Intangible shit! Do you think it smells like tangible turd?
Chris Byron says they stink like human feces....
>>>>>>>>>>>>>>
Don’t Be Like Mike: Ex-CBS C.E.O. Jordan Hits Dot-Com Dumper
by Christopher Byron
Bloomberg News
Seems that life is turning into hard cheese for one of our all-time heroes here at Curmudgeonly Arms: Michael ("Hot Air") Jordan (not the basketball one, the other one.)
First he gets aced out of his job at CBS Corporation, the television and radio broadcaster, by another Curmudgeonly Arms grandee: Mel ("Mad Mel") Karmazin. Then he skulks off to Texas and takes over some New Economy dot-com that promptly goes from $52 to $2 under his steady hand. And now he’s turning up in the press joking that life just ain’t worth living when you can’t fly around in a private Gulfstream anymore. Don’t you hate it when that happens?
We’ll get into the particulars of what e-Jordan’s latest excellent adventure is all about in a minute. But first an update on how things have been going at CBS ever since Mad Mel showed him to the street.
In the world as it is understood on Wall Street, CBS in fact no longer exists, having been taken over just about six months ago by yet a third Curmudgeonly Arms superhero: Sumner Redstone, who one way or another owns and controls Viacom Inc., the media company that owns Paramount Studios, Simon & Schuster publishing, and God knows what else.
Well, to begin at the beginning--which is where you have to in such matters--what happened was this: Ever since God decided to let there be light, William Paley had run CBS. Then, in the ripeness of his passing years, Paley sold out to Laurence Tisch, who himself grew ripe and sold out to Mr. Jordan.
Hot Air--a classic piece of business-world performance art if there ever was one--had himself begun adult life in the potato-chip business. Thereafter, he shucked and jived his way up the Wall Street food chain until, by the mid-1990’s, he found himself presiding over the collapse of Westinghouse Electric Corporation. It was at that point that he sniffed out Mr. Tisch’s apparent interest in dumping CBS, and thereupon devised a scheme to merge Westinghouse and CBS, and then dump the Westinghouse business onto anyone who would take it, thereby reconstituting himself as the head of a media empire instead of a refrigerator and steam-turbine business.
This all would have worked out great for Hot Air except that, in the summer of 1996, with Westinghouse in the process of being transformed into CBS, our boy decided to make a bid for Infinity Broadcasting, and thereby wound up with the head of Infinity, Mad Mel, in his life as CBS’s biggest single shareholder.
In the two years that followed, Mad Mel just bided his time in the slow lane, waiting for Hot Air to make the wrong turn that would send him into the guardrail. And Mel didn’t have long to wait, since by the start of 1998, Hot Air was swerving all over the road, with network advertising slipping from the pressures of cable TV and the Internet, which had begun taking big bites out of broadcast TV’s audience.
Then, in January of 1998, Hot Air put his pedal to the metal big time, and in so doing, sealed his fate. In an effort to bring back viewers, he inked a deal for CBS to pay an astounding $4 billion to acquire the broadcast rights to National Football League football for the next eight years--a deal that sent him careening right through the median divider, as Wall Street took one look at the numbers and concluded that CBS would never make a dime from the contract.
By October 1998, CBS’s stock price had fallen to a low of $18, from a high of almost $37 six months earlier, and Mad Mel, as the company’s largest shareholder, had all the ammunition he needed to orchestrate what looks to have been the boardroom putsch that handed Hot Air his hat while handing Mel himself the job as CBS’s chief executive.
Not long afterward, Mel sold CBS to Sumner Redstone, and the Tiffany Network simply disappeared into the Byzantine financials of Viacom. Meanwhile, Viacom itself has fallen by 25 percent since its high of $74.63 on Aug. 4 and is now selling at about $56 a share, or close to where it stood when Mel sold out.
As for Hot Air, well, he took a $6 million "don’t let the door hit you on your way out" payment, along with some 2.8 million shares of CBS he already held (value at the time: $100 million, give or take), and went quietly into the night … only to resurface in Texas, where we find him now, heading up (of all things) a dot-com operation that, like many others, looks on the verge of going toes-up.
One good way to tell when Wall Street interest in a sector has about peaked is when failed chief executives from other businesses start piling into the game; witness the multitudes of castoffs from network television who resurfaced in cable TV just before the industry went into a nearly decade-long decline at the start of the 1980’s.
Hot Air’s reappearance at the head of a Dallas outfit calling itself Luminant Worldwide Corporation is in that tradition: that of a man with a wildly random résumé ranging across the snack foods, management consulting, and industrial equipment businesses, hoping to restart his career late in life by heading up a dot-com consulting company … a business in which even the old-timers wear ponytails.
What exactly Luminant does is hard to nail down. In its latest quarterly financial report to the Securities and Exchange Commission, Luminant describes its business as being that of "providing electronic commerce professional services to Global 1000 [sic] companies, Internet-based companies, and other organizations."
The company went public in September of 1999 at $18 a share, claiming in its offering prospectus that it possessed "more than 100 clients diversified across many industries, including technology, financial, retailing, media and communications." That’s interesting because, in its latest quarterly financial filing, the company states that "prior to September 1999," Luminant "did not conduct any material operations." I am sure I do not know how both those sentences can be true, but certainly they must be or else they would not be issuing forth from the e-desk of Hot Air (would they?).
In fact, of the roughly $84 million in net proceeds raised by Deutsche Banc Alex. Brown in the initial public offering, some $60 million was already earmarked so that Hot Air could pay for eight Internet companies that were waiting to be bought out. As a result of these acquisitions, Luminant as of June 30 shows balance-sheet cash of only $8.9 million left from the I.P.O., with a stupefying $281 million of essentially worthless goodwill in its place as the company’s only significant asset.
The balance sheet itself is amazing. Though the company claims 950 employees, with offices in New York, Dallas and a number of other cities, the June 30 balance sheet shows total property and equipment of less than $14 million,which would seem to suggest (if you want to be really twisted regarding the math involved) that at least a few of those 950 employees may either be home-office shut-ins or come to the office and have to work standing up (note to the reader: this is an e-joke)--especially when you consider that close to $10 million of that property and equipment consists of capital expenditures to fancify the company’s showcase offices in Dallas and New York. Take the goodwill out of the picture, and on a balance-sheet basis, the entire company looks to be worth not much more than its desks, chairs and computers.
The revenue picture is not a whole lot better. In the three months ended June 30, Luminant reported $40.1 million of revenue. Once you take out operating costs alone, the company showed net quarterly operating income of $1.88 million. But that’s before charging off more than $31 million in worthless goodwill.
With a cash-flow burn-rate of somewhere around $500,000 per quarter, Luminant has four and a half years to go before it’s stone-cold broke. But the company is subject to debt covenants that require it to maintain a cash balance of at least $10 million at all times, meaning that as of June 30, the company was in default already.
Last month the company announced that it had raised $17 million in a convertible debt deal, but simple arithmetic says they really have spendable cash of no more than about $15 million, and a lot of that could disappear quickly if they have to start paying their employees with more cash instead of partly with stock. Luminant shares have traded as high as $52 (last November); now they are selling for about $1.75. Tough noogies for Hot Air--the value of his own stake in the business has plunged right along with the stock price, falling from $6.8 million to $229,000 now.
Meanwhile, Luminant has lately been erupting with turnaround press releases, the most recent of which came on Oct. 17, when the company said it had axed 7 percent of its workforce as part of a "100-day" turnaround scheme … to which one is driven to ask:
If this could be done, then why wasn’t it done a long time ago?
Meanwhile, the world is now left with the spectacle of Hot Air--described in a recent press release as an "old economy turnaround pro"--sounding off at such forums as a recent Internet conference in New York on what the old pros and those young, pony-tailed whippersnappers have to learn from each other. Don’t you hate it when that e-happens?
It was, by the way, on this very occasion that Hot Air unloaded to a New York Times reporter on the essential injustice of not having a corporate jet to fly around in anymore. Oh, my. Mark my words: Before long, he’ll be turning up as the e-savior of Xerox Corporation.
You can reach me by e-mail at cbyron@optonline.net
Christopher Byron is a columnist for Bloomberg News.
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This column ran on page 1 in the 10/30/2000 edition of The New York Observer.
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