Carbonite famously dropped Rush Limbaugh on a Saturday Night at the height of the Sandra Fluke controversy. Carbonite became the poster child for the Rush boycott movement organized by Media Matters, which coordinated the effort with so-called independent groups.
At the time I examined Carbonite’s SEC filings, and how Carbonite had built its business model based on high growth driven, in significant part, by the promotion of Carbonite by Limbaugh. I predicted that Carbonite had shot itself in the foot, and put political correctness before the interests of its shareholders.
Since that time the Stop Rush effort has imploded, with backstabbing and accusations among the participants. Limbaugh has had better numbers than ever, and the hype surrounding Mike Huckabee as a Limbaugh replacement has gone flat.
Yet what became of Carbonite?
On August 1 Carbonite released its 2d Quarter 2012 results, the first full quarter after dropping Limbaugh in March. The results shocked Wall Street, as Carbonite did not meet its growth targets, causing multiple analysts to drop the target price. The stock dropped 15% in a day. (h/t reader W)
Most important, in a conference call held on August 1, the CEO David Friend admitted that dropping Limbaugh damaged Carbonite’s growth, and is likely to do so for at least one or two more quarters.
The full audio is available here. The key passage is embedded below. (Transcription mine, official transcript not available yet)
(3:10) CEO Friend: “There were four factor that contributed to this slower growth. First, in March we stopped working with one of our top producing radio endorsers. While we recently contracted with three new radio personalities, it takes 3-6 months to ramp up new radio hosts so we probably won’t see the full effect of this for another quarter or two.”
(24:15) Q: “I guess I’m a little surprised that you were caught by surprise by the radio host change ’cause I know we’ve talked and I guess my impression was that it wouldn’t be that impactful but I guess it was quite impactful.
CEO Friend: “Yeah, I’d say it turned out to be a bigger issue than we had anticipated. Because you know at the time there was a lot of noise, I mean we had a huge spike in web traffic around that time just because of all the interest in the whole subject. And it took close to a month for that to sort of die down. And meanwhile our metrics were, we really couldn’t see what was going because there was so much noise around the website that we had no idea what the ultimate impact was going to be. It turned out to be a bigger hole in our revenue than we had thought when we initially did this. However, I don’t think there was any, I’m not regretful of the decision, I think things would have been worse had we not done that.
(added) The analyst asking the question indicates that Friend previously had indicated in private conversations that there would not be a substantial impact. This demonstrates how Friend misjudged the situation. Additionally, Friend says the “metrics” could not be known for a month after dropping Limbaugh and that Carbonite had no way of judging the impact. Yet I don’t recall any statements from Carbonite reflecting the disarray in its ability to measure its own business model.
The last statement by Friend, that the damage would have been worse had Carbonite not dropped Limbaugh is laughable. Friend has been caught doing serious damage to shareholders based on a political decision which was taken precipitously on a Saturday night. It’s too convenient now to say things would have been worse, when Friend completely misjudged the impact of dropping Limbaugh.
Update: Carbonite shareholders have another reason to worry. Friend has just started a potentialy competitive online storage company with a recently departed executive.
HuffPo picked up on this post, and emphasizes Friend’s claim that things would have been worse. Interesting that some HuffPo commenters are not buying that line.