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Monday, October 23, 2006

Nike's Loss is Wrigley's...Loss

You read it here first. Or at least if you subscribe to this blog you did.
Remember? Way back in January, 2006, when we watched a long-time owner-run company toss out its "first outside the family" CEO?

The man of that hour was one William Perez, the Caretaker Manager who was soundly punted out of Nike after about three minutes on the job for not being able to man the helm of one of the world's largest apparel companies, Nike. His failure to unite and drive forward the company is now the stuff of history, another chapter in the ever-growing tomes of corporate mismanagement.

Proving the rule that Caretaker Manager Syndrome is now pandemic in America, comes the announcement that Wrigley, those people who bring you the stuff that sticks to the bottom of your shoes in a variety of flavors, has just named William Perez - yes, the very same Caretaker Manager booted out of Nike - as their CEO.

Can you spell D-I-S-A-S-T-E-R?

If you go by the company's press release, you'll find all the earmarks of potential doom. There's the company rationale, as puffed up in the Associated Press:


"To continue to effectively drive our dynamic and highly competitive global company, I firmly believe this is the right time to divide the top leadership responsibilities between two people, particularly given today's commercial and governance climate," said Wrigley, who had headed the company since his father William Wrigley died in 1999.


Yeah, sure. That's pretty much what Nike said about Perez when they hailed him as the company's saviour. Not. He was canned less than a year after they said pretty much the same thing. But wait. It gets even better.

According to the same article:


Morningstar analyst Mitchell Corwin called the CEO switch a good move that should give investors more confidence, particularly after the company struggled to absorb the Altoids and Life Savers businesses it acquired from Kraft Foods Inc. last year.

"The missteps with the Kraft acquisition and heightened competitive environment demonstrated that the company could use a seasoned veteran to run the day-to-day operations," he said. "I think Bill Wrigley had the right strategic vision for the company, but acquisitions can be difficult and the competitive environment is more intense today than it's ever been."


Are they kidding? This is practically word for word what Nike said about this guy, who proved himself capable of one thing and one thing only: His complete inability to merge cultures and drive the brand forward.

The funniest part of the entire announcement is that this news release actually pushed Wrigley's stock up, showing once again that Wall Street will buy anything if you just hype it enough. Ignoring every shred of reality-based evidence, analysts are all enjoying the view out the car window as it drives over the cliff. You just watch and see. The man who sat still at S.C. Johnson for 34 years - possibly longer than most people reading this have been alive - will become the man who succeeded by doing nothing for Wrigley.

How long can this Caretaker Manager last at Wrigley? How long until, like a hung-over bridegroom, Wrigley managers wake up and realize they married the wrong girl? Oh, give it a year or so. Maybe more. Or at least until Perez's headhunter lines up a better offer from even bigger dopes.

Wednesday, October 18, 2006

That Sinking Yahoo Feeling

Once upon a time, a long time ago, there was this thing called the internet. It was brand new and really big. It was not only big, it was growing even bigger every day. Doubling in size every few months, adding billions of lines of content and welcoming millions of new visitors every day.

Getting a handle on all of that content was no easy trick. America Online tried, as did Lycos, Excite and a few other long-forgotten names. Of the early birds, none succeeded quite as handily as Yahoo, which quickly ascended to become the search engine king. The techie company with the typically quirky internet name rose above all others, culminating in its going public at an unheard of pre-bubble valuation.

Yahoo's rise typified the high tech soar-and-crash arc that soon became all too familiar. Except in Yahoo's case, they didn't crash. They survived. They struggled through the bubble burst, emerging from the digital Armageddon with a fairly firm grip on their title as the king of all search engines.

Yahoo stock, as battered as anyone's, slowly regained its health, but it never recovered to be the company it once was. But the reason it didn't recover isn't because of the rise of Google. And it isn't because Yahoo's technology was laggard. In fact, Yahoo had the most to gain and the least to lose in its post-bubble resurrection.

And yet, today, the company is struggling to catch its breath. Its stock languishes as insiders dump whatever they still hold. A fickle public has abandoned whatever allegiance it once had, preferring brands that are more responsive to their needs, while Yahoo's management desperately tries to pull more rabbits out its tattered top hat.

Of course, if you've been reading my stuff, you would have read years ago how it was pretty much over for Yahoo back then. It began with the hiring of Terry Semel, a man seemingly bent on converting Yahoo into the world's first internet television network. There's an old saying in the tech world: "When all you have to sell is hammers, everything looks like a nail." To Terry, a seasoned and successful entertainment executive, the internet must have looked like one big TV, just waiting to be programmed.

Anyone who knows now - or knew then - about the internet, also knew that the web was never destined to become an entertainment medium. Sure, you can find entertainment media on the web. But it doesn't take the memory of an elephant to recall the dismal days of WebTV, when even the wizards of Microsoft finally figured out that our PC's were never going to be televisions - and vice versa.

That's why they call it the digital convergence. It means that everything digital can exist here, not just one, overriding medium.

Yahoo and its crack team never did get that. They still don't. When Semel came aboard, the first thing he did was completely overlook the on asset that Yahoo had going for it: the preferred search engine. Asleep at the switch, his team let everything from paid ads to pay per click to paid inclusion all go to seed. That Google overtook Yahoo is no big deal. Anyone with the right resources could have taken it away from Yahoo. They were practically giving it away.

You know why Yahoo moved its corporate headquarters to Santa Monica, California? Because the studios at Paramount were already leased. Yahoo is not an entertainment company, no matter how much Semel wants to believe it is. The market doesn't believe it, if you go by Yahoo's stock performance over the last five years. See anything you like from January 2006 onward? Bear in mind that at this writing, the Dow Jones Industrial Average is at its record all-time high. And where's Yahoo? In the digital toilet, having lost half its value in the first ten months of 2006.

Neat trick.

Adding to that sinking feeling is the fact that most of the rats are deserting the Yahoo ship. Insiders, including Jerry Yang, can't dump this stuff fast enough.

Why is this happening? For the same reason it happened earlier: no brand strategy at Yahoo. You have the captain of the ship setting his course for Hollywood, while the boat was built for the internet. Clearly, nobody is at the helm of this rudderless ship, which means it's only a matter of time before it runs up on the rocks. While overblown, overvalued stocks like Google continue to beguile and amaze the Wall Street know-nothings, Yahoo can't even muster the strength to do that.

Then again, maybe Semel and Company have something up their sleeves. Maybe they have a plan to finally focus on what Yahoo's real brand strategy is. Or maybe they have a plan to stick to a plan that the public can perceive as something other than a quirky name.

Or maybe they're just taking swimming lessons.

Sunday, October 08, 2006

Google, You Tube & the Next Bubble

Okay, so by now you've read the rumored news that Google, that wunderkind of Wall Street, is rumored to be sniffing around YouTube.com, considering a purchase tagged at more than one billion dollars.

That's right. One Billion Dollars. With a "B".

Why, you may ask, would anyone pay such an exorbitant amount of money for such a piece of new, unproven potential? Does YouTube have some sort of secret worth a billion bucks? Some ravishingly robust technology? Is there anything under the hood that could possibly be worth more than the cost of curing cancer?

The answer, from where I sit at least, is a resounding "no." And before you go playing back your TiVO for what the pundits passed off on your favorite financial cable channel, consider this:

You're watching the wrong replay. What you should be watching is your VHS copies of the internet bubble's previous crash, which is remarkably similar to the one we're watching this week. It wasn't all that long ago, for example, that Lucent technology was trading at $60+ per share. Amazon was way up there. And everyone's favorite blunderball, America Online, had mushroomed to such an overblown valuation that it managed to swallow Time Warner whole.

Back before the Big Pop, Qualcomm was trading near or at $1000 per share. Everyone was buying. Nobody was selling. And the meanest man at the party was Alan Greenspan, who pooped in the punchbowl when he warned Americans of the market's "irrational exuberance." Well, pal, Greenspan was right then. And I'll bet he's chortling right now, too.

What everyone seems to be missing here is that Google and YouTube are the exact same stuff of which bubble stocks are made. The only thing that keeps either of them afloat is the most dangerous thing that inflated and shorted all those previous players: Wall Street analysts who know little about technology. If they read what's really going at Google, they'd be avoiding it like the plague. But it's clear that few of them have ever gotten up close and personal with their Silicon Valley playthings.

For instance, the big under-reported story about Google is that the company is a juggernaut, over-stuffed with engineers suffering from a sever case of "feature creep." For the uninitiated, "feature creep" is the phrase applied to engineers who become so fascinated with inventing new technology that they forget about doing business. They just keep developing new technology. By its management's own admission, Google is quickly becoming crippled with feature creep: more projects are being given the green light, even though there's no real purpose for their development.

And I haven't even begun to address the flaw and holes in Google's systems that threaten to blow apart their revenue strategies. Does the phrase "click fraud" ring a bell? Well, it's only the first one ringing.

Think that's bad? Try this: YouTube has nothing going for it other than high media awareness. It's certainly not the only public video upload site. It has no claims that other brands couldn't boast. And so far, it hasn't earned a dime of profit that it's told anyone about. In fact, recent stories abound about how great it would be if only YouTube could be as profitable as it is fun.

Don't get me wrong, I love both these sites. But there's no way on God's green earth you can tell me that either Google or YouTube can sustain a market cap in the hundred millions, let alone billions. Show me a company with a billion dollar market cap and I'll show you a company that has the power to sustain revenues with lots of zeroes marching in line behind them. The last time anyone tried to pump up the value of an internet stock the way the Wall Street knuckleheads are, they were using phrases like "lifetime value of a customer" to literally increase the real value by one hundred fold.

I wouldn't trust my car to my dentist and I wouldn't let my lawyer take out my appendix, so why would anyone listen to Wall Street analysts - and we all know how ethical and impartial they are - set the value of technology stocks about which they apparently know so little?

Hey, I'm no stock broker. You want to invest in a company that would pay a billion plus for a company that hasn't even come close to turning a profit - and has no reasonable chance to do so in the near future? Fine by me. As far as I'm concerned, Murdoch was having a senior moment when he overpaid for MySpace. But Wall Street is filled with egos, so I guess now the game is on to see which moron will overpay the most.

It's call Big Business for a reason. This time, it's to see who can cause the biggest shareholder lawsuits.