Post of the Day
May 21, 1998
From our AOL
Subject: re: Strip act: fyi
Congratulations Al Dunlap. You finally made the Daily Trouble Motley Fool Board. You finally have hit the bigtime. I remember writing on this Board starting in Fall 1996 about the fantasy, delusional mystery tour of Al Dunlap. Everyone laughed at my suggestion. Chainsaw just told Wall Street that Sunbeam was in the middle of an historical turnaround of unparalleled proportions Al was going to restructure Sunbeam into a revolutionary consumer products franchise. Remember the secret room which had patents to several $100 million kitchen appliance products. The revolutionary smart toaster.. the magical dripless iron, the irreplaceable therometer and the non-torch barbacue grill. Al would turn around Sunbeam in a year or the Company could not be saved! Al stated - by the time you finished reading his book the turnaround would be complete.. or so Al Dunlap preached.
|"Every Wall Street analyst who competed for Dunlap's praise had a Buy Recommendation on the stock even as stock reached $50/share. These are reputable firms including Goldman Sachs, Paine Webber, Merrill Lynch, Oppenheimer and Bear Stearns."|
And for awhile Wall Street listened and repeated every word Dunlap spewed as if it were gospal. Every Wall Street analyst who competed for Dunlap's praise had a Buy Recommendation on the stock even as stock reached $50/share. These are reputable firms including Goldman Sachs, Paine Webber, Merrill Lynch, Oppenheimer and Bear Stearns. Dunlap would lead the investor to the promised land. Sunbeam would be hit $2 billion in sales (a 25%/annum increase) by year 2000 and produce operating margins of 20%. Sunbeam deserved a earnings multiple twice the industry average.. Al could in one year exel in an industry with the llkes of Black & Decker, Braun and Phillips. Motley Fool posters on this Board mocked my every critical word concerning Dunlap's claims.
Note: I urge everyone to return to the archival files and read my comments regarding Sunbeam. Read on the posts. Listen to the arguments of the bears and the bulls. You will gain an appreciation for the art of shorting stock - of the independent research and personal fortitude necessary to withstand the momentum driven bulls. Sunbeam is a superb case for both shorts and longs to understand the inefficiency in the stock market - the divergence between "perceived value" and "fundamental value".
Sunbeam's stock demise is not a suprise. It was only timing. Dunlap made it very difficult for shorts and I suspect that most shorts will be more right in principle than in economics. Yet, patience certainly rewarded those investors who had the fortitude to wait out Dunlap's promotional offensive campaign. The fact remains hat Sunbeam never resembled the "New Sunbeam" that Dunlap promoted on paper Sunbeam is merely a low margin appliance manufacturer subject to the market forces that effect a mature industry with large retail customers.
|"So far, I am very unimpressed with both the results and his complete unwillingness to confess to his personal accountability for Sunbeam's underperforming business."|
The real issue today is what is left at Sunbeam. Al Dunlap is in a box saddled with over $2 billion in debt and 5 substandard product lines. The managerial team is defensive and without depth. That Dunlap keeps firing an executive with each bad report speaks to the corporate culture - rule by fear and tell the outside world nothing of the internal turmoil inside the company. Al has lost much credibility. Even Wall Street analysts suggest some skeptisim - but only privately for fear of public ridicule by Dunlap - or in worse - the loss of corporate finance fees. Dunlap is in unchartered waters. He has no chapter in his book for operating companies - especially block & tackle businesses like Sunbeam. Dunlap must operate a viable company with real assets and real products. Dunlap must manage logistics - that is the business. So far, I am very unimpressed with both the results and his complete unwillingness to confess to his personal accountability for Sunbeam's underperforming business. You can fire as many people as you want Al but someone still must operate Sunbeam for the foreseeable future. Al for the first time in his overhyped career is in a box with no exit strategy
The remains so many interesting angles to the Sunbeam story. The Coleman transaction. Micheal Price's role, the role of Coopers & Lybrand and its productive accounting,practices Dunlap's options, the rise and fall of Don Uzzi, the role of disclosure and information flow, the role of Wall Street analysts etc
I certainly look forward to results both professionally and economically. As I stated early on - it will take patience and fortitude but in the end the fundamental value of Sunbeam is $15/share
Good luck -
While no other competitor in the mature and fiercely competitive small appliance industry produced or predicated such prosperity.
I am so amused by the dramatic change of tone of the "crowd'" on the Sunbeam Board.