Monday, June 08, 2009

There He Goes Again


He’s everywhere!

He’s on Fox Business News parsing the Friday unemployment numbers with Rebecca and the Happy Hour crew!

He’s in Success Magazine giving tips on, well, success!

He’s in the Salt Lake Tribune dissing corporate spin doctors!

The “He” is none other than Patrick Byrne—Doctor Patrick Byrne, we should say—the CEO of a public company called Overstock.com that recently reported a decline in first quarter revenues and a loss.

Now, declining revenues and net losses are nothing out of the ordinary in Corporate America these days—what the recession and all. Still, a tough environment should be right in Overstock.com’s wheelhouse, with plenty of “overstocked” merchandise looking for a home, and millions of downsized consumers looking for a deal.

Oddly enough, however, Overstock.com seems unable to take advantage of the same environment that is providing record sales and earnings for close-out or low-priced merchants such as Ross Stores and Family Dollar, not to mention Internet giants like Amazon.com.

Still, that isn’t stopping the company's voluble CEO from offering his opinions on everything from the better-than-expected unemployment report last Friday (Inflated by statistical adjustments, opined the Doctor) to the key to successful entrepreneurship (Are you sitting down? It is this: “find a need and fill it”).

As for corporate spin-doctoring, Byrne had this to say:

Overstock.com CEO Patrick Byrne suggests that rather than trying to influence the market through the timing of earnings releases, some companies use the content of their announcements to paint an overly positive picture of the results.

“They'll use all kinds of corporate pap to try and put a positive spin on their results,” he said. “They might talk about their pro-forma results and only later in the release reveal their actual results.”—Salt Lake Tribune, June 6, 2009

This from a CEO whose company that regularly reports “Adjusted EBITDA” along with “operating profit (loss)” and “net income (loss).” Possibly because, generally speaking, Adjusted EBITDA tends to be one of the few positive below-the-line numbers in the press release.

This from a CEO who once proclaimed that his company had “passed through the tipping point,” and thus “we can crush” expectations, and “we are really on a roll here.” Unfortunately that was early in 2005, which would turn out to be another money-losing year for Overstock.com (and 2006 would not turn out any better: Byrne would later call it “a wipe-out year”).

This from a CEO who once crowed that his company was “competitive with Blue Nile,” the well-run online engagement ring retailer, saying “we intend to dominate in the $1,000 to $5,000 range” of diamond engagement rings—something his company never came remotely close to doing.

And this from a CEO who, during that “wipe-out year” of 2006 explained an operating glitch as follows:

It's funny that you ask that. We actually have a truck full of important parts trucking in through -- coming in from L.A. through southern Utah, ran into a cow and tipped over the cab, and that actually, literally, has stopped the project for two weeks. But short of any more cows on the interstate, I don't see how that gets delayed. That's just bolting things together.

For “pap” and “positive spin,” it doesn’t get much better—or more worse, depending on your point of view—than that.


Jeff Matthews
I Am Not Making This Up

© 2009 NotMakingThisUp, LLC

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. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.

7 comments:

Aaron said...

Jeff: As a long time reader of your blog, can I ask you a HUGE favor? Could you please ease up the focus on Patrick Byrne and Overstock.com? Readers only need to review OSTK's balance sheet in the last two quarters to see this is a poorly run company.

I hope you'll get back to your takeaways from the questions asked at the latest Berkshire Hathaway meeting, as well as expounding your view on whether the prospect of nationalized healthcare will kill any remaining profits in both health insurers and drug manufacturers.

Please don't take my comment the wrong way, but there are many more interesting and important topics readers like myself would enjoy hearing from you on.

Thanks.

Lyon Jewett said...

I perused the Overstock.com website once for a laptop. As well, due to the fact I was online shopping found MicroCenter in Rockville, Maryland.

As I write this from my Compaq, which costs $489 (specs-http://reviews.cnet.com/4505-3121_7-33127634.html?tag=prodAlert;priceSummary), I can truly say I saved over $300 actually walking in a brick store front.

The reason this CEO dissembles is that he has no game. Believe me, I wanted to buy from him. However, for a laptop I could touch (which was $300 less) versus one I could see online was a no brainer.

My advice to this guy is to check out his competition once in a while.

Jeff Matthews said...

Aaron:

The fact is it takes some time to do get the Berkshire posts together...and in the meantime, readers wonder what's happening.

I saw Byrne's comments, thought them hugely in character and worth a mention.

As it is, we haven't "focused" on Byrne in a long time. As you say, his numbers say it all.

In any event, we'll get back to Berkshire as soon as possible.

Favor granted.

JM

smithycroftman said...

Jeff,

With all due respect for Aaron's point of view, I think that in calling out Byrne you are doing a valuable service. There is a lot of anger out there at present, a lot of Wall St. vs. Main St. commentary, by policing Byrne and his ilk you are doing the job that the bubblevision types and "Wall St.'s Finest" do not. If the financial sector does not self regulate then the politicans will and we will all be worse off as a result. We can't just leave it up to Jon Stewart.

Hal Booth said...

No reason to grant that "favor," Jeff. It has been a long time since you've focused on that company and its CEO, and more scrutiny is welcome.

Anonymous said...

mr. matthews:

dr. byrne has enough problems as it is without you blogging about him again.

while you're 100% correct now and were then, it's cruel to keep revisiting this topic.

your berkshire hathaway blogging is superlative.

cheyfaith said...

Hi Jeff,

Lest you refrain from revisiting topics previously covered, let me weigh in with a vote in favor of doing so. I've only been a JMINMTU reader for about a month, but I've enjoyed every single post. I actually forwarded the Byrne piece to colleagues - while it may not be Byrne's intention to serve as an example, his plight is instructive.