Don't You Know That ...
you are an EchoStar...

1. Ergen Economically Incorrect

EchoStar Communications ( DISH) CEO Charlie Ergen is a smart guy. So how could he be so dumb last Friday?

Yes, after years of watching his success, we have no doubt that the folksy, plain-spoken chief of the Dish Network satellite service has a lot on the ball.

But during the company's week-ago conference call to discuss 2003 financials, we believe Ergen fell off that ball.

It all started when investor Leon Cooperman -- a 25-year Goldman Sachs veteran who now heads Omega Advisors -- asked what we at the research lab think was a simple question: What was the average price per share that EchoStar paid in its recent stock buyback?

"We're not disclosing that," Ergen replied. "You can figure it out. ... You might figure out some range that you can be comfortable with."

This shocked us because we've sat through many conference calls in which this question has been uneventfully asked and answered. It shocked Cooperman, too, apparently. "I don't know any company publicly traded that refuses to give that information," Cooperman said. "I never heard of this. I've been doing this for 38 years."

"Now you've heard of it," responded Ergen, whose folksy plainspokenness suddenly wasn't endearing as usual.

Things went from awkward to weird when EchoStar general counsel David Moskowitz chimed in. "We're not going to provide information on this call that we haven't provided in the 10-K," Moskowitz said. "And so it's not a question we could address to you individually. ... The data you want, to the extent it's required, is provided to you in the 10-K."

Which made no sense at all. Cooperman wasn't asking for information that wasn't in the 10-K -- he was asking to be saved the burden of finding the relevant numbers from the 194-page document and doing the math. (By the way, the per-share buyback figure, according to our calculations, was $32.19, toward the lower end of the stock's 52-week range of $27.33 to $41.)

Not only that, but earlier on the call, EchoStar execs had done exactly what they told Cooperman they wouldn't do: give out a number that wasn't in the 10-K, though it could be calculated from numbers provided therein. Yes, EchoStar gave out fourth-quarter numbers for the closely watched figure of average subscriber-acquisition cost. Given that EchoStar gave out three alternate numbers for SAC, it appears that SAC is more of a judgment call than the calculation necessary to figure out the buyback price. In our minds, that undercuts Ergen's and Moskowitz's righteous reticence to do the quick math for Cooperman.

That gets us back to how odd and inexplicable Ergen's response was. All it served to do, as far as we can figure out, was to divert attention from what Cooperman's reasonable-sounding interest appeared to be: Ergen's general philosophy of stock buybacks.

"We followed SEC rules in our disclosure about the stock buy-back and the details related to that transaction," EchoStar says in a statement. "The stock buy-back is unrelated to subscriber acquisition costs."

We called up Cooperman this week to ask what he thought of Ergen's behavior on the call. "I have a great respect for him," Cooperman said. "I'm a substantial investor in the company. I believe the long-term outlook is attractive. I was looking to get insight into his thought process regarding the repurchases." Ergen, said Cooperman, apparently wanted to keep his cards close to his vest.

Another EchoStar shareholder we spoke with -- a source who is a longtime, fervid fan of Ergen's -- saw it a different way. By not giving out the buyback number, Ergen, was giving the impression he was trying to game his shareholders, the buysider said, speaking on condition of anonymity. "I just thought that was a little bit crazy."

2. Your Hard Thoughts About Microsoft

We asked you last week how to fix the Microsoft ( MSFT) problem. It's time to open up the emailbox and find out who came up with a winning solution.

Yes, we wrote that the European Union's proposed 497 million-euro fine embodies everything that's wrong with regulators' attempts to curb Microsoft's abuses of its monopoly power. We asked you to come up with something better. Or at least different.

Scott Schrader gets points for coming up with a new variation on the old idea of splitting up Microsoft into two companies, one that would focus on the Windows operating system and the other that would sell applications such as the Office suite.

Instead of splitting up Microsoft, suggests Schrader, make Microsoft split up its operating system allegiance. If Microsoft wants to continue to sell the Windows operating system, make it write Office and other applications software to work on other operating systems, such as Linux. "You don't have a conflict of interest there," Schrader writes.

A correspondent named "hanaman" came up with an interesting, minimalist idea: a label for all Microsoft products. It will read, "Warning: In purchasing this item you will/may be contributing to the demise of all other competition." Well, warnings work for cigarettes. Sort of.

Greg McNab suggests recruiting Dr. Phil as a mediator: "Dr. Phil," he writes, "will get Microsoft to focus not on what it's doing wrong, but rather what it's doing right."

We got several variations on the idea that Microsoft should share any ill-gotten gains with the competitors at whose expense it has gained them. Our favorite of such entries -- and the winning entry in our contest -- was from Anthony Favazza, who proposes that in the case of any future anticompetitive violations, Microsoft would be forced to buy the victimized company for five times its market value.

"This rule would make MSFT think twice about it actions, and encourage investment into technologies that compete with MSFT," writes Favazza.

The more we think about that idea, the more we like it -- just for the part about how it will encourage investors to bet on companies in the hopes that they'll be abused by Microsoft, thus qualifying for the quintupled share-price buyout. As we learned from the Internet bubble, it's that kind of reckless investing that encourages true innovation.

3. International Paper Losses

What crushes a company's corporate spirit more than being dumped from the prestigious Dow Jones Industrial Average?

Why, being dumped from the Dow Jones Industrial Average twice.

That questionable honor was enjoyed this week by both AT&T ( T) and International Paper ( IP), which along with Eastman Kodak ( EK) were dropped from the average. Taking their place will be American International Group ( AIG), Pfizer ( PFE) and AT&T corporate descendant Verizon ( VZ).

As Dow Jones ( DJ) noted in its press release announcing the changes, AT&T first joined the index in 1916, but was dropped in 1928; it rejoined in 1939.

But as a sign of how low International Paper is on the stock-index totem pole, Dow Jones neglected to mention that IP -- its preferred stock, actually -- was dumped once before as well. It was added to the average on April 1, 1901, only to be excised three months later.

Some companies get no respect.

I'm Tired
Get the Taj Mahal of Visa cards

4. Trump Card

From the Department of Harmonic Convergence: On Tuesday, the auditor of Trump Hotels & Casino Resorts ( DJT) announced there was substantial doubt about the company's ability "to continue as a going concern," if it can't complete a restructuring.

On Wednesday, Bank One ( ONE) announced the Trump Rewards Visa credit card, one that lets the holder earn points redeemable at one of Trump's three Atlantic City casinos.

The whole thing smells like a publicity stunt to us. We can't imagine that the market for credit card users who hop the bus to Atlantic City is all that huge.

But at least there's an upside here: Now you and Donald Trump can go bankrupt together. Repeat after us: You're mired! In debt!

5. Go Intel It on the Mountain

When the going gets tough, Craig Barrett turns bizarre.

That's the only explanation we have for the opinion piece that the Intel ( INTC) CEO wrote for Wednesday's Wall Street Journal.

In his desperate attempt to prevent the Financial Accounting Standards Board from counting stock options as an expense on its financial statements -- a move that would have lopped $991 million from Intel's $5.6 billion profit last year -- Barrett came up with some of the oddest arguments we've ever heard in support of the fiction that stock options cost nothing to a company's shareholders.

Blathering Barrett
Un-Intel-ligible utterances

There was plenty to question in Barrett's essay. But two strange arguments stood out.

Strange argument No. 1: The U.S. will lose its competitive edge. "Even China is getting into the act, officially encouraging the use of stock options as part of its five-year economic plan just as FASB is preparing to impede their use in the U.S.," writes Barrett.

Hmmm. We never thought of China as a model for the world's accounting system. And perhaps China's biggest advantage over the U.S., compensationwise, has a little more to do with pay scales than stock options.

Strange argument No. 2: Stock-option accounting involves too much number-crunching. FASB, writes Barrett, "should just recognize that one plus one does not equal three and get back to the basics of accounting principles based on cash, not imaginary expenses."

Hmmm. As if getting rid of these messy options calculations will magically restore American accounting to some Edenic time when all the numbers in a 10-K were based on the movement of cold, hard, cash in and out of a company cash register.

As Barrett well knows, virtually every number in a P&L statement, from revenue on down, is a judgment call. When Intel books revenue, does it necessarily have the payment for those sales in hand? Of course not. It ships the chips out the door and assumes it will get paid for them. It calculates the cost of foreign exchange. It estimates the cost of pensions it will pay out years hence.

To say stock options are the root of all fuzzy accounting is about as historically accurate as saying bad taste on TV began with Janet Jackson. You'd only be off by at least 50 years.

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