*NEW* Herb's Hotline: On the Computer Associates Earnings Delay
Thoughts, observations and other comments:
Red flags flapping in the wind:
The only question I had when I saw that
Computer Associates
(CA) - Get Report
had unexpectedly delayed the release of its year-end earnings was, "Didn't they just change auditors?"
Indeed they had ... last July. Remember? (I know I didn't until I went and checked what I had written about the company!) They sneaked the change into an
SEC
filing that appeared the Friday before July 4 -- you know,
when half the financial world is on vacation!
What
I wrote then remains true today: It's
always
a red flag whenever a longtime auditor is canned, especially one that has been with a company for as long as
Ernst & Young
had been with Computer Associates (more than 10 years).
It's even more of an eye-opener at a company like Computer Associates, which has been under fire from critics for what seems like years for unusually high receivables. You can argue that change is a good thing, because it lets a new pair of eyes comb the financials. Yep, but it's a double-edged sword. Which brings us to the delay in the earnings report: Why?! No comment from the company, and until there is, the flags will continue to flap.
"Is Herb Greenberg really unbiased or a true friend of the Salton shorts?"
My name in lights!
: Gee, thanks
DLJ
analyst Peter Schaeffer (and die-hard
Salton
(SFP)
fan) for devoting an entire column to your humble servant (or at least to my recent take on Salton.) Loved the first line: "Is Herb Greenberg really unbiased or a true friend of the Salton shorts?"
Hello! As if there's somethin' wrong with that? Like it's OK to be a true friend of the longs, but not a true friend of the shorts? Who was it who wrote a column in
Fortune
that claimed, "Short-sellers wear the white hats!" (Me.) Who is it who makes it clear that short-sellers are among his best sources? (Me.) Who is it who probably quotes short-sellers more than any other journalist in America? (You're hot ... yes, ME!) Nothing to be ashamed of there.
Schaeffer continues: "It is amazing to me that a well-known columnist, such as Herb Greenberg, can't find more interesting stocks to tear apart than Salton." Like there's anything more interesting than grillmeister George F. and the likelihood that sales growth of the grill is at or near a peak? (Know anybody who
doesn't
have one?)
More from Schaeffer on
moi
: "Over the past two years, this supposedly 'unbiased' Street analyst has attacked the company several times with incomplete and distorted information." Pauly, get yer facts straight: I'm not a "Street analyst." I'm a journalist who writes a column that falls under the "commentary" section on our site. Commentary, last time I looked, ain't about being unbiased. My sources are clearly BIASED, with a capital B! (And the angle I take is, well, an angle.)
More from Schaeffer, on my motives: "But what is really perplexing is why he is interested in Salton. Salton has a market cap below $1 billion and a miniscule list of institutional holders." Like I should
ignore
a company because it doesn't have many institutional investors and it has a market cap under $1 billion? Like stocks that cater to retail investors shouldn't get scrutiny? (
Boston Plucker
, anybody?)
Shaeffer doesn't stop there: He says that Salton's unusually high "short interest is propelled by a belief that Salton will crash, as almost every other appliance company has in recent years. We dispute the claim, as Salton is actually a marketing company rather than a manufacturer, with higher margins, better distribution and less upfront risk than most competitors."
Marketing company my rump! That's corporate malarkey.
Every
company is a marketing company, no? So Salton outsources most of its products; it still has to pay for outsourcing them! No argument that Salton, with its grill, is a great marketing company. (Why hiring George F. helped pull the grill out of obscurity is beyond me, but if it works
go with it!
)
Iomega
(IOM)
, with its zip,
was
a great marketing company, too. (Painted the darn thing blue and it was an overnight hit!) One hit like the Zip or George F. grill, in any company's lifetime, is all an investor can ask for. (Luck of the timing, I guess.) Two hits (along those lines) from the same company: Virtually impossible.
The bottom line of the bulls is that Salton is a low-multiple biz, which means it's undervalued and a safe bet for value-oriented investors seeking growth. Bottom line for bears is that Salton is a low-multiple biz because that's what it
should be
because aside from the grill, much of its pipeline is stuffed with low-growth products. And you don't -- the bears argue -- pay a big multiple for a company that constantly has to reinvent itself. (Especially if it's picking public fights with short-sellers. Claudio Osorio of
CHS Electronics
(HS)
learned that lesson the hard way, but that's another story for another day.)
QLogical:
Suppose you wonder whether this
morning's column, quoting
Brocade
(BRCD)
CEO Greg Reyes on why he couldn't understand the
Ancor
(ANCR)
/
QLogic
(QLGC)
merger was self-serving. Indeed it was (and didn't ya love it?!). But anytime a guy like that wants to go on the record you let him -- because with 90% of the market the man has credibility ... or at least more than I can say about, well, we won't name names, heah! ... Speaking of Ancor, if it keeps plunging the way it has been, it'll get back to where it was
before
the merger was announced Monday (oops, never mind, at last check the stock got as low as 30 1/4. It's officially a take-
under!
).
CVS
(CVS) - Get Report
just reported. Bulls blowing their horns in celebration. One big skeptic says its numbers, though, are a farce. Back with more on
that
later (gator).
Lashinsky's
take on
Cisco
(CSCO) - Get Report
, which is now FREE, is a must-read. You'll see why I call him the "thoughtful" one among us (no hip-shooting from that boy).
Rate rattles continue to wreck this market. My take (as if it matters?): Up a half a point (no duh!), market rallies (whew, whadda relief) only to return to its unusual volatility before the
next
Fed meeting, which is sure to create a new cycle of hand-wringing. (I'm practicing for predictions on our tv
show this week; Mom's coming up from Florida to watch from the control room.)
So, what's is this
Herb's Hotline
anyway? It's a new column if I can get it going with any consistency. Thoughts? Comments?? Observations??? Shoot them
my way, along with any ideas, relevant snippets from analyst reports or any other ideas. Oh, and if you're on the east coast, stay cool! Rolling blackouts coming to New Jersey. (Or so we're told.)
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
herb@thestreet.com. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
