Fluke Limbaugh fallout: Carbonite now Kryptonite for investors
Photo: AP
WASHINGTON, March 13, 2012 – Taking political cheap shots at conservatives is fun for both the usual perps and the preening media talking heads that 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. It’s ultimate outcome failed to play out the way at least one of Rush’s former sponsors—Internet backup/security company Carbonite—had imagined it would.
Last week, after El Rushbo’s intemperate on-air characterization of Ms. Fluke, The Daily Callerreported 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.’”
Rush Limbaugh withstands the latest attack. (Credit: AP.)
Mr. Friend’s ostensibly bold gesture was a big hit with the moveon.org aficionados who’d been flooding the internet and the Twitterverse with demands that advertisers dump Mr. Limbaugh, as a way of eliminating his long-running, highly influential show from the radio airwaves.
Legal Insurrection’s William Jacobson wryly observed, “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.”
Mr. Friend also let the Maharushi have it via Facebook (hat tip Riehl World View):
“No one with daughters the age of Sandra Fluke, and I have two, could possibly abide the insult and abuse heaped upon this courageous and well-intentioned young lady. Mr. Limbaugh, with his highly personal attacks on Miss Fluke, overstepped any reasonable bounds of decency.”
President Obama chimed in last week as well, seeking also to shelter his own two daughters from the evil machinations of Mr. Limbaugh’s Excellence In Broadcasting (EIB) network. Left unsaid by both the President and Mr. Friend (and their daughters by extension) was why both men were MIA last year when left-wing TV personality Bill Maher savaged Sarah Palin, deploying both the c--- word and the t--- word. Mr. Maher, no doubt, was operating within the “reasonable bounds of decency.” No problem for the daughters there.
In the current case, Mr. Friend misunderestimated the business consequences that can result from this kind of hypocritical political stunting. Carbonite’s stock (ticker symbol CARB) promptly tanked after he undertook his grand weekend proclamations.
Carbonite went public in an IPO last August, 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 thermals, quickly soaring to $21.10 before commencing its steady, ongoing dive into oblivion.
Prior to the Limbaugh flap, CARB had already retreated this year to slightly below its IPO offering price. Since then, it’s continued its downward cascade, closing today at $8.05 per share, roughly a 20% drop pre-Limbaugh/Fluke and a nearly 60% drop from its 2011 peak.
CARB drops like a stone after cutting its advertising ties to the Rush Limbaugh show. (Chart: March 6, 2012, Yahoo! business.)
The lesson here: any small-cap company needs to be wary of giving any opening to its competition. In Carbonite’s case, the competition is considerable.
According to Prof. Jacobson, Carbonite’s direct competition “includes Prosoftnet, CrashPlan, Mozy (a division of VMWare, VMW), Symantec's (SYMC) Norton Online Backup, McAfee Online Backup (a division of Intel, INTC), SOS Online Backup, and others.”
In other words, in the networking world, little Carbonite is already battling seriously deep-pocketed mid-to-large cap corporations for its share of the Internet backup business. Perhaps this is one reason why its shares have made little headway since its IPO. Friend’s boneheaded PR decision simply made matters worse for his hapless stockholders.
So why did Mr. Friend go off the deep end on this political issue? The answer, perhaps, lies in his longstanding liberal political leanings. Accuracy in Media (AIM) notes that Mr. Friend has a certain fondness for George Soros-funded entities when it comes to making political contributions.
In the past, according to AIM, Mr. Friend has donated generously to the Howard Dean, John Kerry, and Barack Obama presidential campaigns. He’s sent money to “America Coming Together,” moveon.org, and “Texans for Truth” as well. This latter entity, “a so-called 527 group funded by George Soros through Moveon.org, released a TV ad accusing Bush of evading his National Guard service. One day later,” AIM adds, “on September 8, [Dan] Rather and CBS[‘] 60 Minutes did their program based on the bogus National Guard documents.”
America’s so-called liberals are in reality armchair faux-socialists with Stalinist tendencies. Their instinctive approach toward individuals whose opinion they don’t like is to try to silence, either by agitating for an advertiser boycott (as in an earlier case involving Don Imus) or by smearing and slandering their target into oblivion, à la Sarah Palin.
When such an effort is mounted, the deviant voices in the blogosphere and the Twitter-verse go nuts, and the game is afoot. Monied types—ranging from movie stars to rock stars to the occasional wealthy CEO—then feel safe joining the scrum, chiming in with their insincere two cents’ worth to score publicity points. It’s all meant to draw admiring cooing and plaudits from the raging proletariat, insulating these hypocrites from being identified too closely with their obvious status as members of the wealthy 1%.
But this longstanding free ride may be coming to an end in 2012, at least when it comes to jeopardizing one company’s bottom line.
In the case of Carbonite, the company is inexorably losing more and more of the considerable revenue it once generated by advertising on the Rush Limbaugh show. Limbaugh supporters are canceling their Carbonite subscriptions as they “move on” to competitors’ Internet security products.
Back at the EIB ranch, Mr. Limbaugh is sitting pretty. He remains largely undamaged just a week after his final defeat was pronounced by the left. Prof. Jacobson notes that, ironically, fewer actual Limbaugh advertisers have left him than the moveon types have claimed.
With possibly one exception, all Mr. Limbaugh’s stations and his network have stuck with him. He continues to sign up new advertisers eager to reach his large, well-educated audience—an audience that’s more than happy to consider purchasing products and services he recommends.
As for Carbonite. It’s no longer on the Limbaugh advertiser list. Its stock and its stockholders are collectively getting a swirly. The left is fond of saying that all politics is personal. But for Carbonite, Mr. Friend's personal politics clearly haven’t proved to be very good for business.
Read more of Terry's news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington. For Terry's investing insights, visit his Communities column, The Prudent Man in Politics.