I'm Not Making This Up

Some things you just cannot make up. My son, for example, always asks for plain on his toast because he doesn't like butter or jam.

"Make sure you put plain on it, Dad. I like it with the plain only," he says. But that's not half as incomprehensible as the things people in Corporate America say or do. Not even close.

Take ChoicePoint, for example. The Alpharetta, Ga.-based company made headlines in 2005 for having to admit it was conned into providing sensitive data on private individuals--mostly consumers--to crooks, one of whom, a Nigerian national living in the United States, pled guilty to conspiracy and grand-theft charges in December. ChoicePoint, No. 60 on the 2005 VARBusiness 500 ranking of the largest IT product and service providers in North America, took its lumps in the media and on Wall Street. Shares of its stock plummeted after word of the breach became public, and a humbled company essentially decided to exit the business of selling consumer data in March 2005.

But here's the part that is inexplicable. In a statement to the media, ChoicePoint CEO Derek Smith said, "These changes are a direct result of the recent fraud activity...and the response of consumers who have made it clear to us that they do not approve of sensitive personal data being used without a direct benefit to them."

Who knew consumers could be so prickly?

Who else? How about Unisys, another VARBusiness 500 company (No. 15). Things were going pretty well for Unisys in 2005--that is, until October, when the company announced it would miss targets for the third quarter. Shares plunged, and a reorg followed.

The following month, Unisys president and CEO Joseph McGrath said in a prepared statement that "Unisys is pursuing an aggressive series of actions to restructure its business model, focus on high-growth markets and reduce its cost structure. I believe the plan we have put in place will enable us to significantly enhance our profitability over the coming years."

Those words would have been more credible had he not sung a different tune just four months earlier. In the second quarter, McGrath said things were improving: "There were a number of positives in the [second] quarter. Our services business showed good revenue growth, driven by double-digit growth in our outsourcing business...Overall, our order picture continues to improve as customers respond favorably to our services, products and solutions."

Woops.

Words of praise and pride not only come back to irk, they can also look ahead, then haunt later. Take Lexmark. In his company's 2004 annual report, CEO Paul Curlander highlighted one of his company's strongest attributes--hardware revenue growth.

"One of the most important metrics for Lexmark," he said, "is our hardware-revenue growth because sales of hardware drive our future sales of supplies."

That boast came back to haunt Curlander when Lexmark's hardware sales stalled in the middle of last year, causing the company to blow its third quarter and sending shares to their lowest levels in five years.

As if that weren't bad enough, the company decided to buy back some of its shares. It repurchased roughly 4.4 million shares at an average price of $62.85 per share for a total of approximately $275 million during the third quarter of 2005. Just days after the quarter's close, the company's shares fell from more than $60 each to $39 and change. Had Lexmark been on top of its game, it could have saved itself a bundle.

Curlander has since said Lexmark has a strong balance sheet and good cash flow. Perhaps. But it still sounds to me like he ordered up a quarter with a little "plain on top."

T.C. DOYLE ([email protected]) is senior executive editor of VARBusiness magazine.