Better to have access to investor relations... or not?
I don't own any of this stock, nor do I even rate Nautilus in CAPS; however, I love this article by MarketWatch (quoted from a WSJ article). Pretty cool behind the scenes on why CAPS may be better at providing objective insights than Wall Street analysts. Main point can be summarized in the last paragraph of this article below:
Nautilus muscles out analyst
08:23 a.m. 07/16/2007 By Herb Greenberg Provided byCommentary: Says company hasn't talked him since 'sell' rating
(MarketWatch) -- Stock analysts have long been criticized for issuing very few "sell" recommendations on stocks they cover. If you want to know why they still often are reluctant to be publicly negative, spend a few minutes with Eric Wold, analyst at the San Francisco investment-banking boutique Merriman Curhan Ford & Co. His reward for slapping a sell rating on Nautilus Inc.?
He says the company won't return his phone calls anymore.It wasn't always that way at least not while he was an enthusiastic cheerleader for the Vancouver, Wash., company, best known for its Bowflex exercise machine."They haven't talked to me in over a year," says Wold, who in 2004 was ranked as the No. 2 restaurant-industry analyst by The Wall Street Journal. "They won't return my phone calls or e-mails." Over the past five quarters, he says, he has been allowed to ask a question just once on the quarterly conference calls executives hold with analysts to discuss results.
Their lack of response, he says, appears directly related to the increasingly critical nature of his reports, which culminated in June 2006 with his downgrade to a sell "on heightened concerns" over a variety of issues. That was one month after Wold wrote that he was "unconvinced" the company, which had a series of missteps and disappointments, "has turned the corner."
Wold began his coverage of Nautilus (NLS) in April 2002 with a "buy" recommendation. The stock a month later peaked at about $46. At the time, most of the company's products, especially Bowflex, were promoted in television infomercials and sold directly to consumers. Even as the stock was peaking, management began telling investors Bowflex is "a little harder to read on the demand side."Still, Wold remained a fan, even though the shares eventually lost more than half their value amid weakening sales and earnings growth.
Things started looking up in July 2003, when Gregg Hammann was hired as chief executive, succeeding longtime boss Brian Cook. Hammann, with a background that included stints at Procter & Gamble Co. (PG), Coca-Cola Co. (KO) and Levi Strauss & Co., shifted the company away from its direct-sales model to also selling products through retailers. On Jan. 30, 2004, as the stock showed signs of recovery, Wold wrote that, "with the hiring of Greg Hammann as CEO...and an enhanced focus on the retail channel ... we believe the company is setting the stage for improved sales trends" by year end.At first, Wold says, the retail strategy helped reinvigorate sales.
By early 2006, sales growth had started to stumble. Wold says it was then he realized the new strategy was "cannibalizing existing sales and shifting sales from high-margin channels to low-margin channels."As the quarters rolled on, and the company stopped responding to his inquiries, the tone of Wold's reports became more ominous. He red-flagged such things as undershooting on earnings forecasts, increased competition and retail checks that showed "Bowflex sales down to zero in some stores."
Two weeks ago, Tim Hawkins, president of the Nautilus Fitness Equipment Business, departed. That was a "significant blow to the company's ongoing turnaround efforts," Wold wrote.Ron Arp, Nautilus's senior vice president of corporate communications, says the analyst "is entitled to his opinion." Arp also says it is "not true" that the company won't talk to Wold. "We've assigned a person at an investor-relations firm to arrange or respond to any appointments or calls and to assure that multiple people can be on the line and there would be no questions about our accessibility." He adds that Wold "turned down an opportunity to spend some time with management in the first quarter to compare our points of view."
"That is hilarious," Wold responds. "I would jump at the chance to meet or speak with them, but they will never give me the chance." He says he did get that invitation, after he had briefly upgraded the stock to "neutral." After an earnings conference call the next month, he again chopped his rating to a sell. After that, he says, he asked the company's external investor-relations representative if the offer still stood. "He said they pulled the offer," Wold says. Nautilus's stock was about $18 at the time. As of 4 p.m. composite trading on the New York Stock Exchange Friday, the stock was at $12, up 17 cents, reflecting continued flabby performance.
In looking back, the lack of access forced Wold to rely only on publicly disclosed numbers and outside resources for his analysis, and in doing so he got it right. Maybe that is the moral of this story: Let the numbers do the talking, not the company.