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May 6, 2005

"Now be nice, Carl"

carl_icahn.jpgYesterday'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 5:10 AM |


You can hear the Carl Icahn portion of the conference call, plus your post and some background on my podcast at http://ripnread.com.

Charlie Quidnunc

Posted by: Charlie Quidnunc at May 7, 2005 8:13 AM

I think the biggest problem for Blockbuster, frankly, is Netflix. Blockbuster failed to change with the times, continuing to charge exorbitant fees for their products, and when they did finally decide to change, rather than leapfrogging Netflix and coming out with something more impressive, they simply copied the Netflix approach, choosing to rely on the thin advantage that customers can visit Blockbuster stores and exchange movies without having to wait for the post. The problem is, this change came too late, and many had already developed a kind of brand loyalty to Netflix. Again, if Blockbuster is to recover, they will have to leapfrog rather than follow. Given this recent history, taking a risk seems unlikely, but there seem to be an awful lot of important frontiers being opened in mobile technology. As many reports have suggested lately, more people in China now access the internet via their cell phone than use a PC. Increasingly, market insiders are forecasting that the cell may ultimately become the one product that unites internet, camera, phone, watch, and email. Even YouTube has announced plans to introduce a new mobile friendly site. Why couldn’t Blockbuster begin work on a site that offers instant access to films via download, particularly to mobiles? It would require creating a program that would limit how many times a person could watch a video, but if the cable companies can do it (on-demand), why can’t the video store?

Posted by: Vacuum Cleaner Author Profile Page at May 31, 2007 10:21 PM

Must be nice to have an operator at your disposal – someone who is monitoring your calls and ready to intrude if things get too unruly. I could certainly use this kind of service when talking to my ex-wife. Or better yet, someone should market a device that plays a message when a salesman tries to call you at home: “I’m sorry, but your comments have been deemed inappropriate.”

Posted by: Vacuum Cleaner Author Profile Page at June 14, 2007 12:27 AM

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