Sears CEO Punked
1. The Man Who Never Washes
What's harder to take than know-it-all analysts who ask self-important questions on earnings conference calls?
When the retailer reported second-quarter earnings last week, one particularly persistent Sears customer made sure that Wall Street and the company heard him loud and clear. And boy, was he unhappy.
It all started last Thursday, when the operator prompted Andy Keller of Credit Suisse First Boston to go ahead and ask his question for management.
Except there was no Andy Keller on the line -- which, in hindsight, makes sense, because CSFB says there is no Andy Keller in its research department. The man who came on the line identified himself as "Steven." And what Steven proceeded to do was complain to Lacy about the washer and dryer he'd purchased from a Sears store in Texas last September.
The people who delivered the appliances "damaged my floor and my door and failed to balance the washer, which caused grease to leak out on the clothes," Steven complained. "When I contacted Sears and actually went to speak with you regarding the matter, I was told that you wouldn't take the call. When I actually contacted customer service after that, without even investigating the matter or sending no one out to look at the door, you guys send me a denial letter. So I'm curious as to how you're going to rectify the situation, 'cause I understand Sears likes to back their service and provides 100% satisfaction to their customers."
Evidently, it wasn't bad enough that Sears blew the quarter and guided downward for the rest of the year. Someone had to put a face on all those unhappy customers.
CEO Lacy promised Steven -- who didn't disclose his last name on the call -- a quick solution. "My apologies," said Lacy. "We clearly did not do a proper job with your delivery, and we'll fix it."
And it did, apparently. "We did resolve his issue to his satisfaction," a Sears spokesman said Thursday.
Whoa. While we admire Lacy's responsiveness -- not to mention Steven's resourcefulness -- we wonder whether Wall Street conference calls will be overwhelmed by analyst-impersonating disgruntled customers as word of this maneuver trickles out.
Our advice for Sears: You guys sell caller ID telephones in your stores. Maybe you should buy one for yourself in time for the third-quarter call.
2. A Lycos Is a Terra Thing to Waste
A moment of silence, please. We're painfully aware that the glorious days of the dot-com bubble are dead and buried, but we still get misty-eyed each time we read further evidence of that era's passing.
Taking the spring out of our step this week is a
report this week that Terra Networks, aka
, is about to sell the Lycos portal to an unnamed buyer for somewhere between $95 million and $115 million.
This is, of course, the same portal that Terra Networks bought in 2000 in a deal worth $4.6 billion. Which is the same Lycos that Terra Networks announced earlier in 2000 it would buy for $12.5 billion, before the bubble intervened and Net stock prices plunged in soufflelike fashion.
It's the same Lycos that backed out of a deal to merge with Barry Diller's then-USA Network in 1999 because grumpy shareholders protested the insultingly low valuation -- $4 billion or so -- implied for Lycos in the transaction.
Like everyone else who has to adjust to the New Math, we prefer the Old Math instead.
3. Doughnuts to You
Securities and Exchange Commission
thinks there may be something worth investigating at not-so-hot doughnut purveyor
Whoa! Who would have believed?
Well, the Five Dumbest Thing Research Lab, actually.
We can't say we're shocked by Krispy Kreme's Thursday disclosure that the SEC is conducting "an informal, non-public inquiry" of Krispy Kreme's franchise reacquisitions and its previously announced reduction in earnings guidance.
The research lab, you may recall,
puzzled over Krispy Kreme's May preannouncement. If, as Krispy Kreme explained, the low-carb craze was to blame, why, we wondered, would the effect hit Krispy Kreme's different retail channels so unevenly?
also have raised flags about Krispy Kreme's purchase of franchises from former directors last year.
We can't wait to see the results of the SEC's inquiry. We're always on the lookout, you see, for the hole truth.
4. Oh, Those Lazy, Hazy, Crazy Days of Fog Cutter
Fog Cutter Capital Group's
future got just a little foggier this week.
Fog Cutter, to refresh your memory, is the Oregon-based parent of the Fatburger restaurant chain, which, in its wisdom,
has decided to pay its felonious CEO a $2 million bonus on the occasion of his going to prison.
If you're able to trade shares of Fog Cutter on the
on Friday, it's not because the staff of the Nasdaq think it's a good idea. As Fog Cutter Capital reported last week, the Nasdaq made a "staff determination" last week to delist the company effective this Thursday.
Apparently, some folks at the Nasdaq were as uncomfortable as we were with the cushy, salary-plus-$2-million-bonus "leave of absence" agreement the company signed with CEO and controlling shareholder Andrew Wiederhorn as he prepared for incarceration.
In a Fog
The Nasdaq people based their decision, says Fog Cutter, on Nasdaq rules 4300 and 4330(a)(3). We're no lawyers, but as far as we can tell, the rules give the Nasdaq the right to kick out anyone it darn well pleases. Nasdaq, reads rule 4300, can suspend or terminate any listing "based on any event, condition, or circumstance" that makes continued inclusion "inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for initial or continued inclusion in Nasdaq."
Yup, can't get much broader than that.
But, based on the totally logical argument you can read about
here, Fog Cutter is appealing, which is why the delisting is on hold.
In the meantime, Fog Cutter auditor Ernst & Young is resigning the account. Not because of any disagreements, adverse opinions, disclaimers or any other auditing problems, mind you. The people at E&Y just wanted to get the heck out of there.
Can't say we blame them.
5. The $57 Billion Question
As you may recall, last week we pointed out that
could probably do something better for shareholders with its billions than to simply pass it out to shareholders in the form of dividends and stock buybacks.
There had to be some way, we thought, to create greater value for shareholders -- greater entertainment value, at least.
Which led us to launching the latest in our sporadic reader contests:
"Where Should Microsoft Have Stuck its Money?"
Which leads us to this week, where we reveal the contest winner.
First, a few runners-up:
Brad Morrison suggests taking $36 billion of the $75 billion payout and divvying it up among the 25 million people living in Iraq. Given that the per-capita income in Iraq is somewhere between $746 and $1,435, according to the World Bank, it would be "a tremendous windfall that will result in making their world more livable and give them a flavor of what capitalism can bring," says Morrison. "The U.S. can then stop spending the billions earmarked for the war effort, which will then help us reduce our debt and allow for lower taxes."
Tom Randall of Maplewood, N.J., suggests that Microsoft should purchase Medicare, privatize it, computerize it and thus morph it into "the most largest and most powerful health care management company in America." Says Randall, "I'm sure they can run it more efficiently (just think how they could 'bundle' services), make gobs of money, and still make it cheaper for Americans to get health care."
Our winner, however, is Harry Ward, who believes the best way for any corporation to increase shareholder returns is to buy naming rights for a sports complex or event. "Brand recognition is the name of the game," writes Ward, "and Microsoft could corner the market with $75 billion."
Just imagine, says Ward: "No longer would announcers or fans get confused about, is it Enron Field or Minute Maid Park, is it The Ballpark or Ameriquest Field, is it the NASCAR Winston Cup or NASCAR Nextel Cup? No, now all arenas, fields, parks and stadiums and sporting events would be named after Microsoft, thereby ending the confusion."
Ward wins an autographed-by-Jim-Cramer hat for that outside-the-shrinkwrapped-box thinking.
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