Tag Archive: Enron


“Can’t decide whether you are a Democrat or a Republican …”

Bless these two students, who on separate occasions, refreshingly relayed their puzzlement to your author.

Almost DailyBrett does not believe that classrooms should ever be the venue for the indoctrination, let along the formation of young warriors in the fight between noble socialism and evil capitalism.

Gee … maybe … just maybe these students are smart enough to make up their own minds on these issues?

Even though long-time Almost DailyBrett readers and contemporaries know or at least suspect your author’s political predilection, it was rewarding to know at least some of my students weren’t so sure … and that is how it should be for all professors or instructors.

There seems to be a contagious disease among tenure-track or tenured academic types (e.g., professors and instructors) that university students are there to endure for hours on end their personal political pontifications and bloviations.

Is that why students are taking out loans averaging $30,000 each, waiting tables or asking mom and dad to dig deep … real deep … for their college education?

Don’t think so.

Buy Low, Sell High

As Almost DailyBrett fondly looks back to more than five years teaching public relations, integrated marketing, corporate communications and investor relations, one particular moment always brings back tears to the eyes.

More than 30 of my Central Washington University PR students chanted in unison … “Buy Low, Sell High!” … at my retirement party.

Upon receiving the Central Washington University Department of Communication Faculty Spotlight Award, they gathered around me for a group picture. Your author will always remember this moment.

Isn’t Buy Low and Sell High the essence of capitalism, particularly publicly traded corporate capitalism?

The answer is “yes.” Keep in mind that buying low and selling high is easier said than done. More importantly this phrase is the backbone to the practice of fiduciary responsibility on behalf of the 54 percent of Americans investing in stocks and stock-based mutual funds.

America’s investor class — planning for retirements, funding higher education for their children, opening up a new businesses — require accurate and complete communication about a company’s business plan, financials and simply … how does a corporation make money.

The highest expected communications professional compensation levels … usually in six figures … are directed to students adept at financial communications, who are studying at today’s schools of journalism and mass communication.

Almost DailyBrett believes wholeheartedly the purpose of universities/colleges is to prepare students to attain and sustain salaried professional positions with full benefits … and maybe even employee stock purchase plans (ESPP) and/or stock options.

Universities and colleges should be professional schools, providing students with lifelong learning skills and tools to succeed in our increasingly complex digital world … including beating artificial intelligence (AI).

If students wish to Occupy Wall Street that should be their choice, not their command.

By the way, how did that movement work out?

Students should always be fully aware of the imperfections of Capitalism. For example, watching The Smartest Men In The Room (Fortune’s Bethany McLean’s tome on the Enron bankruptcy) was required for each of your author’s Corporate Communications/Investor Relations classes.

In addition to the aforementioned Fiduciary Responsibility, a publicly traded company needs to complement this requirement with Corporate Social Responsibility (CSR). Besides doing well, a company should be mindful of doing good … including giving back to communities, protecting the environment … that make success, possible.

Certainly, students can be taught to live in tents, recite cumbersome theory or rail at the world back in their own bedrooms at mom and dad’s house.

They also can learn how to decipher an income statement, a balance sheet, a cash-flow statement and to understand the significance and formulas associated with market capitalization, earnings per share (EPS), and price/earnings (P/E) ratios and related multiples.

Looking back at your author’s professorship, there is no doubt about political disposition. There was also a comprehension that students are to be prepared for the professional world, and many of these graduates have done well, real well.

And if a couple of students or more, can’t tell whether Almost DailyBrett or any other professor/instructor, drifts left or right that’s the way … it should be.

 

 

 

“After taking your PR classes for the past three years, I feel confident to go out into the world of PR communications professionals. I will miss your enthusiasm in the classroom every day, and writing your two-page executive memos! I can’t thank you enough.” – Graduating Central Washington University Public Relations Student

“I have learned more from your classes than all the other classes I’ve taken combined, and that’s not just including lessons having to do with school. You taught me to take pride in my work, and to put in the effort to do my best. I honestly do not know if I would be where I am today, or have the future that I see myself having if it weren’t for you.” – Another Graduating Central Washington University Public Relations Student

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Trust me when I say not all student reviews are so positive.

When they are, you treasure each and every one.

Most of all you don’t take them for granted because there is always another opinion.

What we call the “Rule of One.” There is always at least one student, who quite frankly hates your guts and even loathes the very ground you walk on. Sigh.

And then there is the student, who can quote back what you said.

In this world of texting, Snapchatting, mobile devices and old-fashioned laptops, breaking through and instilling even ein bisschen wisdom seems almost miraculous.

A professor can prepare. She or he can spend hours researching. And devote even more time to tinkering with PowerPoints and video. Finally, the time comes to deliver the lecture, coax questions and then ask two key rhetorical questions:

  1. Was anyone listening?
  2. Does anyone care what you have to say?

One of my students provided me with a thank you card with valuable “Kevin Quotes” including a smiley face.graduation2016

Here they are with an Almost DailyBrett commentary under each one. They are offered in the exact order chosen by the student writer:

  • “Buy on rumor; sell on news” Almost DailyBrett: This ubiquitous expression in the late 1990s directly led to the Securities Exchange Commission (SEC) promulgating Reg. FD (Fair Disclosure). Corporate chieftains could no longer “whisper” meaningful tidbits to favored financial analysts (e.g., Goldman Sachs, JP Morgan, Fidelity, Morgan Stanley) allowing their clients to buy on the whispered rumor and then sell on the actual news.
  • “Your Brand Is In Play 24/7/365” Almost DailyBrett: Donald Trump in particular should pay close attention to this axiom. With instantaneous global communication through a few key strokes, digital communication can advance a personal or corporate with lightning speed, and destroy it just as quick.
  • “Digital Is Eternal” Almost DailyBrett: The complement to your brand being in play 24/7/365 is that all digital communications are permanent, enduring and can be resurrected by hiring managers, plaintiff attorneys and others who can hurt your reputation and/or career.justinesacco
  • “The Long and Short Program” Almost DailyBrett: The Olympics figure skating competition metaphor pertains to 10-K annual report letters and 10-Q quarterly earnings reports respectively. The former has more flexibility, while the latter must give precedence to GAAP (Generally Accepted Accounting Principles) and include revenues, gross margin percentage, net income, EPS, cash-on-hand and dividends (if applicable).
  • “Don’t Be a Google Glasshole” Almost DailyBrett: Guess, I really did say that …
  • “Buy Low; Sell High” Almost DailyBrett. Every one of our corporate communications/investor relations classes began with this chant. One must understand profit margins.
  • “Do Not Buy Stock in Enron” Almost DailyBrett: Don’t buy a stock just because it is going up. You need to understand a company’s raison d’ etat before you commit funds. There is a real difference between investing and gambling. Those who gambled on Enron lost everything.
  • “How Does a Company Make Money?” Almost DailyBrett: Bethany McLean of Fortune asked this basic question to Jeffrey Skilling, now imprisoned former Enron president. The Harvard-trained chief executive needed an accountant to answer this most basic of questions. McLean smelled a rat.
  • “Stocks Are Forward-Looking Indicators” Almost DailyBrett: As Wall Street wild man Jim Cramer of CNBC Mad Money fame always states” “I don’t care about a stock’s past, only its future.”edwards1
  • “Tell the Truth, Tell It All, Tell It Fast. Move On” Almost DailyBrett: These 11 words are the crux of effective crisis communications. Disclosure is inevitable. You can manage or be managed. Former presidential candidate John Edwards is the poster child for failing to follow this advice.
  • “Corporate America Needs Better PR” Almost DailyBrett: Amen

Appreciate the nice words. Even more: Thanks for listening and learning.

https://www.snapchat.com/

https://www.sec.gov/answers/regfd.htm

https://almostdailybrett.wordpress.com/2015/04/08/the-internet-where-fools-go-to-feel-important/

https://almostdailybrett.wordpress.com/2015/05/25/the-mother-of-all-weak-arguments/

 

 

“Bulls make money, bears make money, pigs get slaughtered.” – CNBC Mad Money host Jim Cramercramerpigs

Which decision requires more mental gymnastics?

When to buy?

When to sell?

The author of Almost DailyBrett humbly opines that when to sell is the tougher call.

Why?

There are two kinds of remorse: ‘Darn it the stock kept going up after I sold’; and the worse one, ‘I could have sold when the stock was up, but I was a pig … and oh fiddlesticks, now I am selling when the stock is down.’

Yep, there are a lot of potential could-of, would-of, should-of when it comes to selling.

So what should you do in the view of this humble retail investor (read: Charles Schwab account)?

Don’t Fall in Love

“…Sometimes the most obvious question really is the question. In Enron’s case: How do you make money? – Bethany McLean, Fortune Magazine

Preparing to teach Corporate Public Relations/Investor Relations to Central Washington University seniors and a few juniors starting this coming Wednesday, yours truly will pose the same simple question that Fortune’s McLean posed to Enron’s Jeffrey Skilling: “How do you (Enron) make money?”

Communicators need to have elevator pitches at their ready when asked this very same straightforward question about their own employer. The same is true for investors: How does a company make money? If the answer is clear; you like the company; you understand the business strategy; you have done your homework including consulting with your financial advisor, then it may be time to purchase shares of the company stock.bullandbear

This particular company’s stock is now part of your diversified portfolio, which in turn represents a portion of your retirement savings, a child’s college education, that dream vacation etc.

All is good, but when does it make sense to sell?

Buy and hold is a sure loser. Why? At some point, stocks will stop growing. Your invested company certainly will change, and not necessarily for the better. Circumstances may shift and a wave of caca may hit a company or an industry.

Remember the Internet bubble two decades ago? It burst.

Remember the housing bubble a decade ago. It burst.

Don’t fall in love with your securities. Follow your instinct and your plan. When it is time to pull the trigger and unload the stock, then sell the shares.

Have a Plan

“I love the company. I hate the stock.” – Jim Cramer on Tesla (NASDAQ: TSLA)

Okay, it’s time to confess: I fell in love with the Elon Musk Ion-Lithium Battery/Electric Car story at Tesla. Yes, I bought the stock and road it up and down (pardon the pun) and eventually got tired of the downward roller coaster.muskcar

Before I weighed selling, I considered at what average price point did I buy the stock and how low would it have to go before I would sell the stock? It hit that point, and it was time to sell.

Maybe at some future time, it will be low enough to once again purchase the stock, but only when one is convinced the company has a realistic plan for long-term profitability.

The same is true when selling a stock that is going up. Social media stock LinkedIn (NYSE: LNKD) recorded a blow-out quarter and the stock exceeded my prearranged sell price point. As Joseph Kennedy reportedly said: “Never apologize when taking a profit.”

And we should never worry about paying taxes on our profits; profits are taxable.

The point here is to follow your game plan and sell when it’s time. That’s a good thing, really.

What are some other signs that it is time to sell a stock?

  • The Music Stopped: Once upon a time, Intel (e.g., microprocessors), Microsoft (e.g., software operating systems) and Cisco (e.g., Internet routers and switches) were literally rocking and rolling. We couldn’t get enough of these stocks until … the music stopped. The PC is yesterday’s news. The 1990s came and went. It became time to sell and move on.
  • Commoditization: Just like Intel’s microprocessors became a commodity to serve as the brains of social, mobile and cloud, the same is true for all other semiconductors and those that build semiconductor manufacturing equipment and electronic design automation (EDA) software. Intel’s rumored takeover of Altera, similar to Avago’s absorption of LSI Corporation, are more signs of industry consolidation. If you have not sold already, it’s past time.
  • High Volatility: Sometimes an investor can benefit from a highly volatile stock. A perfect example is Salesforce.com (NYSE: CRM). Lost track of how many times, yours truly has bought, sold, bought, sold, bought … this stock. As long as the trend line is consistently up, it’s okay to let go of the shares now and then, only to become reacquainted at a later date.
  • New Management: Tim Cook is proving that there is life at Apple following the ultimate demise of Steve Jobs, but that is the exception not the rule. Companies change. Business plans shift. Circumstances change. Markets explode or implode. Almost DailyBrett has always followed the mantra that if the old boss or new boss is a bosshole, it’s time to pass on the stock or sell the stock. Translated: Stay away from Larry Ellison and Oracle (NASDAQ: ORCL)
  • No Balance Between Fiduciary and Corporate Social Responsibility: The best run publicly traded companies do NOT see “doing well” and “doing good” as being mutually exclusive. Publicly traded companies with their brands under a digital 21st. Century microscope must appreciate their respective brands are trading in the cloud 24/7/365. Worshipping exclusively at the altar of fiduciary responsibility will no longer cut it. If so, it’s time to sell.
  • Caca Happens: Planes land at the wrong airports (e.g., Southwest). Companies name shoes (e.g., Umbro) after the cyanide gas used in Nazi concentration camps. The CEO falls dead in the backseat of a car (e.g., Texas Instruments). Oil wells explode and gush on global video for three months (e.g., BP). Guano hits the fan. This is precisely the reason not to fall in love with any stock.

Sometimes, it is time to say goodbye.

Breaking up is hard to do.

http://www.thestreet.com/story/10292084/1/bulls-bears-make-money-pigs-get-slaughtered.html

http://en.wikipedia.org/wiki/Joseph_P._Kennedy,_Sr.

https://almostdailybrett.wordpress.com/2011/07/21/what-happens-when-the-music-stops/

https://almostdailybrett.wordpress.com/2013/10/06/how-does-a-company-make-money-2/

https://almostdailybrett.wordpress.com/2014/07/18/donate-to-united-way-or-invest-in-tesla/

http://finance.yahoo.com/video/cramers-stop-trading-tesla-motors-135400997.html

https://almostdailybrett.wordpress.com/2014/01/02/farewell-lsi-logic/

https://almostdailybrett.wordpress.com/2011/12/13/fiduciary-responsibility-vs-corporate-social-responsibility/

 

 

 

 

 

 

“Public scrutiny of business is constant and intense, and in the past decade, disillusionment has grown over excesses in executive pay, questionable accounting practices, drug recalls, and moral laxity on the part of corporations.” — Paul A. Argenti, Professor of Management and Corporate Communication at the Tuck School of Business at Dartmouth College

Should communication students be encouraged to work for publicly traded companies either from inside the corporation or providing external advice as a hired gun at public relations or advertising agency?

Or should these very same students be galvanized against the excesses of capitalism, demonstrating against Wall Street under the banner of social justice?

floodwallstreet

Are these questions mutually exclusive? Are you either for or against capitalism or for or against social justice?

These questions are magnified and intensified against the backdrop of underachieving employment, wage and real estate markets, while the NYSE and NASDAQ remain persistently bullish.

It appears this persistent economic scenario quite possibly will greet graduating students at least for the next academic year or two.

Examples of Corporate Excess

Finding examples of corporate excess is relatively easy.

Almost DailyBrett has joined the scads of other bloggers that take issue with seemingly brain-dead or just plain greedy antics by the leadership of large-cap publicly traded companies:

  • The author’s former company, LSI Logic, provided a seven-or-eight figure Golden Parachute to former CEO Abhi Talwalkar as he drove the 33-year-old specialty semiconductor designer into the abyss.
  • Spirit Airlines famously stiffed a decorated 76-year old, dying of cancer Marine veteran asking for a mere $197 refund, telling him literally to pound sand because he didn’t buy trip insurance. The carrier generously offered a partial credit, if he succumbed to the Grim Reaper before his flight.
  • October is right around the corner and that means (drum roll) even more corporate efforts to tie marketing bonanzas to Breast Cancer Awareness Month. Both 5-hour ENERGY and “Buckets for the Cure” KFC have become global leaders when it comes to “Pink Washing.”
  • Largest corporate bankruptcy-ever, Enron, is the poster-child when it comes to corporate greed and wrongdoing. And yet there were innocent people who were just trying to do their job, including telling the corporate story, until they realized they too were being misled.

Considering these examples and literally hundreds more, it is easy to give a broad-sweeping thumbs-down to multi-national corporations. At the same time, it should be remembered that these companies make the products and provide the services that we use on a daily basis (e.g., Apple = Macs, iPads, iPhones, iPods). They hire and provide benefits to literally tens of thousands (e.g., Boeing, 168,400; Starbucks, 160,000; Amazon, 88,400; Nordstrom, 58,140), Microsoft, 55,455). They provide wealth-accumulation prospects for the 54 percent of Americans who buy stocks, mutual funds and bonds (e.g., America’s investor class), including 73 percent of college graduates, and 83 percent of post-graduates.

Profit Motive

One of the major beefs espoused by the Occupy Wall Street movement three years ago, and the Flood Wall Street demonstrators earlier this month, is that publicly traded companies are focused on profits. These statements are accurate, but it should also be pointed out that companies have a legal (e.g., Employee Retirement Income Security Act or ERISA 1974) and moral (e.g., Fiduciary) obligation to produce the best bottom-line return possible for shareholders. Failure to do so invites almost certain civil and possible criminal litigation against the companies and potential dismissal of C-level executives.

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As a master’s degree candidate four years ago at the University of Oregon, the author of Almost DailyBrett noted the unrestrained celebration of competitive advantage and buy low/sell high mantra at the business school, and the unrestrained embrace of social justice including redistribution of income at the journalism school.

It seemed that one would build a statue of Adam Smith, while the other would throw flowers at the feet of Che Guevara. One would urge students to work and advise corporate America and the other would implore becoming an activist, marching, demonstrating and hopefully not being arrested.

Which is the better option for graduating students in making corporate America, particularly fallible publicly traded companies, more responsive to communities, the environment and let’s not forget, its own employees?

Corporate Social Responsibility

Corporate social responsibility or CSR should not be seen as an oxymoron. The concept of doing good (CSR) should not be viewed as contradictory to doing well (fiduciary responsibility). Graduates of communications, journalism and business schools can and should emphasize the value of doing BOTH to improve the bottom line for investors, including employees, while doing good deeds for communities, the planet and the rank-and-file employees.

Certainly the likes of Occupy Wall Street, which never found a unifying message, and Flood Wall Street, which tied capitalism to climate change, have their First Amendment Rights to (preferably) peacefully demonstrate. These NGOs need trained communicators and message developers.

Conversely, graduates could also choose to work internally to make companies better. They can stand for both fiduciary and corporate social responsibility. They can advocate against excessive C-level compensation. They can take stands against Pink Washing and Green Washing. They can ensure that the public is provided with good products at fair prices and everyone is treated with dignity and respect.

And heaven forbid, if another Enron is in the offing, they can courageouly tell the uncomfortable truth using their communication skills.

Is it better to be inside the corporation under the banner of capitalism or out in the streets (or in tents) calling for social justice?

There is more than one way to make corporate America better for everyone.

http://exec.tuck.dartmouth.edu/about-us/faculty/paul-argenti

http://www.huffingtonpost.com/2014/09/22/flood-wall-street-arrests_n_5865468.html

http://nypost.com/2014/09/22/climate-change-protesters-flood-wall-street/

https://almostdailybrett.wordpress.com/2014/01/02/farewell-lsi-logic/

https://almostdailybrett.wordpress.com/2012/05/06/lessons-from-the-spirit-airlines-pr-debacle/

https://almostdailybrett.wordpress.com/2012/05/02/evil-spirit-airlines/

https://almostdailybrett.wordpress.com/2013/10/10/5-hour-pink-washing/

https://almostdailybrett.wordpress.com/2014/05/22/shameless-5-hour-energy/

https://almostdailybrett.wordpress.com/2012/10/11/buckets-for-the-cure/

https://almostdailybrett.wordpress.com/2013/02/08/what-would-you-do-if-you-were-enrons-pr-chief/

https://almostdailybrett.wordpress.com/2011/12/13/fiduciary-responsibility-vs-corporate-social-responsibility/

https://almostdailybrett.wordpress.com/2011/06/03/adam-smith-vs-che%e2%80%99-guevera/

 

 

“Sometimes the most obvious question is the question. In Enron’s case: How do you make money?” — Fortune Magazine Reporter Bethany McLean.

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The simple answer was Enron wasn’t making money; the company was losing money hand-over-fist.

Enron was hiding these massive losses from regulators, investors, suppliers, partners and most of all, its own massively investing-in-Enron-stock employees.

Still investors poured billions into Enron simply because the stock was going up big time. The majority had no idea about how Enron made money in its energy, bandwidth and weather (go figure) trading schemes and didn’t seem to care because the stock was skyrocketing. As Martha would say: “It (was) a good thing.” Yep, a good thing until the house of cards came tumbling down in a 2001 bankruptcy filing, crashing and burning.

What was that about how does a company makes money?

As we head into the next round of hysteria as yet a third social media provider goes IPO (Initial Public Offering), this one, Twitter, under the ticker, TWTR, one needs to contemplate Bethany McLean’s most obvious of all questions.

twitterjackdorsey

How does Twitter make money?

How does LinkedIn make money?

How does Facebook make money?

How does J.C. Penne’ make money? Hint: It doesn’t.

This simple question needs to be posed to and answered by all publicly traded companies, whether they play in the new economy or the old economy.

The need to quickly, credibility and confidently answer this question, preferably in a brief elevator pitch, solidifies the need for well-trained and highly skilled corporate public relations, investor relations, crisis communications, brand and reputation management practitioners.

Teaching upper-division public relations courses, I would flash images of corporate logos up on the screen and ask students how Company A or Company B makes money.

In our quick media world — whether by conventional or digital means — the millennial digital native generation, more than any other that preceded it, has been bombarded incessantly on all sides by brands.

After initial hesitations, the students were quickly and enthusiastically recalling what the brand means in term of how a company makes money, and even “positioning” companies in their respective market spaces (e.g., BMW vs. VW: Nordstrom vs. Macy’s; Southwest vs. United). Starbucks and McDonald’s both sell upscale coffee. They now both offer drive-through windows. They are the same. Right? Wrong.

As mentioned before in Almost DailyBrett, LinkedIn and Facebook are both social media outlets. To Wall Street they couldn’t be more different.

LinkedIn debuted at $45 in 2011 and now trades at $245.13.linkedin_logo_11

Facebook went public at $38 in 2012 and now trades at $51.01.

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LinkedIn has been able to easily answer the how it makes money question (e.g., monetizes social media) by pointing to “connections,” premium services, advertising and the fact that LinkedIn is the choice for recruiters, job hunters, network builders and those seeking business leads.

Facebook is finally starting to gain traction in the market after its disastrous NASDAQ IPO. The company has been plagued by how do “friends” correlate with the legal tender?

Will 140-character per tweet Twitter be the next LinkedIn, the next Facebook or just maybe the first Twitter in the eyes of Wall Street investors?

A CNBC report this week pointed to Twitter’s relationship with the hard-to-get National Football League and CBS in which video supplied by both will be available for tweets. Wall Street may very well see a ka-ching correlation with this deal.

The deal and others, plus the recently announced Twitter S-1 (e.g., company prospectus) may have a direct bearing on what will be the pricing and Wall Street response to the much-anticipated IPO.

As more companies pursue the IPO route, minus the ones that opt to rebuild in privacy (e.g., Dell), that means even more opportunities for skilled-and-trained corporate public relations, investor relations, crisis communications, brand-and-management protection pros.

Conservatively, there are more than 5,100 publicly traded companies on the two major exchanges, the NYSE Euronext and NASDAQ. There are thousands more on overseas exchange, such as Japan’s Nikkei, Hong Kong’s Hang Sang, Britain’s “Footsie” or FTSE, France’s CAC-40 and Germany’s DAX.

Each of these companies, most definitely those in America, has reporting requirements on an annualized and quarterly basis. The Securities Exchange Commission (SEC) mandates 10-Q quarterly earnings reports; 10-K annual reports to shareholders; 8-K unscheduled “material” information disclosure announcements; S-4 additional share purchases, an annual meeting with shareholders, and of course, an S-1 filing of a privately held company prospectus prior to an IPO.

All of these filings require on-target prose, delivered conventionally and digitally, employing text, audio and video. Who are these message builders? Who will train them? And where can they be found?

As long as a publicly traded company is in business, it must report. It must communicate. It has absolutely no choice.

Quite clearly, the demand for these highly skilled corporate PR and investor relations practitioners outstrips the supply. Maybe that’s why they are compensated at a PR segment high average of $117,233 annually.

Sounds like an upwards-to-the-right market for qualitative-and-quantitative PR/IR types.

Full-Disclosure Note: The editor of Almost DailyBrett at various times owned shares of both LinkedIn and Facebook, only to subsequently sell the stocks. He fully anticipates as a mere retail investor being a late arrival to the upcoming Twitter IPO, if only to follow TWTR on a daily basis…Thank God he never bought into Enron.

http://www.linkedin.com/today/post/article/20131003191330-270738-with-twitter-s-ipo-5-key-things-you-need-to-understand-about-the-social-ad-revolution

http://www.forbes.com/sites/tomiogeron/2013/10/03/twitter-reveals-long-awaited-ipo-plans-253m-revenue-in-first-half-of-2013/

http://dealbook.nytimes.com/2013/10/03/twitter-discloses-its-i-p-o-plans/?_r=0

“Fear of criminal prosecution trumps any fear of public humiliation.” – Mark Palmer, former Enron managing director of Corporate Communications

“The longer you indulge in the practice of maintaining a cosmetic shell, the harder it is to recover when the shell eventually cracks.” — Len Brooks, University of Toronto

“Thanks to the Enron implosion and the subsequent rash of accounting and corporate-governance scandals, the credibility of any corporation is no longer assumed. It must be earned.” – Matthew Boyle, Fortune Magazine

palmer

Growing up, I repeatedly followed the mantra that winners never quit, and quitters never win.

But mumsy always said: “If you are in a bad situation get out of it.”

These two adages seem to be in direct conflict with each other, which brings me to the question that I posed to my students this week: If you were Mark Palmer, the former Enron managing director of Corporate Communications, what would you have done?

Would you quit?

Would you try to stop the sinning?

Would you become a whistle-blower?

Would you continue to drink your own bath water?

The answers to these questions and many more are not easy, considering that the staggering tales of criminal intent of the Smartest Guys in the Room story did not become clear until it was too late…way too late

Securing Palmer’s six-figure job as the head of PR for Fortune’s Magazine’s Most Innovative Company — the darling of Wall Street’s financiers, analysts and investors — would have been universally seen as a coup.

Chairman Kenneth Lay, President Jeffrey Skilling and CFO Andrew Fastow were regarded as business rock stars. The company could do no wrong as the stock price continued to rise even after the Internet bubble burst.

Business Week, Fortune, Forbes, Wall Street Journal and other influential business pubs couldn’t say enough good things about the Holy Trinity, and Enron. Life was presumably good for Palmer and his team…until the nightmare unfolded.

As we all know a decade later, it was all a lie. For the longest time, the Enron PR team didn’t know it was telling a lie.

In the documentary, The Smartest Guys in the Room (a.k.a. Lay, Skilling, Fastow), Enron Energy Services public relations director Mark Eberts recalled repeatedly hearing internal rumbles that the company was not doing well. And then…magically every quarter just like clockwork the company always exceeded its quarterly projections…and the stock continued to rise.

When something is too good to be true, isn’t that usually the case?

The first shot across the bow came in the form of a call from Fortune reporter Bethany McLean in 2001, who merely asked how the company made its money. Sounds like a softball question, but it wasn’t for Enron. Skilling told McLean that he wasn’t an accountant. Why does one need an advanced accounting degree to answer the most simple of business strategy questions?

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The subsequent story wondering whether Enron (NYSE: ENE) was overvalued started the downward pressure on the stock. That would not be enough to cause an experienced PR team to panic.

Enron

However, when Skilling suddenly resigned on August 14, 2001 for “personal reasons” the alarm bells started going off. Did he want to spend more time with his neglected family?

These warning signals intensified when the following evening the PR team was waiting unusually long, until 2 am for management to produce the income statement, the balance sheet and the cash-flow statement that normally accompanies a SEC-required quarterly earnings release.

Enron’s Karen Denne remembered the scene all-too-well: “I remember at the time there were sections in the press release that didn’t make sense, that I had questions about,” she said.

When she asked the executives to provide more information, she was told that everything was fine and there was nothing to worry about. Ultimately, though, the sections that concerned her were “the very quotes and phrases” that drew the attention of the reporters at the Wall Street Journal, she said.

It all came to an end on Dec. 2, 2001, when the nation’s seventh largest corporation filed for Chapter 11 bankruptcy protection with $63.4 billion of assets on its balance sheet.

Lay was sentenced to 45 years in the slam (he died of a heart attack); Skilling, 24 years (currently serving his term in Colorado) and Fastow, 10 years (He served five years).

lay

For the public relations team, their shares in Enron were worthless. Thousands of Enron employees loaded up on the stock for their retirement, and for far too many ENE was their nest egg. The team members also carry the Enron imprimatur on their resumes.

For Palmer, he appears to be doing well according to LinkedIn as he is a Brunswick Group Partner in Dallas.  For Enron PR expert Karen Denne, she is the chief communications officer for the Broad Foundation in Los Angeles.

For each and every member of the Enron public relations team, Almost DailyBrett wishes them the best in their respective careers. One must wonder if they still wake up in the middle of the night thinking about the Smartest Guys in the Room.

http://www.savvypr.com/iabcethicscolumn3.html

http://www.bizjournals.com/houston/stories/2003/06/30/newscolumn5.html?page=all

http://annenberg.usc.edu/News%20and%20Events/News/111110Enron.aspx

Pounding PR Buzz Words to Death

To be successful in communications choreography you must be skillful in planning and implementing a multi-faceted communications campaign . . . A little ADD doesn’t hurt.

Included in this campaign is message development, formulation of timelines, preparation of deliverables, composing Q&As and briefing papers, crafting contributed articles, training spokespersons, pitching media and analysts, monitoring interviews, writing blogs, recording podcasts, twittering tweets, reviewing media reports and eventually accessing what went right and what went wrong.

As any communications professional knows there are always going to be challenges associated in choreographing a winning PR campaign from start to finish, namely because you are dealing at every turn with people…and people have issues and “concerns.” Keep in mind that Newton never would have found gravity, Edison would never have invented the light bulb, the Wright Brothers never would have learned to fly and Al Gore would have never invented the Internet, if they were overly concerned with “concerns.”

Having said all that, I do have a concern that must be addressed. Why do we insist upon hammering the same buzz words over and over again to the point that they have become cliché?

It has almost reached the point that if we do not use certain words in the presence of those who pay the bills (e.g. our clients) that we are not providing them with our best thinking . . .  But are we really providing them with our best thinking if we just merely recite the same PR-speak over and over again? It’s reminds one of  Bill Murray in Ground Hog Day or Yogi Berra when he said, “It’s like déjà vu all over again.”

groundhogday

So what are these offending buzz words that we as a public relations community are literally loving to death? Here is a sampling in alphabetical order. Please feel free to mentally add your favorites:

Brand: Probably the most tired word in the PR professional’s dictionary, particular those hailing from the integrated marketing side of the industry. They talk about “building brand,” “safeguarding brand,” “brand management,” “enhancing brand,” “establishing brand awareness” and on and on and on. It’s reached the point that corporate sales VPs are checking off how many times a marketer can repeat the same word. Maybe we should brand that?

Cloud: When Salesforce.com (NYSE: CRM) invented “cloud computing” allowing customers to download software capability off the web it was a novel idea and an alternative to the purchase-the-entire-package from Microsoft, Oracle, SAP, IBM…Now everyone in the overly hyped software space is embracing the cloud, even Microsoft is running ads for the “Most Comprehensive Solutions for the Cloud on Earth” or “Cloud Power.” But wait…SpotCloud, “The Cloud Capacity Clearinghouse & Marketplace” is offering to trade clouds, just like Enron endeavored to trade bandwidth and eventually, the weather.

CSR or Corporate Social Responsibility, which could very well be an oxymoron. PR agency executive types are fond of lecturing the captains of industry on how they need to build trust by doing good deeds. Here’s a hint as long as there is this thing called fiduciary responsibility, corporate chieftains are going to be more interested in delivering shareholder value in the form of rising top and bottom lines and expanding gross margin. Oh by the way, a large percentage of employees are shareholders as well.

organic

Organic. This is a counterculture word that has been successfully marketed to derive higher prices from essentially the same product. There are regular apples and “organic” apples. There are regular oranges and “organic” oranges. There are regular spears of broccoli and “organic” spears of broccoli. Guess which are more expensive?

Solutions. Probably the buzz word that raises my blood pressure the fastest. Please note the word has already been used in this blog in the Microsoft cloud ad…That’s right, Microsoft managed to incorporate “solutions” and “cloud” in the same tag line. Where is the creativity? At LSI Logic, one of our marketers breathlessly came into my domain with a proposed corporate tag line: “LSI Logic, The Solutions Company.” Ah…No!

Sustainable. Lately, I have been contemplating labeling myself as a “sustainable capitalist.” Yes, I am vitally interested in sustaining capitalism. This is one word that has already morphed into a cliché. It is probably the one and only word that has made more Eugene (and other “progressive” enclave) elitists more proud of themselves. They adore stating that they are dedicated to sustainable living including maintaining a sustainable garden with sustainable vegetables originating from sustainable seeds that came from…

Thinking Out of the Box. As General George S. Patton said, “If we are all thinking the same, then no one is thinking.” Different kinds of thinking is to be encouraged and celebrated, but using the same almost mundane phrase over and over and over again completely erodes its effectiveness. Come on Silicon Valley, let’s come up with a new “Thinking Out of the Box.”

Thought Leadership. Wonder how many PR agency execs have used the words, “brand,” “CSR,” “cloud” and “thought leadership” in the same meeting with company executives? Let’s see if we can put all of them into the same sentence. When it comes to run-on sentences, no one does them better than the PR industry.

(Turning on the projector to run the 64-graphic PowerPoint presentation): “Today we are thinking out of the box in leveraging a portfolio of organic, sustainable cloud computing solutions that enhance your company brand, while demonstrating thought leadership and exemplifying your dedication to corporate social responsibility.” Pass the popcorn please.

http://www.spotcloud.com/

http://www.microsoft.com/en-us/cloud/default.aspx#tab2-small

http://www.salesforce.com/

Ten years ago, a friend of mine was getting his knickers in a twist about a hugely successful, $101 billion energy-trading company from Houston, Texas that had just completed a takeover of his firm, a Pacific Northwest public utility.

He told me that these Texans were so friggin’ smart, in fact they were “The Smartest Guys in the Room” – I believe their names were Ken, Andrew, and Jeffrey – and that I needed to buy stock in their company pronto.

So I did some homework. And even more homework. And still some more homework…And I just couldn’t for the life of me figure out how this company made money. And the more I read, the more dazed and confused I became. Why would anyone pay gobs of money to this company to broker energy deals…sounds like a very expensive middle man?

Out of frustration because of my lack of business acumen, I didn’t invest a dime in this company. I think it was called…Enron (NYSE: ENE).

Which brings me to Somali Pirates and the question of whether there should be an IPO (Initial Public Offering) for their business?

somali

A cursory check on the CNBC website indicates that no NYSE-member company has the ticker symbol, PRT, or Pirate, and no NASDAQ-member has the ticker symbol, PIRS, for Pirates.

More importantly Somali Pirates has a “devastatingly effective business model,” according to the most recent edition of The Economist. The UN estimates that the annual cost of piracy lies somewhere between $5 billion and $7 billion (top line?). The Economist reported that Somali Pirate “earnings” (bottom line?) reached $238 million. To top it off, the pirates are now accepting ransom payments via electronic funds transfer.

“Great Investor” Peter Lynch has repeatedly stated that the difference between investing and gambling is that investors need to clearly understand a company’s business model and why they are buying shares. CNBC’s Jim “Mad Money” Cramer has repeatedly reminds his viewers that share prices are a leading indicator of the anticipated direction of a stock and that he is not interested in a stock’s past, only its future.

If you take both Lynch and Cramer at face value, and many other Wall Street talking heads, then you have to be excited about investing in Somali Pirates. We can all figure out how they make money (e.g. seize shipping, demand ransom, receive revenues either in cold, hard cash or via EFT). Got it. Wish that Enron was that clear…or maybe not.

Better yet, they are a minority-run-and-operated business. Do you think they would receive preferential treatment from the federal government?

What are the COGS (Cost of Goods Sold) on the financial statement for Somali Pirates? Mostly speed boats, AK-47s, rocket-propelled grenade launchers and scaling ladders. They have reduced these costs somewhat by using “mother ships,” often captured deep-sea fishing vessels that they use as floating bases for their fast skiffs. Even though there are no hard-and-fast COGS numbers, there is every indication that the gross margin for Somali Pirates is expanding, not contracting (WallStreetease…).

What about personnel costs? Somali Pirates hail from the ultimate low-cost state (or more accurately, no state), Somalia. They don’t need to outsource to India. Let’s see that means that we can enter almost zero next to the line on the financial statement for SG&A (selling, general and administrative), unless you consider demanding ransoms to be “selling.”

How about R&D? The response by naval forces in the region about the size of Western Europe poses a risk to the business model of Somali Pirates, forcing them to operate further and further away from Somalia. Obviously some more work needs to go into supply over such long distances. And apparently they have not been successful catching up to ships making 18 knots or more…Sounds like they need to invest in competitive research focused on speed-boat technology.

Okay, so now we should have an operating income figure. Which brings us to taxes? What taxes? How about GAAP reporting? What’s Generally Accepted Accounting Principles to a bunch of pirates?

And finally, what about the threats to the business model of Somali Pirates? And will they prefer, similar to Facebook, to remain private…at least for the time being? There is a very real possibility that there will never be an IPO for Somali Pirates.

Maybe Goldman Sachs will just set up a hedge fund and invite wealthy investors to take their own stakes in privately held Somali Pirates. Besides who needs the headaches associated with quarterly earnings reports, pre-announcements, chairman’s letters, annual meetings of shareholders, SEC enforcement and the prospect of corporate raiders?

Think of it this way, if Wall Street-types could embrace Enron with irrational exuberance, then what’s to stop them from investing in a bunch of pirates?

http://en.wikipedia.org/wiki/Enron:_The_Smartest_Guys_in_the_Room

http://www.investopedia.com/university/greatest/peterlynch.asp

http://www.cramers-mad-money.com/

http://www.economist.com/node/21015664

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