Fluke Limbaugh fallout II: Carbonite still Kryptonite

CEO regrets anti-Limbaugh grandstanding as CARB continues to tank. Photo: AP

WASHINGTON, August 26, 2012 – Instant replay. As some of our readers may recall, we opened our March 13 column this way: “Taking political cheap shots at conservatives is fun for both the usual perps and the preening media talking heads who adore them. But in the dollars-and-cents world of business, stunting like this can and does backfire. Take for example last week’s Rush Limbaugh/Sandra Fluke free contraception kerfuffle. Its ultimate outcome failed to play out the way at least one of Rush’s former sponsors—Internet backup company Carbonite—had imagined it would.”

You remember this flap, right? The one that began with an allegedly innocent Georgetown University Law student, named Sandra Fluke, bellyaching about allegedly losing access to contraceptives due to alleged evildoings by anti-female Republicans and Conservatives? The grandstanding was later revealed to have been a put-up job by Obama campaign operatives looking to sidetrack the electorate from its attack on the Roman Catholic Church.

Unfortunately, the Democrats’ psy-ops unit ended up striking gold, big-time, as none other than Rush Limbaugh took the bait, launched an intemperate attack on the front woman of this key “war on women” dirty trick.

Rush Limbaugh is still on the air. Carbonite (CARB) continues to tank after CEO’s grandstanding. (Credit: AP.)

Bad move for the usually carefully calibrated El Rushbo. The Soros-funded, left-wing propaganda organization otherwise known as Media Matters, aided and abetted by the usual suspects at moveon.org, launched a pre-cooked attack against Limbaugh. Its aim was to rob the conservative talk show host of his advertising revenue via an aggressive move to intimidate his show’s advertisers into joining a boycott against Limbaugh.

Limbaugh apologized almost immediately even though he, more than anyone else, must have known that the left would never, under any circumstances, accept even the most abject apology from the right.

As we next observed, “after El Rushbo’s intemperate on-air characterization of Ms. Fluke, The Daily Caller reported that advertiser Carbonite’s CEO David Friend released a statement on his company’s website declaring that Carbonite had decided to ‘withdraw’ advertising from Rush Limbaugh’s radio show in the wake of his controversial remarks involving Georgetown Law student Sandra Fluke because it will ‘ultimately contribute to a more civilized public discourse.’”

Obviously, it never accomplished that. Lefty fanatics on the Internet and in the Twitterverse to this very day continue to flood online venues, crowing about “proof” that they’ve irrevocably destroyed the Limbaugh broadcasting empire. It’s not true, of course. But just Google this controversy, and you’ll have to go past about ten pages of entries to get through the anti-Limbaugh spam and acquire some actual facts that paint a different story.

But the primary point of our March 13 article was less about Limbaugh—who can take care of himself—and more about what seemed to be the compelling personal need of a fledgling Internet security corporation president to be seen as a crony of the left. We predicted that David Friend’s unnecessary grandstanding would cost him a considerable amount of business.

Lefty trolls immediately attacked our column with denunciation and invective via both commentary and email, the latter being particularly vile as we expected it would be. The consensus from the seminar spammers, particularly in the emails, seemed to be that Limbaugh was finished and Carbonite would flourish as a result of its grand gesture of feminist solidarity.

I promised to one of our commentators that I’d revisit this issue after Carbonite (CARB) reported its second quarter earnings—the second quarter being the first quarter of earnings to be reported after the company terminated its advertising on the Rush Limbaugh Show. Carbonite did indeed come out with its earnings and commentary during the first week of August, and guess what? They were lousy, causing the stock to sink even lower in the Wall Street polls. Who knew?

As we reported here in March, Carbonite had gone public in an IPO launched in August, 2011, “pricing its initial offering at $10 per share. This was somewhat lower than original market expectations, perhaps due in part to last summer’s market turmoil. Nonetheless, CARB was initially lofted by the usual high-tech, high beta thermals, quickly soaring to $21.10 before commencing its steady, ongoing dive into oblivion.”

We also noted that “[p]rior to the Limbaugh flap, CARB had already been retreating from its brief peak to a bid slightly lower than its IPO offering price. Since then, it’s continued its downward cascade, establishing a new bottom recently at $8.05 per share, roughly a 20% drop pre-Limbaugh/Fluke and a nearly 60% drop from its 2011 peak.”

This past Friday, we should note, CARB plummeted even lower, closing at $7.59 per share, continuing to suffer as a result of its poor second quarter earnings.

What is occasioning some delicious schadenfreude here is that Friend actually admitted he’d pulled a dumb move when the question came up on the company’s second quarter conference call. According to Newsbusters:

Carbonite (CARB) chart. Note its continuing decline, already in motion but generally accelerated by the Limbaugh attack. (Yahoo Business charts.)

“Key to the drop in Carbonite’s growth was its withdrawal from Limbaugh’s show. By withdrawing its ads under pressure from the far left, Carbonite disrupted its own business model of attracting many small-time accounts through mass advertising.”

Newbusters’ proof is actually in Friend’s own words, taken from the transcript of his second quarter conference call, obtained here via the Professor Jacobsen. Said Friend:

“Yeah, I’d say it turned out to be a bigger issue than we had anticipated.  Because you know at the time there was a lot of noise, I mean we had a huge spike in web traffic around that time just because of all the interest in the whole subject. And it took close to a month for that to sort of die down. And meanwhile our metrics were, we really couldn’t see what was going because there was so much noise around the website that we had no idea what the ultimate impact was going to be.  It turned out to be a bigger hole in our revenue than we had thought when we initially did this.”

Perhaps realizing what he’d just admitted, Friend quickly pivoted and tried to spin his way out of it with this illogical statement: 

“I don’t think there was any, I’m not regretful of the decision, I think things would have been worse had we not done that.” Of course. Such a statement is unintentionally hilarious, particularly after you’ve just confessed that your own political grandstanding had cost you significant revenue in a company that has yet to generate a profit.

Newsbuster duly noted that “The company tried to offset the publicity hit by expanding advertising to other radio hosts, not realizing that it would take months for it to reach the kind of audience they had already established via Limbaugh.”

To put things in clearer perspective, Newsbusters also observed that “Friend, who has donated nearly $7,000 to President Obama, did not pull his company’s ads from left-wing nutcase Ed Schultz’s radio show, despite Schultz having called fellow radio talker Laura Ingraham a “talk slut.”

This led Newsbusters’ writer Matthew Sheffield to conclude that, “His political double-standard notwithstanding, it is apparent that Friend was not providing proper guidance to investors during the Fluke controversy…. Friend never told investors that his company was unsure of the impact that its decision to withdraw from Limbaugh’s show would have.”

But there’s something else CEO Friend didn’t bother to tell his investors. According to Kevin “Coach” Collins, “On Friday [a couple of days after the conference call had been held] Friend and a former Carbonite executive revealed they have formed a new on-line file backup service company, one that will eventually be a competitor to Carbonite.” Funny this didn’t come up in the conference call. Too bad for those investors who are still hanging in there with their CARB shares, ignoring its CEO’s continuing bonehead, value-busting political malpractice.

As one of the Coach’s commentators—a current Carbonite customer—observed,now that I know that the Carbonite CEO is a George-Soros-influenced Liberal who believes in shutting down Rush Limbaugh and I guess anyone else who isn’t a “Progressive,” I will consider not renewing that Service when the time comes. Sounds like he is going to do what ALL Liberal groups do, just CHANGE the name to something else, and play-pretend it’s not the same Obama-loving entity. What is ACORN’s new name now?”

According to the Coach, “An examination of Carbonite’s Security and Exchange Commission filings and Rush’s listenership figures show that David Friend’s knee jerk liberal move has sent these two traveling in opposite directions. Limbaugh’s numbers are higher than ever and the per share price of Carbonite stock has fallen by 15%.”

So at this point in the time-space continuum, Limbaugh continues to flourish, his ratings continue to increase, and virtually all the stations carrying his show continue to carry it—which is actually how his broadcasting syndicate makes most of its money anyway, national advertisers notwithstanding. Meanwhile, Carbonite continues to flounder after its CEO’s colossal PR blunder. And Friend’s quiet effort to build another, apparently similar company on the side, speaks volumes to where Carbonite—the company and the stock—are now likely to end up.

So who made the bigger blunder? Just askin’.

“A Prudent man sees danger and takes refuge, but the simple keep going and suffer for it”. Proverbs 22:3.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently holds no position, long or short, in CARB, and has no intention of establishing any position in the stock.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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