EightBlack.

Man, this can’t be a pleasant place to be right now.

News just out is that Richard Webb, the co-founder and CEO of the embattled digital group has just pulled the pin. So has the CFO, Ken McDonnell (more on this later).

The stock price today has taken a “wayne carey” of a belting. This morning, it fell to an all time low of just 26 cents, but has recovered somewhat later today. I think it’s around 45 cents now. More than 3.7 million shares have traded hands when a typical day for their stock is around the 40-50K mark in terms of volume. Sometimes higher.

The market is clearly not happy with their performance.

What I don’t get is the execution of their strategy. They’ve spent a boatload on their platform BLU, then built a sales team, then tried to sell it.

When I worked for BT (as in British Telecom), this is what they would do. The engineers would get drunk at the labs in Martlesham, think of something to build, spend copious amounts of real british money developing it and when it could withstand a nuclear blast, would reluctantly turn it over to the sales people to sell.

Or something like that.

Then when I worked across the pond at MCI (now Verizon Business) which was the telecom company previously known as “WorldCom”. Don’t get me started on the whole WorldCom saga. That crazed, bible-bashing psycho Bernie Ebbers has a lot to answer for….

Anyway.

The Yanks used to go out and sell something, come back to the office waving their arms, hugging each other and crying. Then the truth would come out and they’d sort of tell the engineers and marketers that they may have inadvertently sold a product that wasn’t yet built but could they have it by next Tuesday. Or something like this.

True cynics will say that BlueFreeway was nothing more than a stock market play. If it was (and is), then it’s going to be a long, long time before any significant shareholder heads off to a European car dealership with their chequebook in hand. I actually feel sorry for all those business owners who sold to BlueFreeway and took a lot of the proceeds in equity.

Greg Daniel, who is sort of the last man standing holding the wheel, said today in a statement released to the market.

“In preparing the December FY08 half year accounts and our FY08 second half forecasts, it became apparent to the board that the costs associated with building and servicing the blu portal, centralised sales force and 24/7 support, had grown substantially faster than we felt was sustainable in the short term, given the level of centralised sales,” said Daniel.

“We are still committed to further developing and selling the blu portal to global and domestic clients, however we will now do this from a sustainable cost base and in an evolutionary fashion.”

If the strategy is correct and the blu portal is they way to go, surely smart people like the management of BlueFreeway will have taken onboard the advice of every Venture Capitalist around which is “it always takes twice as long and costs twice us much”.

I don’t care what anyone says. Digital or physical space - same rule. Nothing happens without sales and this must come first. BlueFreeway should have worked this out and built the platform behind it. Not the other way round.

Daniel continued with comments relating to the costs with the development of the blu platform under Webb and said that the board had moved decisively “to reduce corporate overheads and refocus the business on the 25 portfolio companies, which are growing strongly”.

I’m not sure that eliminating a co-founder is the right signal to the market. There’s more to the story than that. And I’m sure Richard Webb has his own version of the facts. Same with the poor CFO. He’s watched the stock price plummet from $2.40 down today to 26 cents. He probably got sick and tired of everyone crawling up his bum with a toilet brush, including all his relatives who probably dumped a good chunk of their super into the stock (ok don’t sue me, I’m just making that up).

Bottom line is this. Something smells at the Digital Conglomerate. In the past 30 days, the stock price has imploded, David Smithers resigned (former Chairman PWC), one of the founders couldn’t take it anymore and quits, and the CFO departs citing “personal reasons”. No shit sherlock. How would you like to be that guy? I’d rather have a prostrate exam with a whipper snipper.

More importantly, the remaining management have to address not only a falling staff morale, but an angry group of investors, a concerned group of business owners who sold either half or all of their businesses to the “digital dream”‘ and above all, the entire BlueFreeway customer base who are reading all the coverage and wondering if their choice was the right one.

Me? My prediction is still the same. The joint wont be alive come this December. Not in its present format anyway.

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This entry was posted on Wednesday, January 30th, 2008 at 4:59 pm and is filed under Predictions.... You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.