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0 Smith Holds Martha, Sells Atkins [Special] February 6, 2004

David and Tom Gardner recently interviewed Starbucks' (Nasdaq: SBUX) CEO Orin Smith onThe Motley Fool Radio Show on NPR. Starbucks' stock has risen 60% over the last three years, a period in which the S&P 500 dropped 15%. This is the fifth of five parts. All previous parts are linked to the right.

TMF: Orin, please tell us what you consider to be your smartest and dumbest business decisions in your time as CEO of Starbucks.

Smith: I sold stock. (Laughs.)

TMF: I guess you are saying that is the dumbest, I'm hoping anyway. (Laughing.)

Smith: I think that probably, at least of late, the best decision I have made was to push into this license concept far more aggressively. These are areas where we can't own operator-owned stores and we made a push into that area about three years ago now, at a time when we had probably 150 of them. Today we have 1,500 and this last quarter they grew by 35% bottom line. So it has been a tremendous opportunity for us.

TMF: So for those who aren't quite clear on that, give me an example of what you mean there.

Smith: I mean like the kiosks you find in airports, in supermarkets, in Target(NYSE: TGT), sometimes in casinos. We don't have an opportunity to operate there. It is not our real estate and they won't lease it to us.

TMF: I didn't know Starbucks were in casinos, but I guess that is because I don't go into casinos. That is a fun idea.

Let's close with our game "Buy, Sell, or Hold." Orin Smith, we have played this before. I will be throwing out things happening in our world and ask you if they were stock, would you be buying, selling, or holding, and a sentence about why. Are you ready?

Smith: Sure.

TMF: Great. Let's start it off with, well the trial is underway. Buy, sell, or hold the future of the Martha Stewart brand?

Smith: That is a hold for me. I think there are just a lot of questions around where this is likely to head. None of the things that will sort out during this trial will be very positive for that, but people can be pretty forgiving sometimes and it has shown a lot of resilience so it could remain strong.

TMF: It generated some news a couple of weeks ago over how it was being interpreted. Buy, sell, or hold, if it were a stock, the future of the Atkins Diet?

Smith: That is a sell. I think that will turn out to be faddish. Clearly people have some success with that, but on balance I don't think that is a long-term solution either.

TMF: It is all the rage the last few years. Trump is doing it now. Southwest Airlines(NYSE: LUV) is doing it. Buy, sell, or hold the likelihood that we might see a Starbucks-based reality TV show someday.

Smith: Sell. (Laughs.)

TMF: Would you like to elaborate any more or is that a...

Smith: You know, I just can't see us in that kind of fabricated environment.

TMF: (Laughing.) It's not reality you mean?

Smith: (Laughing.) No, it is not. Maybe we take ourselves too seriously sometimes, but I think that is about where I am.

TMF: OK, so no TV cameras in Orin Smith's house, for example.

Smith: I don't think so.

TMF: Finally, I suspect you saw his post-Iowa caucus speech. Buy, sell, or hold the need for Howard Dean maybe to switch to decaf?

Smith: That is a buy. (Laughs.)

TMF: Orin Smith is the president and CEO of Starbucks. Orin, thanks for joining us, and we wish you continued success.

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