1. A Bear Market for Barry
During each quarter's earnings season, we've noticed, you can count on at least one respectable executive to go nuts.
This quarter, that executive is Barry Diller.
Yes. On Tuesday evening, following the release of
mixed second-quarter results, the
boss managed to turn a mildly unpleasant conference call into a truly painful, 104-minute marathon.
The plot line was oh-so familiar: Management reports short-term troubles, analysts ask about the long-term outlook, management chastises analysts for failing to see the Big Picture. This is standard stuff.
What wasn't standard was Diller's reaction. To be sure, many executives clearly doubt that analysts and reporters can comprehend the glory of their company's prospects. But Diller did a singularly bad job of masking his frustration in a feature-film-length, 87-minute question-and-answer session.
The low point came in response to a cordial-as-possible question from Piper Jaffray's Safa Rashtchy, an IAC bull who asked Diller what made him so confident about the travel sector.
"I don't want to at all be defensive about this," Diller responded. "The truth is, our travel businesses are
. Your expectations and anyone else's expectations be damned, they are actually growing."
Why no, Barry. You don't sound defensive at all.
But Diller was just getting started. "I'd be
if anybody can find a single negative" with international travel, he said, "
other than the fact
for one quarter
was down. Now do you think
that international travel is not gonna continue to
as travel has always kind of
Ultimately, Diller's response morphed into an indictment of all the company's critics. "You have said to us for
that our margins ... are gonna deteriorate. You've said it for two years. You've asked us forty-seven
sand times about it. We have said forty-
thousand times we don't agree with you. Two years later, we are -- again -- minus 80 basis points -- we said it'd be 100, and that was entirely acceptable to us --
Fools!, we can almost hear him screaming to the pitchfork-wielding, torch-carrying mob. This isn't a monster! I have created life!
When IAC tanked after hours Tuesday, American Technology Research analyst Mark Mahaney blamed not only the numbers, but the company's "rambling, frustrating" conference call. "It just seemed like the company was talking itself into a dizzying, downward spiral," wrote Mahaney in a research note.
Mahaney has a buy rating on IAC. With friends like that, one shudders to think of what the company's enemies are saying.
2. M-I-C, K-E-Y, B-O-A-R-D
is getting into the computer business.
Lots of luck.
On Thursday, the multimedia conglomerate unveiled its new Disney Dream Desk PC -- we call it the DDDPC -- at a press event attended not only by Mickey Mouse himself, but by cast members from ABC's sitcom Hope & Faith and its soap opera One Life to Live.
Featuring a kid-friendly hardware design, lots of Internet-filtering software and all sorts of Disney-brand software, the PC has a suggested retail price of $898, mouse-eared monitor included.
Disney believes the product has the usual things going for it: demand from the underserved youth computer market, positive attributes of the Disney brand, nearly three years' worth of development.
But, cranks that we are at the research lab, all we can think of is the inauspicious history of consumer-branded personal computers.
Back in 1999, you may recall, Patriot Computers introduced the Mattel-licensed, his-and-her Hot Wheels and Barbie-branded PCs. A little more than a year later, Patriot was bankrupt.
In early 2002, news surfaced that
MTV planned to market an MTV brand PC. But the product's subsequent disappearance makes us speculate that the total request for the MTV PC was, uh, dead.
Could it be that if parents are going to spend $900 on a computer, they want it to look like something their budding Einsteins will grow into, not out of?
A Disney spokeswoman dismisses our concerns, pointing to the value in such DDDPC elements as its proprietary movie, picture and audio software suite. "From a bundle perspective," she says, the DDDPC "really does demonstrate its value."
And after studying the Hot Wheels/Barbie debacle, she says, Disney folks concluded it wasn't a lack of demand that sunk Patriot. "It was a quality problem," she says.
Still, $900 for a kids' PC? No matter how cool it is, that strikes us as a little Goofy.
3. Fidelity to the Truth
This week, we learned of a revolutionary new way to achieve a spotless record when it comes to complying with
New York Stock Exchange
rules and securities laws.
All you have to do is erase the spots.
On Monday, see, Fidelity Brokerage paid a $2 million fine in a
Securities and Exchange Commission
investigation of document destruction at the company's branch offices. Without admitting or denying the findings, the company settled charges that employees in at least 24% of branch offices between January 2001 and July 2002 took extraordinary measures to ensure that they'd have a clean compliance record.
Specifically, the SEC says, branch-office managers were warned of impending internal inspections and encouraged to conduct preinspection inspections. As a result, employees altered or destroyed records that were incomplete or improperly filled out.
Hold That Shredder
In other words, if there was evidence of misbehavior, the idea wasn't to fix the misbehavior but to hide the evidence, the SEC alleges.
Stating the obvious, NYSE enforcement chief Susan Merrill commented Monday, "Destroying and 'cleaning up' files in advance of internal inspections or NYSE examinations corrupts the integrity of the regulatory process and will not be tolerated."
That reference to file clean-up, of course, reminds us of the smoking-gun memo sent by former Credit Suisse First Boston banker Frank Quattrone -- the memo that got him convicted on federal obstruction charges.
Most of the time, cleanliness is next to godliness. Unfortunately, people keep coming up with new exceptions to that rule.
4. A MatchNet Made in Heaven
Remember the good old days of what people used to charitably call the "public venture capital market"? As in, when companies would go public willy-nilly, and when profitability -- and even the chance of profitability or even the slightest movement toward profitability -- Just Didn't Matter?
Well, those days are back.
This week's evidence: MatchNet's Thursday filing at the Securities and Exchange Commission, indicating that the online-dating company -- which already trades in Germany -- plans to offer its stock for sale in the U.S.
There's plenty to like about MatchNet -- except, that is, for a few problematic details. Its losses are increasing year over year. Revenue per subscriber is decreasing. Subscriber churn is increasing. Advertising costs are rising. It's runner-up in the online-dating market to IAC/InterActiveCorp's Match.com. It plans to change its name, and will have to spend heavily to rebrand.
And if that doesn't give you confidence, we remind you that things aren't much better for the industry leader. Earlier this week, Match.com said results were disappointing on both the top and bottom lines.
Yes, compared to MatchNet,
at $150 a share is a value stock.
5. Let's Sing a Song of Choice One
We're aware that directors and officers are supposed to be unreasonably enthusiastic about their company's prospects. But at Choice One, it's getting ridiculous.
Choice One, to refresh your memory, is one of the dozens of well-funded telecom companies that boomed and busted on Wall Street in the telecom bubble.
Brought public by Morgan Stanley in February 2000 at a price of $20 a share, the stock zoomed past $60 within a month, then drifted downward from there. Delisted by the Nasdaq in late 2002, the bulletin board stock now trades for pennies a share.
But back to the ridiculousness. On Monday, Choice One announced it planned to file for bankruptcy protection this fall as part of a restructuring that would take the telecom provider private.
The planned filing, which will wipe away more than two-thirds of the company's debt -- and all the value of its stock -- isn't a sign of financial weakness, company officials told the Rochester (N.Y.) Democrat and Chronicle. "People have this perception about bankruptcy," Choice One Chairman Steve Dubnik told the paper. "For us, it is a tool to effectuate a restructuring of our balance sheet."
Yeah, we know. We have this "perception" about bankruptcy -- that shareholders get screwed. Maybe what we need is a tool to effectuate the restructuring of our thought processes, like some sort of hole in the head.
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