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    Carbonite’s Saturday Night Massacre

    Carbonite’s Saturday Night Massacre

    One week agao, on Saturday night, March 3, 2012, Carbonite announced its decision to break off relations with its key radio endorser.  It appears to have been a fateful decision.

    From Chuck Jaffe at MarketWatch, Don’t ‘rush’ to Carbonite shares (h/t commenter Eliot Ness):

    When Carbonite Inc. stock took a quick plunge this week, there was an obvious consensus about what caused the move: The company pulled advertising from Rush Limbaugh’s talk-radio program after the controversial host made inflammatory remarks about a Georgetown University law student.

    Yes, the market could have feared that Limbaugh’s fans would cancel Carbonite’s service, an online back-up solution for consumers and businesses, or mount their own boycott. Or maybe investors assumed Carbonite will suffer because it will no longer have access to Limbaugh’s audience.

    Jaffe goes on to point out that Carbonite has underlying business problems which are driving the long term decline in the stock price, but quotes another analyst as pointing out that the result drop likely is attributable to the Rush controversy:

     “There is no way Carbonite’s underlying business is changing as much as the stock trading says it is on a daily basis,” said David Trainer, president of New Constructs Inc., a research firm based in Nashville. “That says there is a lot of excessive trading going on; maybe it’s the Rush thing or maybe not. … For the average investor, a stock this young being pushed around by like this traders is a wing and a prayer.”

    Reader Zane makes a related point at his blog:

    However, the reality is, with the exception of a zealous few, there will be likely little customers to be had amongst the activists – certainly not the amount of customers that were reached by the Limbaugh show. By the time next Valentines day rolls around will the money spent by the activist come close to money spent by listeners of Rush- likely not even close.That being said,

    One more thing : I don’t know if boycotting Limbaugh was a good business choice and I think, no one else knows either. What I do know is: making decisions based on the loudest screamers of the moment, does not usually bring about good business results.

    That was my first reaction when Carbonite dropped Rush.  How many of the DailyKos and Media Matters screamers actually used or were considering using Carbonite.  Probably few.

    Why did Carbonite make such a precipitous decision?

    There are few things that cannot wait for Monday morning, yet Carbonite issued its statement on a Saturday night, in what appears to be a matter of executives’ personal and political opinions outweighing shareholder interests.

    Shareholder are getting massacred as a result.

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    Comments



     
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    persecutor | March 11, 2012 at 8:50 am

    Rumor has it that David Friend discovered through past life regression therapy that he was the captain of the Hindenburg in his last life.

    It’s scary that his karma should keep gravitating towards disaster.


       
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      Eliot Ness in reply to persecutor. | March 11, 2012 at 4:48 pm

      Metaphorically, Carbonite was the Titanic from Feb 2005 to Mar 2012, slowly taking on massive amounts of water ($100 million of losses).

      A week ago it became the Hindenburg — a “spectacular dot-com flameout” whose wounds will not be visible until the next few quarterly reports have been published.

      Customers are now fleeing in droves to the (cheaper, better) competition, and the stock price can be expected to trend down from $8-$9 toward the $2-$3 range (representing CARB’s $60 million of venture capital IPO cash-in-the-bank).

      Any venture capital investors who held onto their stock after the six-month post-IPO lockout period ended in mid-Feb, are screwed. (The whole point of IPOing a money-loser like Carbonite is precisely to let the VCs slither away by shifting the burden onto the investing public.)

      NASDAQ:CARB will die a slow death, however, because it got a fistful of cash last summer during its desperation IPO.

      [Probably new] management will likely slash expenses, including advertising, and will likely look to acquire other businesses in order to shuffle the deck.

      I expect CEO/founder Friend to “move on” to other opportunities because he is now too much of a lightning rod.

      And Rush will be lampooning the Left long after NASDAQ:CARB is a mere blot on the copybook of financial history.

      A disastrous money-losing dot-con like Carbonite should never have slapped the face of the audience of the most successful talk radio host in history.

      The poetic justice is delicious.

      “Pride goes before destruction, and a haughty spirit before a fall.”


       
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      Eliot Ness in reply to persecutor. | March 11, 2012 at 5:22 pm

      Some psychololgical observations are in order here too.

      David Friend donates large sums to Obama, Dean, Move On, et al. He is a “Leftist” and it has to have galled his soul to pay huge advertising fees to Limbaugh and Levin.

      Friend’s initial statement was conciliatory, talking about a meeting with Limbaugh. Then suddenly, Whack!

      Friend is 63-years-old. He’s been working on Carbonite for seven full years, since he was 56. Carbonite should have been his crowning achievement.

      Instead, it’s such a disaster that if Phil Kaplan were still running F’dCompany.com, Carbonite would be a snarky ongoing discussion thread (like, for example, the $250 million Printcafe dot-com disaster was).

      How do you spend $100 million of other-people’s-money and have nothing to show for it but an increasing “burn rate?”

      Ridiculously, Friend is paid $500,000 per year to manage the loss of $500,000 per week. It’s insane (rather like Congress)!

      Friend lashed out and flame-threw at Limbaugh. But the ‘backdraft’ is likely going to end his startup career in flames instead, in a sort of “slutwalk” away from the flaming turkey carcass that is NASDAQ:CARB.

      (Sic transit Gloria Allred.)

      BTW, ‘Kamikaze’ is another good metaphor. In this case, the ‘Zero’ exploded, but it just bounced off the hull of the battleship that it hit.

      Oh, the humanity!

      Enjoy the show.

    […] Le·gal In·sur·rec·tion: Carbonite’s Saturday Night Massacre […]


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