Last month, I introduced a new weekly series, the "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the Worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the t op -- and with leaders like these on your side, sometimes you don't need enemies!
This week I want to highlight the suddenly popular business-to-business software firm BroadVision (NAS: BVSN) and its CEO Pehong Chen, as I wag my finger at Wall Street bad boy Jonathan Lebed.
The dunce cap
Don't look now, shareholders, but your stock looks like it has the potential to wind up on the wrong side of 60 Minutes if this keeps up.
To say that BroadVision shares have been taken for a wild ride since the beginning of the year would be a gross understatement. Shares began the year around $11, traded as high as $44.75, fell back to $20, and ended yesterday back above $31. No, this isn't 1999 all over again, but if you looked at the culprit behind the move, you'd certainly think so.
It took some digging, but news surfaced as early as two weeks ago that Lebed, the famous penny-stock pump-and-dump promoter who at age 15 was forced to settle with the SEC for hyping stock prices, was promoting BroadVision as his top pick of 2012. The move by Lebed really isn't surprising, since BroadVision has an extremely low float of just 4.5 million shares, which allows for easier manipulation of its stock price. Apparently aging 12 years really hasn't done much to change Lebed's approach to stock valuation.
A quick rundown of BroadVision's past performance is enough to make any sane individual run in the other direction. Revenue has fallen for an incredible 11 consecutive years, from $416 million in 2000 to just $17.6 million in 2011. Many will point to BroadVision's $54.4 million in cash as the reason to buy, but I'd remind you that an erratic history of losses is going to make quick work of that cash balance, which is down $6.4 million year over year.
The real reason CEO Chen earned the gaffe award this week relates to a statement he made during the company's fourth-quarter report on Jan. 26:
"The Company noted that, during the past few weeks, there has been an unusually large amount of trading activity and price movement in its stock. The Company is not aware of any corporate developments that it believes would explain this unusual activity. ... Looking ahead at 2012, we will continue to execute our two-prong go-to-market strategy of focusing on channel partners via our Clearvale PaasPort program and on driving adoption via our Clearvale Social Enterprise Transformation (SET) program."
No corporate developments and a plan to stick to its corporate strategy ... yeah, that's worked really well for investors over the past decade, hasn't it?
To the corner, both of you
With the company's stock down 98% in the past 10 years, I think the worst thing CEO Chen can do is stick to its business plan, because it's clearly not working! It's also hilarious and sad that BroadVision was either unable to deduce the reason for its stock move or is unwilling to refute Lebed's far-fetched claims -- one of which is that BroadVision could have possible Facebook tie-ins. BroadVision is in survival mode -- it's as simple as that -- and neither Chen nor Lebed, or even the two added together, are even within arm's reach of being in touch with reality.
Relative to 25 industry peers, BroadVision is only one of two companies to show compounded annual revenue declines over the past five years. VeriSign (NAS: VRSN) is the other, but it also sold off its Authentication Services division last year, so direct comparisons are tough to make. Most industry peers, like Nuance Communications (NAS: NUAN) , have managed to grow revenue consistently. In Nuance's case, it has a voice-recognition supplier partnership with Apple to thank for its 28% compounded annual growth over the past five years. In short, BroadVision's CEO and Lebed have completely put the stock off limits, as far as I'm concerned.
Do you have a CEO you'd like to nominate for this dubious weekly-gaffe honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.
And if you'd like a surefire way to avoid investing in companies with questionable leadership practices, I invite you to download a copy of our latest special report, "11 Rock-Solid Dividend Stocks." This report contains a wide-array of companies and sectors that are likely to keep your best interests in mind regardless of whether the market is up or down. Best of all, it's completely free for a limited time, so don't miss out!
At the time thisarticle was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at dubious CEO antics. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong. The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and Nuance Communications, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policythat never wears a dunce cap.
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