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May 06, 2005

"Now be nice, Carl"

Yesterday's conference call for Blockbuster, Inc.'s CEO John Antioco to discuss the company's quarterly earnings turned out not to be the routine chat that usually occurs in such calls. Blockbuster investor Carl Icahn made sure of that.

Mr. Icahn and two entertainment industry veterans are opposing Mr. Antioco and two current directors in the company's upcoming annual meeting. Mr. Icahn is Blockbuster's biggest shareholder, with about 8.6% of Blockbuster's combined voting shares. He is also expected to receive support in his fight with Mr. Antioco from most of the hedge funds that own a big chunk of Blockbuster's stock.

So, this veteran warrior of seemingly countless corporate battles (here are a few previous posts on Mr. Icahn) surprised everyone on the call (via about 450 phone and Web connections) when his distinctive raspy-voice joined the question-and-answer session of the call, beginning with the following missile shot at Mr. Antioco:

"You have mischaracterized what I'm trying to achieve here," Mr. Icahn alleged regarding his recent move to gain control of the Blockbuster board. "We would want you accountable."

Mr. Icahn went on to characterize Mr. Antioco's $50 million bonus last year as "egregious" given Blockbuster's faltering business. Earlier, the company had announced a first-quarter loss of $57.5 million compared with year-earlier net income of about $115 million.

Well, if you want a fight, just mischaracterize a CEO's pay. The usually calm Mr. Antioco accused Mr. Icahn of making an "erroneous" statement about his pay and then said:

"I didn't get a $50 million bonus. I think you know that."

Blockbuster regulatory filings show that Mr. Antioco earned $7 million in cash and $26.7 million in restricted stock in addition to stock options worth potentially much more. Mr. Antioco then appealed to investors on the call:

"Do you honestly believe that electing a divisive element will help move the company and your investment forward?"

In addition to the foregoing, Mr. Icahn challenged Mr. Antioco to give up his entitlement to future bonuses in light of Blockbuster's financial problems and to put the entire board up for election next year rather than continuing the staggered current system under which two or three directors are nominated for election every year. Mr. Antioco shot back that such decisions were the preogative of the board.

At any rate, the unusual dust-up between the two rivals went on for six minutes with each man interrupting the other and ended only when Mr. Icahn was cut off in midsentence by the conference call operator, who declared the investor's comments were not "appropriate." The operator's cut-off came right before Mr. Icahn appeared ready to reveal details of an offer from a leveraged buyout firm to bid for Blockbuster. Mr. Antioco later told listeners on the call that the company had received no such offers. Being cut off in mid-sentence was "corporate democracy, Antioco-style," Mr. Icahn commented later.

No word yet on whether Blockbuster is selling tickets to its upcoming annual meeting.

Update: Charlie Quidnunc, a podcast-blogger in Mercer Island, Washington, actually listened in on the Blockbuster conference call and has this post and podcast on the call. Don't miss it. As Charlie notes, this was not your typical conference call for a publicly-traded company.

Posted by Tom at May 6, 2005 05:10 AM

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Posted by: Charlie Quidnunc at May 7, 2005 08:13 AM

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