These three companies just didn't live up to Mr. Market's expectations last week. Whether there was a target set by the company's own management, by Wall Street analysts, or by the market at large, that miss can have serious consequences, and share prices took a serious slide as a result.
Sometimes, an earnings stumble is a signal to sell, but digging in the dirt is also a good way to find turnaround candidates while they're getting beaten down. Today, we'll look at a family matter, a credit issue, and a diversion tactic.
Not always simple, is it?
Let's kick things off with memory-module manufacturer STEC
Well, on Monday, the company's COO was elevated to president. While that in itself normally wouldn't raise any red flags, you could argue that the company is falling back into old and perhaps unhealthy patterns of operations.
You see, former president Mike Moshayedi left the company last month as it changed its name from Simpletech and span off the consumer-products division to a private-equity firm. That left older brother Manouch Moshayedi in the CEO and chairman seats, while youngest sibling Mark held the COO spot. So now, the top three executive spots are back in the hands of one family again.
Investment manager Lehman Brothers
There's nothing wrong with a heavily invested executive team, per se, but this is a bit of an extreme case. The three brothers own about 61% of company stock, according to the latest 10-Q report. When Mike left, investors might have thought the family would loosen its two-fisted grip on STEC a little bit, but they were then proven wrong. Are you comfortable with one family controlling every shareholder vote and manning every one of the major executive positions? On that note, we're moving on.
Somewhere over the rainbow
You know Spectrum Brands
This week, the deal brokers at Goldman Sachs
Look, over there! A dividend!
Finally, we get to a more traditional earnings miss. Computer-system builder Systemax
Say what? It's not such a big mystery, actually. While the top and bottom lines looked just fine, operating profits came in very weak, and an unusually small income-tax provision was the only thing saving net income from a freefall situation.
So gross margins are down because of massive product discounts, and the effect trickles down to the operating results. A British tax refund saves the day, but how do you keep skeptical investors from digging too deeply and getting turned off? Let's try a generous special dividend!
Yep, Systemax announced a $1.00 dividend per share, which comes out to about $34 million in payouts. That's three times the operating income for this quarter. I have to wonder whether this dividend is a wise use of company cash, or just a poorly staged distraction from the real story.
Some of these underperformers are victims of larger circumstances, while others might have only themselves to blame. It's up to you to decide which down-on-their-luck companies should be able to pull themselves up by the bootstraps, and which really are stuck in the mud. Come back next week, and we'll take a look at another batch of mishaps and disappointments. It'll be fun and educational.
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Fool contributor Anders Bylund is a shareholder and longtime customer of Bank of America, but he holds no other position in the companies discussed this week. He's got enough trouble on his own. The Fool has a disclosure policy, and you can see his current holdings for yourself.