Rush to Judgment Hurt Carbonite

NEW YORK (TheStreet) -- There should be two requirements to be a CEO:

1) Every CEO should take a course in basic economics.

2) Every CEO should pass that course.

Shareholders at the data back-up company Carbonite ( CARB) are surely regretting their CEO did not meet these requirements.

Carbonite is the company that, on a Saturday night five months ago, announced it was dumping Rush Limbaugh as a place to advertise. Rush said something of which CEO David Friend did not approve.

Do you remember what it was? Exactly. (It was about Georgetown University student Sandra Fluke, whom Limbaugh referred to as a "slut.")

This move of the company's was dumb on so many levels it is hard to figure out where to begin.

Let's start with the Econ 101 course. Carbonite's advertising with Rush was based on one thing only: If the company spent $100 on ads, it made more than that in profits.

Today, thanks to sophisticated analytics, every company like Carbonite knows exactly how many sales result every time an ad runs. The company's quarterly reports from earlier this year acknowledged the vast majority of its sales came from people who listed to Rush.

Pulling ads under these circumstances was dumb.

Then the CEO made it worse: He made it clear he was part of an effort to remove Rush from the airwaves.

If you say the Pope is the anti-Christ, don't be surprised if Catholics stop doing business with you.

Every Carbonite shareholder is entitled to ask CEO Friend: "Why did you throw our money away picking fights with a person whom millions count on for information about the world in general and Carbonite in particular?"

In March, when Carbonite stock tumbled 12% almost right away following the cancellation, Friend had no answer other than mumbling something about customers were going to cancel anyway.

During an Aug. 1 conference call, we learned the truth: Sales at Carbonite crashed much worse than anyone at the company imagined. And it is not over yet. Hundreds of thousands, if not millions, of Rush listeners are like a ticking time bomb, just waiting for their contracts with the company to expire so they can get dump the people who wanted to dump Rush.

Mozy is just as good, if not better. Consumers know that.

Apparently the CEO of Carbonite did not.

Then he made it worse, again: He said it took the company months to gather the metrics to figure out the change in sales from dropping Rush.

There is no kind and gentle way to put this: Everyone knew that was not true. Metrics from the web -- where the company's sales take place -- are almost real-time. If people stop buying at noon, you know it by 1 p.m.

And he said it took months?

That is why Carbonite took a 15% dive last week when the real results of the CEO's misplaced political activism came out. The stock is down 20% over the last five days and down 31% since the beginning of the year.

Here's the takeaway: If you own shares in a company where the CEO is using your money to make political enemies with people who are making you money, maybe you should take away your investment and put it in a company where the CEO passes the third test: Is he sane?

As for Rush, his ratings have never been better.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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