious nature of the situation.) "I apologize for that," Sanders said, explaining that the info in the Q had been written by a "junior analyst."
And not reviewed by an army of
attorneys? Let's just say that based on the 30% slide in Pinnacle's stock since the Q was filed 10 days ago, the whole thing doesn't sound (smell) right to somebody.
Hewlett Packard officials did not return repeated calls for comment.
Lots of react to yesterday's
Hotline mention of troubles at
, and how supermarkets have turned up the heat. Readers also remind me of the
influence, which is taking hold.
Don't forget to check out Part 1 of Herb on TheStreet earlier today.
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at
email@example.com. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.