Friday, September 16, 2005

It's Always Something at Overstocked.com


Well, Patrick has done it again.

With a just-after-the-Friday-close press release headlined "Overstock.com Overstocked With Bargains," CEO Patrick Byrne has come up with another very amusing spin on his company's latest change in fortune, which includes "sharply" slowed sales and "downward pressure on gross margins."

Once again, the CEO who bills himself as "one of the most transparent CEOs" in the world has painted a beautiful face on one dog of an announcement, blaming the whole thing on an IT infrastructure "transplant."

And keeping in style, Patrick uses an elegant, erudite word ("caesura") to suggest his company's latest SNAFU is merely a pause that refreshes...and that everything now is, as they say, up-and-to-the-right.


(Unfortunately, "caesura" is not the correct word, for it implies a pause in a conversation or a break in a line of poetry...and not even Allen Ginsberg's "Howl" would begin to describe Overstock's "caesura.")

Poor word-selection aside, this latest of missives from Overstock.com's "Humble Servant" merely extends the long line of excuses (recall, and I am not making this up, that he mentioned the death of Pope John Paul II after last spring's "caesura") that never admit to an actual problem for which Overstock.com management might bear responsibility.

It's always something, isn't it?

We'll take a closer look at the whole thing on Monday.


Jeff Matthews
I Am Not Making This Up

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.

36 comments:

Sith Lord said...

The computer is craptastic because I am the ghost in the machine!

Sith

somervillec said...
This comment has been removed by a blog administrator.
somervillec said...

I believe he did you a favor, you and herb both hit your vitriol quota for the week, and not a second to soon!

Sith Lord said...

The Sith Lord notes that with his "pause that refreshes" Mr B has got his advice from THE CLASH

Elevator! Going up!
In the gleaming corridors of the 51st floor
The money can be made if you really want some more
Executive decision-a clinical precision
Jumping from the windows-filled with indecision
I get good advice from the advertising world
Treat me nice says the party girl
Koke adds life where there isn't any
So freeze, man, freeze
It's the pause that refreshes in the corridors of power
When top men need a top up long before the happy hour
Your snakeskin suit and your alligator boot
You won't need a launderette, you can send them to the vet!
I get my advice from the advertising world
Treat me nice says the party girl
Koke adds life where there isn't any
So freeze, man, freeze
Koka Kola advertising and kokaine
Strolling down the Broadway in the rain
Neon light sign says it
I read it in the paper-they're crazy!
Suit your life, maybe so
In the White House-I know
All Over Berlin (they've been doing it for years)
And in Manhattan!
Coming through the door is a snub nose 44
What the barrel can't snort it can spatter on the floor
Your eyeballs feel like pinballs
And your tongue feels like a fish
You're leaping from the windows-saying don't
Ayaiiiiirrrghhh! *@!!*@!!*!
Don't give me none of this!
I get good advice from the advertising world
Treat me nice says the party girl
Koke adds life where there isn't any
So freeze, man, freeze
Hit the deck!

k9thunder said...

Right on Jeff!

Why did Patrick wait till options expire today?

Yep, there is history of Patrick releasing bad new after close on Fridays. Last was acquisition of gee forgot the Ski venture.

Ah, bring on the weekend to forget and stop onslaught of sell orders. NOT!

Anyway, why did Patrick wait till today when the trouble has been going for 5 weeks? I suspect he was a big player in the options. Afterall, he did this and admitted doing this on Jan concall. Yep use shareholder's equity on call option. Such confidence...

Then again why not? He hold 6.6 MILLION shares with recent 660k for which he only paid $4.26. His cost is literally pennies per share. No wonder he was buying like madman in last 2 weeks and of course PLAYING THE OPTIONS too.

Damn, so glad to short this POS!

k9thunder said...

Hey Jeff, I recall reading from your blog, Patrick complaining of:

1. deCRAPitating IT system - sorry I'm not eloquent enough to define deCRAPitating...

2. Some kind of nutty analogy on that IT system is like bowl of "spaghetti"? Such fine logic from of course PhD in Philosophy

As I recall, these comments were made in April. Hey that's like FIVE months ago! Gee, prob has been plaguing in last FIVE weeks. Nice numeralogy...

And poor Shawn, once praised and not the scapegoat galore...

No wonder Shawn literally sold out his holding on 9/12 (and 5/25) leaving him with meager token 988 shares.

Cheers and keep up the good work!

k9thunder said...

Sith Lord,

I can think of another the Clash song...

How about Lost in Supermarket? Maybe Armageddon Times?

As for good the Clash album, how about their 2nd album " Give 'Em Enough Rope"?

Lost in the Supermarket Lyrics

(Strummer/Jones)

CHORUS
I'm all lost in the supermarket
I can no longer shop happily
I came in here for that special offer
A guaranteed personality

I wasn't born so much as I fell out
Nobody seemed to notice me
We had a hedge back home in the suburbs
Over which I never could see

I heard the people who lived on the ceiling
Scream and fight most scarily
Hearing that noise was my first ever feeling
That's how it's been all around me

CHORUS

I'm all tuned in, I see all the programmes
I save coupons from packets of tea
I've got my giant hit discoteque album
I empty a bottle and I feel a bit free

The kids in the halls and the pipes in the walls
Make me noises for company
Long distance callers make long distance calls
And the silence makes me lonely

CHORUS

And it's not hear
It disappear
I'm all lost


The central theme is "hey I'm lost"!

Sith Lord said...

I thought the cocaine, the party girl, the venal hunt for money and getting advice from the advertising world roughly summed up Mr B's Overstock.com.

Sith

I suppose I have to withdraw. Mr B says he is not a coke-head.

k9thunder said...

Sith Lord of the universe,

Your honor, you forgot to mention that Dr. Byrnes also stated that "I'm not gay" as well as "I'm not coke addict". These are his words from about 2 hour orgy/manifesto of conspiracies galore he spewed out about 2 or 3 weeks ago.

Then again his "star" Stormy is questionable background in some kind of "mature" dancing and experience in video business (which begs the question what kind of video) is a hottie and I'm sure she likes to PARTY.

Cheers

Harvard Homeboy said...

Hmmmmmm, let's see.

I guess this means that:

(1) inventories are going up;

(2) gross margins are going down;

(3) inventory turns are going way down; and

(4) inventory financing costs are going up;

(5) all of the above

Well, since I'm short this POS, that works just fine for me.

Hey thanks Patrick, thanks Sith Lord. Love you guys.

ostkwillshine10 said...

Great post, Jeff.

You are very smart, and the world needs more smart, motivated and capable guys like you, who build things rather than lying and parasitically destroying things in order to profit.

Too bad you don't know anything about a ubiquitous practice in your core competency - naked short selling. Apparently most others in the hedge fund and brokerage business do, judging by the hundreds of millions of fails per day. But no matter. Nobody knew about the analysts or mutual fund frontrunning or specialist hijinks in those scandals, so your approach is a well trodden path for Wall Street. Deny everything, demand that everyone else answer your rapidfire questions, and insist on ignorance as the court of last appeals.

And the wildly poor Amazon analysis you did, which you got dead wrong, and which demonstrates an alarming lack of qualification in understanding or analyzing internet retailers, is a tough ball and chain to drag around. Maybe nobody will remember that, or you can perhaps try the "I was dead wrong on the last internet retailer, but hey, now I really know what I'm talking about" tact. Hope springs eternal.

Perhaps if you get the same 4 or 5 posters to tell you how great your thoughts are, eventually the public will forget your disastrous 15 minutes on CNBC, and your venomous missives will be accepted as something other than sheer self-serving fiction again.

One has to have goals.

Have a nice weekend.

k9thunder said...

ostkwillshine10,

Hey Phil Saunders AKA Bobo Easter Bunny ncansd3 god know how many more alias...

Had to chip in on Jeff's board, huh.

As usual your eloquence manifesto really reminds me of the Unibomber.

Hey what's the deal with Patty stating:

"If I had focused on the business, instead of inanely working with NCANS on Bob O'Brien, which I did because of naked short sellers, I would not have completely dropped the ball on managing the company", said Byrne in an interview

Aha, your pal Patty is blaming you too?

Perhaps Patty should have taken an advice from Motley Fool who said Patty should focus on running the business and distance himself from Bobo.

Hey Phil, try to have nice weekend!

k9thunder said...

Some financial review from Q2. Boy can't wait for earning to be released in late Oct!

Key take aways:
1. Cash shrunk by $6 mil to $31.3 mil. Neg
2. Short term investment shrunk almost by half to $88.6 mil. Where did it go? Stupid buyback? Neg
3. Receivable almost doulbed (ouch!) to $13.6 mil. What's the matter? Can't collect from customer or too many request by customers to their credit card companies to dispute? Neg
4. Inventory rises by $21 mil to $70.2 mil. What's the matter? Can't sell CRAPs you peddle? Can't be for stocking up for x-mas could it? Neg
5. Other assests shrink over half/big time to $8 mil. Neg
6. Total current assets shrinks by, gasp, $56 mil to $212 mil. Neg
7. Total assests shrinks by, gasp, $48 mil to $268 mil. Neg

Sounds like it's time to raise more DINERO VIA yet ANOTHER 2NDARY OFFERING!

Its_strange said...

Something is very odd. Fridays press release just makes me question past results.

Its_strange said...

Has ostk issued warnings or guidance in the past or is this the first time they had something to say between reports ?...

DaleW said...

Too bad you don't know anything about a ubiquitous practice in your core competency - naked short selling. Apparently most others in the hedge fund and brokerage business do, judging by the hundreds of millions of fails per day.

I love how such a high percentage of people who own Overstock and who manage Overstock have become such masters of this arcane area of the equity market. Bravo, people, bravo! Way to concentrate on the right stuff. Another few quarters of this and this business will implode. This is a real page-turner of a crappy situation.

Its_strange said...

ostl delayed its second quarter results to Aug. 03 and than told us what thier $35,000,000 tech improvement would do...Now this ? I gotta tell all you wallstreet pros . I'm just to plain dumb and stupid for this cause i just don't get it

Mad man on the water said...

Over time Overstock will NOT be judged by the naked short selling. It will be judged by the company's ability to put revenues and profits on the income statement. This classic Friday after the close press release full of spin suggets the ability to deliver on those revenues and profits is getting harder, but finding the excuses for falling short has not. Everything else is just noise-be it naked short selling, Stormy is this or that and all the other stuff you posters obsess about. My advice to Phil (aka BOB) and Jeff is follow Deep Throat's advice: Follow the Money.

DaleW said...

I'm still waiting for the announcement on Jack Byrne becoming Chairman. I haven't seen that, yet it was touted by the CEO on a call in early August. I wonder about the intention of announcing this when it had not been formally proposed to the board. It sounds a lot like puffery to me, which is a little funny given the call position held by the company. I find it hard to believe the board has not met in the last 1 1/2 months given they met nine times in FY 2004 and given the current operating issues being encountered by the company. If the board has met, where's the 8-K on the election of Byrne to the post of Chairman?

Its_strange said...

" I'm the most transparent CEO in america" Byrne has said it more times than i can remember . Its on the CNBC tapes . Its on the conference calls...Well Patrick , transparent CEO don't drop a warning after the close on a Friday and when they are annoucing bad news they often have a conference call.

k9thunder said...

Well, just reviwed Shawn's bio (see below). Like rest of Sr VP gangs at OSTK, rather young crowd.

Does this guy have the IT/IS insights and knowledges?

For examples:

1. "Previously, Schwegman was director of Books, Music & Videos department and the affiliate marketing program"

Yep not techie that's FOR SURE! He is MARKETING guy! YIKES. THAT EXPLAINS IT!

2. "Prior to joining Overstock.com in 2000, Schwegman held various sales management and engineering positions at Sycamore Software Development Corp., Fechheimer Brothers Co., KiZAN, and PC Upgrades International Inc."

He can't be more than 30 but worked at quite a few places in "SALES MANAGEMENT"! AHA PLOT THICKENS... HE IS SALES AND MARKETING DUDE!

No wonder the IT system is deCRAPitating and more like "bowl of spaghetti"!

PS - Let's give Shawn some credit for selling out on 9/12 and 5/25 and left with token 988 shares.

DOES SHAWN KNOW SOMETHING WE DON'T like IT SYSTEM IS PHUCKED UP BEYOND REPAIR and hiring consultants?

--

Shawn Schwegman
Senior Vice President, Technology
Shawn Schwegman is the Senior Vice President, Technology for Overstock.com®. He is responsible for IT, development, website design and all Internet, e-mail, affiliate and partner marketing programs.

Previously, Schwegman was director of Books, Music & Videos department and the affiliate marketing program at Overstock.com. He is credited with building both into two of the company's most successful departments.

Prior to joining Overstock.com in 2000, Schwegman held various sales management and engineering positions at Sycamore Software Development Corp., Fechheimer Brothers Co., KiZAN, and PC Upgrades International Inc.

smr said...

The Truth About De-Crapitation was written up a few weeks ago (found the reference to this on The Fool):

http://tinyurl.com/a6qwc

Pretty damning . . .

A clap of the hands to whoever gives me the reference for the start of this post. I've got an uncontrollable urge to see just how obscure it really is.

Its_strange said...

OSTK in the NY Post today ..OSTK lawyer said they will deliver a amended complaint within a month. ...Well if the thing is ever served i bet Mary Helbrun isn't part of it and i wonder if Patrick will still be running ostk . I gut tells me this legal stuff is about over and tomorrows review of ostk by Jeff is must reading.

longhair said...

Something doesn't ring true about not being able to upload new items to the OSTK website for five weeks:

1. If you're performing a major IT upgrade or system changeover, you would run parallel systems until all the bugs are out so that you could always conduct business as usual.

2. Even if I believed that they could not upload data, why did their purchasers continue to acquire merchandise they couldn't sell? Don't IT and purchasing communicate? They should have known this in 5 hours, not 5 weeks. Sounds like we're being set up for a major inventory problem in coming press missives.

IMHO, I wouldn't trust Dr PB as far as I could throw him.
LH

Its_strange said...

Read todays NY Post article on this sideshow.....Now i bet that big , strapping texas attroney is wondering if Irwine Jacobs will testify on Rocker's behalf. In fact i bet he called Patrick and said " You know i look as silly as you. Nice work . Case over"

settlements said...

Jeff, great story. Funny how you have nothing to say however about the 35 firms being investigated by the NASD for their stock loan department procedures as reported by NY Post. You also failed to dicuss the issue of the FED Reserve discussing with the 14 Major Banks the concerns over unconfirmed trades in the derivatives markets. Reports in the papers are that Hedge Fund trading will be reeled in or they will no longer be able to play these games.

Why do you not ever discuss the Industry you run in and the continuous troubles caused by the preferential treatments given to Hedge Funds? While you berate Byrne and OSTK, you ignore every venue of evidence against the community you live in. Remember - It was Hedge Funds that received the preferred treatment in late trading.

Fair? Balanced? Or nothing more that a paid shill to drive profits?

Jeff Matthews said...

The realities of so-called naked shortselling were discussed at length in "When CEOs Obsess" back in the spring.

Don't bother reading, nothing will change your mind.

"A man hears what he wants to hear and disregards the rest."

Best of luck.

k9thunder said...

According to NY Post, Bobo O'Brien is Phillip Ross Saunders. He used to have medical equipment business in Irvine, CA and moved to Las Vegas.

But who would have ever thought Bozo Bobo Wacky Wabbit Silly Philly is religious man and even published a book with his brother?

The Spirit Among Us
Everything Happens For A Reason
By Phillip Ross and George Saunders
A collection of eighteen uplifting stories drawn from real life experiences, which celebrates the triumph of the human spirit and explores the unseen forces that guide human destiny. These everyday tales of serendipity and hope demonstrate the power of the energy, the "Spirit", that is everywhere around us, if we know where to look.
0-9763154-1-6

Links:
http://www.irvinepress.com/store.aspx?CategoryID=7&ItemID=0-9763154-1-6

http://www.revsaunders.com/blog

BelowTheCrowd said...

I have commented numerous times about the fact that:

Schwegman does not appear to have the necessary qualifications for a CIO/CTO in a business this size. I speak as somebody who has filled that role before, and who has been part of the team hiring for those positions. Not to say he's not a nice guy, but to take on that role, you've got to have a bunch of experience in similar projects and roles. He doesn't. Core IT management expertise isn't something you learn on the job in the top position.

I have noted similar issues with Stormy Simon, whose qualifications to run any significant operation appear to be questionable.

I had issues with a couple of the others as well, you'd have to go back and find my previous posts.

Bottom line is that if I were a CIO and I led a project which caused major functionality to be unavailable for five weeks, I'd expect to be unemployed very fast. In fact, I've been unemployed very fast, for much smaller failures, when I let myself get in over my head as Schwegman appears to have done.

-btc

k9thunder said...

Good to hear similar views on LACK of relevant experiences with Patty's direct reports.

In his own words Shawn and deCRAPitating IT. Read on...

Read on from influential CIO Insight.

www.cioinsight.com/article2/0,1540,1852559,00.asp

Some interesting excerpts from CIO are below:

"This 'fire and forget' approach is killing us. In reality, a file might not send properly, become corrupted in transfer or produce errors when the receiving system attempts to process it. In most cases, we don't know when we have problems. The architecture is horribly architected."

"It's critically important that I prepare you for the worst," he wrote as he described a major Oracle upgrade and added that he "expects it to get worse in the short term," and better eventually.

Shortly after the letter leaked, much to the displeasure of Schwegman, he said that a lot of the memo was simplified because he was writing "to a bunch of non-technical people," and that simplifications may have been misleading.

Schwegman is not only the CIO, but he's also a senior vice president. Partners interpret senior executive comments in a certain way and the kind of raw candor that Schwegman's letter used can be, to say the least, discomforting.

Sam S. Park said...

You must be kiddin'... Is Patrick blaming the IT implication process for causing OSTK's sharply slowed sales (the triple threat "S").

Jeff, many of your blog commentors have discussed and predicted the likelihood of OSTK's "sharply slowed" situation...

Is it me, or does it seem like nobody needs to explain Overstock's triple S?

tahoe kid said...

Overstock.com cut to Hold from Buy at Legg Mason (OSTK) 42.85 : Firm lowering full-year revenue estimate from $844 million to $835 million and while 2006 revenue estimate has been reduced only modestly . Firm lowering its 2005 estimate from a loss per share of $0.22 to a loss per share of $0.61 and 2006 EPS est from $0.73 to $0.33. Firm continues to believe in the long-term opportunity for Overstock.com, however, believes that there will be a near-term decline in the shares as investors reset expectations for the leverage point in this business.- Briefing.com

BelowTheCrowd said...

As I've considered this, I still think Schwegman is incompetent for the job he holds, but that's only a piece of the puzzle. He was in that position because somebody overlooked his lack of real experience in that kind of job and offered it to him anyway.

One of the most important things I've learned in a long career in IT is not to take a job in which I'll clearly be in over my head. Two reasons for this:

1) I'll fail.
2) If the hiring manager is willing to put me into a job that I know I'm unqualified for, then my success or failure is the least of the company's problems.

I wrote up a lot more about how I'd search for a CIO type, what I'd look for, and why I think this is indiciative of a larger problem:

http://www.belowthecrowd.com/archive/2005/09/on_overstock_an.html

-btc

Its_strange said...

btc. think ostk's billing could be a mess as well ?

BelowTheCrowd said...

I don't know about billing. It's an online retailer. Retailers in general, and online ones in particular tend not to have as many AP/billing issues as you would expect in B2B type companies.

Certainly, there could be problems with them processing bills from and payments to suppliers of all sorts. And as the CIO Insight article suggests, many of their partners may already be unhappy with them.

BelowTheCrowd said...

In the first paragraph above, I obviously meant "AR" when I said "AP." Retailers that sell to customers with credit cards tend not to have much in the way of receivables or billings to worry about.