Tacos and Beer

I don’t drink that much beer, but I do enjoy an occasional light brew when tacos are present. It’s a very nice complement, kind of like mondel bread and coffee.
 
The media is shedding light on a different kind of complement these days. I am referring to blogs and PR. The Wall Street Journal recently devoted more than 20 inches of copy to a beer blog that Miller Brewing Co. recently launched.
 
The blog is written by a former Advertising Age staffer who channels his sudsy muse into an analysis of the beer industry. Of course, I suspect the blog doesn’t break news about the very brewer that pays for its existence. But to Miller’s credit, the company is completely transparent about its relationship with the blog.
 
As more companies attempt to ride the wave of blah-blah-blogging (ours included), I find Miller’s approach refreshing and full bodied. They are taking the foam out of foam. They are tapping the proverbial keg and making themselves look smart, as opposed to drunk and stupid.
 
So, here’s to Miller Brewing Co. for drumming up a savvy PR program. The question is whether a similar program could be applied to a publicly-traded company.
 
My advice is to proceed with caution. Don’t get me wrong, I think blogs can be valuable for public companies. However, public companies must not forget that they are blogging on behalf of shareholders, too.

 

Evan Pondel, Senior Associate, epondel@pondel.com
 
 

WPM

Executive bios are a dime a dozen. Like instant cake mix, you add a couple of ingredients, some water, and stir until the lumps (or time lapses between jobs) fade into a silky smooth consistency. But I recently stumbled upon an ingredient I haven’t seen for a long time called “WPM.”
 
No, I’m not talking about weapons of plausible meaningless. I’m talking about words per minute. When was the last time you saw a resume with “50+ WPM” listed as a special skill? I reckon it’s been a long time.
 
I’m pretty sure that most corporate executives can type at a clip of at least 50+ WPM. But does it really matter? Should the C-suite disclose special skills like WPM in their bios? Perhaps, but only if they’re typing at Guinness-book levels.
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I do think it’s OK to disclose interesting factoids.  For example, if a CEO plays cello, has a knack for fine art, or is a connoisseur of kishke, I say go ahead, add a little color to perk up those staid, old bios. But WPM is a different story. Unless you’re measuring the Width of your Profit Margins.

 

Evan Pondel, Senior Associate, epondel@pondel.com
 
 

To Buy or Not to Buy, That is the Question

At a time when many stocks are languishing (the Dow is down 3.7% over the last 12 months, the Nasdaq Composite is down 6.9% over the same period and the S&P 500 has lost 8.2%), many investors are asking companies to put their cash to work and initiate stock buyback programs.
 
Is a buyback a good idea?  In 2007, many companies thought so.  According to the Wall Street Journal, companies in the S&P 500 repurchased a record $589 billion of their own stock in 2007, up 36% from the prior year. 
 
Buybacks reduce a company’s number of shares outstanding, which in turn helps increase earnings per share.  Company’s stocks often advance on the news of a buy-back, but the effect is generally short-term.  According to a May 2007 article in Forbes, the increase in EPS as the result of a buyback gives only a temporary, one-time, artificial boost to earnings, while causing companies without the proper cash position to increase debt, leaving them vulnerable to a downturn in the economy.  Additionally, a study by Birinyi Associates and cited in the Forbes article showed that of 375 S&P 500 companies that bought back their shares in the six years through December 2006, the companies’ median stock return post-buyback was 56%, versus 72% at companies that did not repurchase their shares. The average return post-buyback was 102%, compared with 131% at companies that did not repurchase.
 
So what’s a company to do now that the economy has turned sour?  Buybacks fell 18% in the 2007 fourth quarter, the biggest quarter-to-quarter drop in more than five years, says the Journal, and given the current credit crunch and fall of the large financials, buybacks are unlikely to reverse this trend in the near-future.
 
If your company’s stock represents a great investment, you have idle cash in the bank and your business can self-fund its growth, a buyback can be a fantastic statement of your future confidence.  However, if you’re considering buying back stock to please a group of critical investors, think hard about whether the cash outlay will introduce unnecessary risk to the business.

 

Laurie Berman, Senior Vice President, lberman@pondel.com