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The Fluke / Limbaugh flap: When Carbonite became investor Kryptonite

Written By | Jan 25, 2019

Screen grab of image from Rush Limbaugh’s home page.

WASHINGTON.  Regular readers know that for years in these columns, I’ve recently criticized companies like Gillette whose CEOs or marketing chiefs embark on public virtue-signaling sprees. The current wave of corporate PC nonsense arguably started with the grandstanding exit of advertiser Carbonite from the popular Rush Limbaugh radio show. Since that day in 2012, ongoing, business-destroying virtue-signaling  nonsense has cost many of the companies involved in it — and their stockholders and employees — money, jobs, and prestige.

Simultaneously, they and their allies in the PC Police force  generally failed in their likely objective: inspiring boycotts of targeted companies and individuals. Historically, such nonsense tends to bring on conservative consumer boycotts of varying durability. Such companies have ranged from Carbonite to PayPal to Cracker Barrel, to Kellogg’s and others ad infinitum.

Which brings us to, this, the final article in our Gillette virtue-signaling series of articles. Earlier installments appear here, here and here.

The cautionary tale of Carbonite

The earliest offender that I can recall in this ongoing wave of virtue-signaling and public shaming was security company Carbonite (trading symbol: CARB). I strongly criticized the company back in March, 2012. That’s when its virtue-signaling CEO got on his soapbox to publicly pull his company’s ads from Rush Limbaugh’s popular talk radio show. The occasion? Limbaugh’s unusually harsh criticism of free birth-control pill poster-girl Sandra Fluke.

Dan Riehl, writing for Breitbart.com, cited my original article, which appeared in the Washington Times Communities section and ran with a lengthy excerpt from it.  Unfortunately, I can’t link to that piece anymore. The original went down the memory hole after CDN and the Times parted ways over a number of matters early in 2014. But I was able to unearth the article  courtesy of the invaluable Wayback Machine. Among other excerpts, Riehl highlighted the following paragraph.

“Since Carbonite CEO David Friend thought it wise to lecture existing and potential customers on his idea of a needed civility, the company’s stock has dropped 20%, according to Terry Ponick of the Washington Times, and now sits at 60% off a 2011 high mark in a difficult market…”

That kind of hit in a publicly traded stock is sometimes known as “the tale of the tape.”

Down Memory Lane

Let’s go back now to those thrilling days of yesteryear. That’s when I first exposed what Carbonite’s CEO was really up to in the Fluke / Limbaugh flap. The company’s influence helped set the current pattern for corporate disinformation campaigns and media boycotts. Similar astroturf campaigns from the left and its corporate shills have, to date, also ensnared a number of conservative Fox news analysts, most recently Sean Hannity and Laura Ingraham.

Here’s the article as it originally appeared, save for a few modern SEO touch-ups. We start with the original headline.

Fluke Limbaugh fallout turns Carbonite into Kryptonite for investors

WASHINGTON, March 13, 2012 – Taking political cheap shots at conservatives is fun for both the usual perps and the preening media talking heads that adore them. But in the dollars-and-cents world of business, political stunting can and does backfire. Take for example last week’s Rush Limbaugh / Sandra Fluke free contraception kerfuffle. Its ultimate outcome failed to play out the way at least one of Rush’s former sponsors—Internet backup/security company Carbonite—had imagined it would.

Last week, after El Rushbo’s intemperate on-air characterization of Ms. Fluke, The Daily Caller reported that [one of his advertisers,] Carbonite’s “CEO David Friend released a statement on his company’s website declaring that Carbonite had decided to ‘withdraw’ advertising from Rush Limbaugh’s radio show in the wake of his controversial remarks involving Georgetown Law student Sandra Fluke. [His alleged goal: to] ‘ultimately contribute to a more civilized public discourse.’”

Mr. Friend’s ostensibly bold gesture was a big hit with the moveon.org aficionados who’d been flooding the internet and the Twitterverse with demands that advertisers dump Mr. Limbaugh. [Their goal was to defund and eliminate] his long-running, highly influential show from the radio airwaves.



Legal Insurrection’s William Jacobson wryly observed, “There are few things that cannot wait for Monday morning, yet Carbonite issued its statement on a Saturday night, in what appears to be a matter of executives’ personal and political opinions outweighing shareholder interests.”

Obama joins the Carbonite attack

Mr. Friend also let the Maha-rushi have it via Facebook (hat tip Riehl World View):

“No one with daughters the age of Sandra Fluke, and I have two, could possibly abide the insult and abuse heaped upon this courageous and well-intentioned young lady. Mr. Limbaugh, with his highly personal attacks on Miss Fluke, overstepped any reasonable bounds of decency.”

President Obama chimed in last week as well, seeking also to shelter his own two daughters from the evil machinations of Mr. Limbaugh’s Excellence In Broadcasting (EIB) network. Left unsaid by both the President and Mr. Friend (and their daughters by extension) was why both men were MIA last year when left-wing TV personality Bill Maher savaged Sarah Palin, deploying both the c— word and the t— word. Mr. Maher, no doubt, was operating within the “reasonable bounds of decency.” No problem for the [Obama] daughters there.

In the current case, Mr. Friend misunderestimated the business consequences that can result from this kind of hypocritical political stunting. Carbonite’s stock (ticker symbol CARB) promptly tanked after he undertook his grand weekend proclamations.

The tale of the tape

Carbonite went public in an IPO last August, pricing its initial offering at $10 per share. This was somewhat lower than original market expectations, perhaps due in part to last summer’s market turmoil. Nonetheless, CARB was initially lofted by the usual high-tech thermals, quickly soaring to $21.10 before commencing its steady, ongoing dive into oblivion.

Prior to the Limbaugh flap, CARB had already retreated this year to slightly below its IPO offering price. Since then, it’s continued its downward cascade, closing today at $8.05 per share, roughly a 20% drop pre-Limbaugh / Fluke and a nearly 60% drop from its 2011 peak.

Carbonite

Carbonite. Clipped grafik, originally from Yahoo Finance.

[Note: Poor copy of original chart does illustrate stock’s precipitous drope: CARB drops like a stone after cutting its advertising ties to the Rush Limbaugh show. (Chart: March 6, 2012, Yahoo! business.)]

The lesson here: any small-cap company needs to be wary of [providing] any [exploitable] opening to its competition. In Carbonite’s case, the competition is considerable.

According to Prof. Jacobson, Carbonite’s direct competition “includes Prosoftnet, CrashPlan, Mozy (a division of VMWare, VMW), Symantec’s (SYMC) Norton Online Backup, McAfee Online Backup (a division of Intel, INTC), SOS Online Backup, and others.”

In other words, in the networking world, little Carbonite is already battling seriously deep-pocketed mid-to-large cap corporations for its share of the Internet backup business. Perhaps this is one reason why its shares have made little headway since its IPO. Friend’s boneheaded PR decision simply made matters worse for his hapless stockholders.

Why would any CEO jeopardize the company he runs?

So why did Mr. Friend go off the deep end on this political issue? The answer, perhaps, lies in his longstanding liberal political leanings. Accuracy in Media (AIM) notes that Mr. Friend has a certain fondness for George Soros-funded entities when it comes to making political contributions.

In the past, according to AIM, Mr. Friend has donated generously to the Howard Dean, John Kerry, and Barack Obama presidential campaigns. He’s sent money to “America Coming Together,” moveon.org, and “Texans for Truth” as well. This latter entity, “a so-called 527 group funded by George Soros through Moveon.org, released a TV ad accusing Bush of evading his National Guard service. One day later,” AIM adds, “on September 8, [Dan] Rather and CBS[‘] 60 Minutes did their program based on the bogus National Guard documents.”

Unleashing the never-censored Twitter Troll Armada

America’s so-called liberals are in reality armchair faux-socialists with Stalinist tendencies. Their instinctive approach toward individuals whose opinion they don’t like is to try to silence [them. They attempt to accomplish this] by agitating for an advertiser boycott (as in an earlier case involving Don Imus). [Alternatively, the attempt to do the deed] by smearing and slandering their target into oblivion. À la Sarah Palin.

When such an effort is mounted, the deviant voices in the blogosphere and the Twitter-verse go nuts, and the game is afoot. Monied types—ranging from movie stars to rock stars to the occasional wealthy CEO—then feel safe joining the scrum, chiming in with their insincere two cents’ worth to score publicity points. It’s all meant to draw admiring cooing and plaudits from the raging proletariat, insulating these hypocrites from being identified too closely with their obvious status as members of the wealthy 1%.

Carbonite discovers there’s a cost to politicizing your company

But this longstanding free ride may be coming to an end in 2012, at least when it comes to jeopardizing one company’s bottom line.

In the case of Carbonite, the company is inexorably losing more and more of the considerable revenue it once generated by advertising on the Rush Limbaugh show. Limbaugh supporters are canceling their Carbonite subscriptions as they “move on” to competitors’ Internet security products.

Back at the EIB ranch, Mr. Limbaugh is sitting pretty. He remains largely undamaged just a week after his final defeat was pronounced by the left. Prof. Jacobson notes that, ironically, fewer actual Limbaugh advertisers have left him than the moveon types have claimed.

With possibly one exception, all Mr. Limbaugh’s stations and his network have stuck with him. He continues to sign up new advertisers eager to reach his large, well-educated audience—an audience that’s more than happy to consider purchasing products and services he recommends.

As for Carbonite. It’s no longer on the Limbaugh advertiser list, of course. Its stock and its stockholders are collectively getting a swirly [on Wall Street]. The left is fond of saying that all politics is personal. But for Carbonite, Mr. Friend’s personal politics clearly haven’t proved to be very good for business.

Decline and fall of your average virtue-signaling company

Say what you want about Limbaugh. His listeners tend to heavily support the companies that advertise on his popular radio show. By throwing rotten, virtue-signaling tomatoes at Limbaugh, Carbonite immediately and permanently alienated Rush’s legion of regular listeners. In addition, the company lost a great deal of business in successive quarters as I later documented. (Note: That article, too, is currently down the memory hole. I may resurrect it at a later date to provide an article trail on this generaly topic.)

Demonstrably, Rush’s listeners tend to support products advertised on his show and during commercial breaks of his many local radio affiliates. Carbonite lost them all.

Similar negative results have rewarded the companies cited above as well as a more recent virtue-signaling fails at Dick’s Sporting Goods stores. That company severely curtailed gun sales and broadly publicized the move. Dick’s was openly kowtowing to former President Obama and his assorted left-wing supporters and anti-Second Amendment shills. It hasn’t worked out for them.

The only company that seems, thus far at least, to have avoided the inevitable earnings and profatability hit that follows each episode of corporate virtue-signaling, is Nike (NKE). That’s possibly due to pinpoint identification of the primary market for its most costly athletic shoes. This would explain the company’s support for America-hating ex-NFL quarterback Colin Kaepernick. But that’s another story for another time.

Corporate virtue-signaling: Stockholders should bring a halt to the nonsense

In most other cases, companies pay a heavy price for alienating a substantial percentage of their customers. Ultimately, sucking up to the latest purveyors of class struggle on the organized left is a losing proposition. Gillette, Schick, and any number of additional companies need to remember.

Like it or not, America has been split down the political middle for at least three decades. Insult one side or the other, you alienate half of your potential market. Like Gillette and Schick, businesses that pull virtue-signaling stunts to please the Stalinist left ultimately damage their companies and stockholders. Shareholders suffering losses after such corporate grandstanding should hold them accountable when the inevitable negative numbers are reported. And there are plenty of lawyers out there only too eager to help.

— Headline image: Current home page screen grab from Rush Limbaugh’s website, https://www.rushlimbaugh.com.

 

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17