Blockbuster CEO John Antioco and financier Carl Icahn, who is attempting to oust Antioco and nearly half the company board, traded accusations...
Blockbuster CEO John Antioco and financier Carl Icahn, who is attempting to oust Antioco and nearly half the company board, traded accusations of misleading investors after the movie-rental leader announced a $57.5 million first-quarter loss yesterday.
The testy exchange, during a company conference call with analysts, ended with Icahn being cut off in mid-sentence.
Shareholders are scheduled to vote next week on whether to replace three directors, including Antioco, who is also chairman of the board, with Icahn and his allies, who accuse the company of spending too much money.
For the January-March quarter, Blockbuster said it swung to a loss of 31 cents per share compared with a profit of $114.4 million, or 63 cents per share, a year earlier.
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Analysts surveyed by Thomson Financial had expected a loss of 28 cents per share. The company said analysts didn’t include money spent on stock compensation and a failed bid to buy movie-rental rival Hollywood Entertainment, and that it would have lost $42.7 million, or 23 cents per share.
Blockbuster eliminated most fees on overdue rentals Jan. 1 to quell consumers’ biggest complaint about the chain. State officials, however, complained that the company’s “No Late Fee” advertising campaign was deceptive because consumers can still be charged if they return a movie more than seven days late, and Blockbuster paid $630,000 in the quarter to settle those charges.
In a conference call with analysts, Antioco defended his decisions to forgo late-fee revenue and invest in an online-rental service as needed steps to compete against an earlier online service by Netflix . and against cheap DVDs sold at discount stores.
Antioco said Icahn, by criticizing the investment in online service, would starve the company in a declining market for rentals.
“Do you honestly believe that electing a divisive element will help move this company and your investment forward?” Antioco said. “Remember that for all his talk about helping Blockbuster, Mr. Icahn doesn’t know our business.”
That’s when Icahn phoned in. It is rare that shareholders are allowed to speak during such calls, but Icahn was able to ask Antioco if he would let all seven company directors stand for election next year — a move that would make it easier to overthrow the board.
“We want you accountable next year if your initiatives fail as they have in the past,” Icahn said.
Icahn criticized the company for failing to buy Hollywood or respond sooner to Netflix. He also asked Antioco to give up all bonuses. Last year, Antioco got a compensation deal potentially worth more than $50 million, mostly in stock — which Icahn called “egregious.”
Antioco said he had no control over board rules or bonuses. When Icahn persisted, he was cut off and dropped from the call.
It is likely that many shareholders who will vote next week heard the call. Michael Pachter, an analyst with Wedbush Morgan Securities, said Antioco’s scripted appeal to stay the course was more effective than Icahn’s comments, “but cutting Icahn off was bad form.”
“Most shareholders believe in what the company is doing, but they would welcome a little debate on the board,” said Pachter, who thinks the likely outcome next week is that Antioco will be re-elected but Icahn’s two running mates will also win.
Blockbuster shares fell 27 cents, or 2.6 percent, to close at $10.03 yesterday. They have traded between $6.50 and $16.60 over the past 52 weeks.
Strong razor sales give boost to profit
Gillette, the razor maker being acquired by Procter & Gamble, said first-quarter profit rose 19 percent as it sold more premium Mach3 razors and Duracell batteries.
Net income increased to $449 million, or 45 cents a share, from $376 million, or 37 cents, a year earlier, Gillette reported yesterday. Sales gained 17 percent to $2.61 billion, helped by a weak U.S. dollar and five additional days in this year’s first quarter compared with 2004.
Earnings exceeded the 43 cents average forecast of 14 analysts surveyed by Thomson Financial. The additional days in this year’s first quarter, which ended April 2 compared with March 27 in 2004, added about 4 percentage points to the sales gain, while foreign exchange gave a 3-point boost.
Shares of Gillette fell 43 cents to $52.42 yesterday. They’ve gained 26 percent in the past year.
Gillette has beat analysts’ average estimates in four of the past five quarters. Of 16 securities analysts who track Gillette, five rate it “buy,” eight “hold” and three say “sell.”
Operating costs cut, narrowing losses
MCI, which recently agreed to be acquired by Verizon and rejected a higher offer from Qwest, reported much smaller first-quarter losses yesterday, due to lower operating costs.
The long-distance phone company also backed its earlier revenue guidance for 2005, projecting an annual decrease of 10 to 14 percent.
Its shares rose 21 cents to close at $25.50 yesterday, below the price of at least $26 Verizon has agreed to pay.
The company reported it lost $2 million, or 1 cent per share, for the three months ended March 31 versus a loss of $388 million, or $1.19 per share, in the year-earlier quarter.
Losses from continuing operations totaled $91 million, or 28 cents per share, compared with $386 million, or $1.18 per share, in the 2004 period.
Compiled from The Associated Press and Bloomberg News