Sunbeam’s Strange Saga

The Sunbeam saga (see my earlier entry on this subject) only gets stranger. Yesterday, news broke that the SEC was conducting an “informal” investigation into the possibility that the company’s accounting practices had violated securities regulations, which would be significantly more serious than the already-existing charges that Sunbeam had done everything it could to make its numbers look good in previous quarters. That story sent the stock tumbling to below $9 a share, which was almost a third lower than it had been when Chainsaw Al Dunlap took over at the company and an incredible one-sixth of the stock’s 52-week high. But then today, the bargain-hunters piled in and sent the stock up almost 30 percent.

It’s not exactly clear what it means for a federal agency to conduct an informal investigation. Does that mean SEC agents are going to check up on Sunbeam in their spare time? What is clear is that Al Dunlap took a mediocre company in a low-margin business and turned it into a devastated company that employs tens of thousands fewer people. Oddly, CNBC’s Joe Kernen–whose reports on stocks in the news are almost uniformly informative–yesterday described the stock’s tumble since Dunlap’s firing as evidence that Chainsaw wasn’t the real problem with the company. But all the news that has crushed the stock in the last two weeks is news about what Dunlap and his cronies did while they were at Sunbeam. No one but Dunlap is responsible for what happened.

The really interesting question is whether similar things would have happened to Scott Paper, Dunlap’s greatest turnaround success, had the company not been sold to Kimberly-Clark. Kimberly-Clark has had a great deal of trouble ingesting Scott Paper, and we’ve all assumed it was because of the inherent problems of meshing two different companies. But the Sunbeam affair makes it reasonable to wonder if Scott Paper, too, was pretty on the outside but falling apart internally.

… Apropos of nothing, I came across this curious item in an article about the FAA’s new head, Jane Garvey: “Garvey has teamed up with the [airline] industry to implement a new alarm system that will warn pilots if they’re about to fly into the side of a mountain.” Do you really want to fly with pilots who don’t know when they’re about to fly into a mountain? … The Indonesian state security force is named Intel. The company has yet to sue… . I’ll have something about the Microsoft decision tomorrow.