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Investors turn away with Six Flags flapping in wind

Forget Mr Six’s Pandemonium.
If you’re looking for a terrifying roller-coaster ride that will turn you green, just buy stock in the Six Flags theme park company instead.
Back in the late ’90s the shares rolled all the way up to $40. Click, click, click. And . . .
Aaaaaaaaaaaaaaargh!
Today: $5.83. It plunged another 23 percent on Friday.
And no wonder. Attendance is through the floor. The company says it may breach covenants with the lenders on its $2.1 billion in debt.
And it’s putting 6 of its 30 theme parks up for sale - though Six Flags New England out in Agawam will be unaffected.
It’s less than a year since new management came in to turn things around. Mark Shapiro took over as CEO.
He deep-sixed that creepy old mascot Mr Six.
And he set out a clear strategy: Kick out all the teenagers loitering around the theme parks all day smoking, and woo back families.
“We are driving out a certain segment of the teen population,” Shapiro explained last week. “Those that loiter, those that smoke, those that don’t spend money, those that drive up our security problems.”
Call it “Six Drags.”
Just one problem.
Turns out those were a bigger section of his customer base than he thought.
How big? Latest results: attendance through June 18 this year, across Six Flags’ 30 theme parks, is down nearly 13 percent.
That’s 1.3 million people.
Shapiro thinks the old experience was so bad that he is now talking of the need to “rebuild trust” with families.
As communications boss Wendy Goldberg admits, “when families traditionally came to Six Flags, they didn’t find a family-friendly atmosphere.”
Six out of six for candor. “The parks weren’t as clean as they could have been,” she continued, “there weren’t enough representatives, and they were not as helpful as they could have been.”
Ouch.
Only time is going to tell whether Shapiro can pull this roller-coaster out of its latest death plunge.
A lot depends on people like Mark Kane, the general manager at the New England park. If the company recovers, it’s going to be because he and his staff are making the experience that much better on the ground.
But the prospects aren’t as dismal as Wall Street may think.
Spending per customer is up 14 percent.
Goldberg insists the company faces no cash crunch and “absolutely” no threat of bankruptcy.
And with fuel prices high and many people still nervous about traveling abroad, it’s got to be a good time to market a local attraction.

- - - - -

There was more gloomy reading last week for Globe publisher Richard Gilman and president Mary Jacobus.
Parent company The New York Times Co. revealed its troubled New England Media division, which largely means the Globe, is actually poised to fall behind the Times’ local newspapers network in advertising revenue for the first time in history.
New England Media ad sales fell 6.9 percent in May to $33.6 million. Local papers: up 7.1 percent to $30.3 million.
Five years ago, the advertising sales of the Globe and the Worcester Telegram & Gazette beat that of the Tuscaloosa News, and the Times’ other local papers, by a 40 percent margin.

Money talks as top exec walks: Screw-ups pay off

Friday, June 23, 2006 - Updated: 10:31 AM EST

What’s the reward for failure in Waltham these days?
If you’re Jack Messman, who was ousted yesterday as boss of local software company Novell, it’s not too shabby.
Several million dollars, in fact.
Under his contract, Messman, who was kicked out by the board yesterday for poor performance, will get severance that starts at $1.9 million.
They will also pay him cash for 6.5 million share options, which had a value of $13.7 million at the end of the last fiscal year.
The windfall includes money for 2.4 million share options that he wasn’t allowed to exercise while he was running the company, but can cash in now that he’s leaving.
Not bad. Especially when you compare it to what the shareholders are getting.
Total company net income during Messman’s last 12 months in charge: $2.3 million.
It’s also a pretty good downside in a contract that might have yielded him a fortune if he had made the company a sparkling success.
The directors who suddenly kicked Messman out yesterday were only too happy to give him a fat $625,000 bonus last year for doing such a great job.
In their annual mailing to stockholders, they defended offering Messman bonuses that were way above average on the grounds that it “enables us to highly motivate Mr. Messman to achieve Novell’s key business initiatives.”
Boy, that worked well.
But when it comes to executives, the rule is: Heads they win, tails you lose.
It’s simply one sign of the troubling corporate governance at Novell, which tries to make money by selling open-source Linux software.
Linux is booming everywhere, but somehow Novell has missed out.
Look at the company’s stock price and you would have no idea that this company bet a few years ago on what has turned out to be the hottest area of the technology market.
If you had invested $1,000 in the company’s stock five years ago, around the time Messman took over, you’d have $1,300 today.
The same money invested in Novell’s chief Linux rival, Red Hat Inc., over the same period would be worth nearly $5,700.
It’s a lucky thing for Novell’s non-employee directors that they haven’t invested too much in the company’s stock.
New CEO Ronald Hovsepian tells the Herald he plans to stick to the same strategy. Shareholders’ biggest hope: that the execution will be a lot better.
The only problem? Hovsepian, as the chief operating officer, has been the guy in charge of that execution over the last few years.


- - - - -
If you think interest rates are high now, just wait six months. Lee Forker, the president of New England Research & Management, observes that the money markets are predicting another half-point rise in the Fed funds rate by Christmas.
That would take the rate, which was at 1 percent just a few years ago, to 5.5 percent.
Brokerage firm Barclays yesterday upped the ante, by predicting rates would go to 6 percent.
We’ll be counting the extra cost on everything from credit card bills to adjustable-rate mortgages.
ble in house prices and consumer debt, including the rise in ARMs, isn’t his fault. Nor is the rising inflation that makes higher rates necessary.
It was all created under his grossly over-rated predecessor, “Sir” Alan Greenspan.
Something noted here last fall, while the rest of the media were extravagantly singing Greenspan’s praises.

‘He’s away on safari’ - Oracle chief’s $115M never gets to Harvard

Maybe Harvard honchos should have spoken to Larry Ellison’s three ex-wives before taking one of the software tycoon’s promises at face value.
Instead the university has spent a year vainly trying to get the Silicon Valley billionaire to make good on his vow to donate $115 million to set up a new institute for global health.
Now it looks like plans for the “Ellison Institute of World Health” at Harvard, and its 130 jobs, are on hold indefinitely. Three people hired in top positions have actually been let go.


It was in March of last year that Harvard’s then-president Larry Summers, and the university’s Global Health Initiative chief Christopher Murray, persuaded Ellison, who has made $16 billion at software company Oracle, to make the donation.
The agreement came after 10 months of discussions.
No doubt the idea appealed to Ellison’s famous vanity as well as his better instincts. After all, the institute would bear his name. And Bill Gates, Ellison’s bete noire, already had his own world health charity.
Ellison promptly leaked news of his generosity - first to the San Francisco Chronicle and then, in more detail, to The Wall Street Journal.
Perhaps he was so excited about the prospects of helping the world’s poorest people that he just couldn’t keep it to himself.
But when Murray tried contacting Ellison’s office to get the check, the billionaire was suddenly, mysteriously, unavailable.
And so he remains. Twelve months later, and counting.
“I’m sorry, he’s away on safari,” an Ellison flack told Murray at one point.
Ellison and Oracle spokespeople did not return repeated calls yesterday seeking comment. Harvard says its last communication with Ellison was in November.
What’s going on?
It’s possible the mercurial Ellison, now 62, has forgotten, or lost track of, his pledge.
And you could argue that Harvard’s loss of Larry Summers, a formidable fund-raiser, hasn’t helped.
But it doesn’t really explain forgetting to mail a $115 million check.
Alternatively, some mischievous people might note that Ellison made his generous promise at a time when it might prove useful to him.
A year ago he was trying to settle a troublesome lawsuit. He was being sued for having sold $900 million worth of Oracle stock in early 2001, less than a month before news of a profits slump caused the price to collapse.
The tycoon was working on a settlement in which he would admit no wrongdoing, in return for giving a separate chunk of cash to charity.
Ellison was able to cite his promise to Harvard as evidence of his bona fides and generosity.
Is that far too cynical an explanation for Ellison’s behavior?
We’ll see. It depends upon whether the check is actually in the mail - or merely “in the mail.”

- - - - -
If we are going to make the Fluffernutter “the official state sandwich,” as state Rep. Kathi-Anne Reinstein (D-Revere) proposes, why don’t we charge Fluff’s manufacturers, Durkee-Mower Inc., of Lynn for the privilege?
We could have sponsorship,” jokes Reinstein. “And instead of the FleetCenter, we could have the Fluff Center.”
Ditto a proposal to make Necco candy wafers “the official state wafer.” A bill to that effect has been bogged down for two years. History shows a little “candy” can get things moving on Beacon Hill.

Gates may be falling to Buffett wealth level

Bill Gates’ decision to stand down from his day job at Microsoft is only half the story.
The deepening crisis in the company’s stock is also threatening to cost the tycoon his crown as the world’s richest man.
In fact, by my math, it may already have done so.
He is now barely level with Wall Street’s favorite curmudgeon, Warren Buffett.
It is less than 4 months since Forbes Magazine once again named Gates, 50, as the world’s richest in its authoritative annual rankings. They put his fortune at $50.0 billion.
Just over half of that was in Microsoft stock. Gates has been quietly, but steadily, reducing his holdings in the company for years.
However, soon after Forbes’ rankings hit the newsstands, Microsoft shares hit the skids as the company disappointed Wall Street and warned of leaner times to come.
The stock, $27 in early March, has fallen to just $22.55. It is flirting with levels not seen since 1998.
The latest plunge has wiped about $4.5 billion off Gates’ fortune. Exact numbers are hard to come by, because we don’t know what’s happened to the other half of his investments.
But unless they have moved dramatically, it would suggest he is down to about $45.5 billion.
Buffett?
Forbes had him at just $42 billion back in early March but shares in his enormous investment empire, Berkshire Hathaway, have risen sharply since.
With ‘A’ class shares in Berkshire now $92,600 each, Buffett’s stake is valued at $46 billion.
The two men, who are friends and occasional bridge partners, share certain characteristics.
Their fortunes are self-made. Neither leads a particularly lavish lifestyle. Buffett is especially frugal. They have invested small stakes in each other’s companies. Gates serves on Buffett’s board.
But while Gates made his legendary money from the 1990s technology mania, Buffett famously refused to invest in it.
Even at the height of the dotcom bubble, when Gates was theoretically worth a staggering $100 billion, Buffett warned that the IT industry was far too volatile to invest in and steered clear.
It was exactly the kind of prescience and wisdom that has allowed him to create such a vast fortune simply through investing.
Buffett’s company, Berkshire Hathaway, is effectively a closed-end investment fund and Buffett himself probably the most successful fund manager who ever lived.
Anyone who invested $10,000 in his original partnership and stuck with him is now worth more than $200 million.
Really.
I’m not so lucky, although in full disclosure I have been an investor in Berkshire Hathaway for just over a year.
As for Microsoft stock , even at these humbled levels opinion is divided. Hub fund manager Lee Forker, president of New England Research & Management, thinks the price is going to get worse before it gets any better. “I’m scared to death by the chart,” he said yesterday. “It looks like there is no end in sight.”
But Rich Cervone, co-manager of the Putnam Investors’ Fund, thinks the stock is already too cheap and is buying.
He likes the company’s core software business and huge cashflow. However he admits he is taking a long-term view, and that the short term could well be rocky.

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