Digital soapbox

A former Prudential exec's message board missives on Sykes Enterprises gain visitor attention for their candor and insight. But is anybody at the Tampa company listening?

By SCOTT BARANCIK

© St. Petersburg Times, published July 7, 2000

John LeDell has a warning for Sykes Enterprises Inc.: Screw up another quarterly earnings prediction, and your stock price will plummet to single digits.

The 55-year-old retiree from Basking Ridge, N.J., is not just another investor screaming into the wind at Sykes. Stock in the Tampa-based operator of technical support call centers has tumbled from a high of $51.06 per share in January, closing Thursday at $14.06, up 50 cents.

LeDell is the uncrowned king of the firm's Yahoo "message board," a Web site where shareholders trade rants, raves, rumors and ruminations about Sykes' fortunes (http://messages.yahoo.com/?action=q&board=SYKE).

"Looking over the past three years since June 1997, we see the Nasdaq up 300 percent, Sykes' revenue up 400 percent, and Sykes' stock down 50 percent," LeDell wrote with characteristic authority on June 24. "If management had done nothing over the past three years except to try to torpedo their stock price, they could not have done a better job."

Yahoo, like RagingBull.com and SiliconInvestor.com, hosts unsupervised message boards for many publicly traded companies. Its "Sykes" board receives about 30 postings a day, some of them no doubt crafted by 20-something day-traders who have never prepared a financial statement or devised a business plan.

But the regulars give special attention to missives from LeDell.

Maybe it's because he claims to have purchased about $1-million worth of Sykes stock this year. Maybe it's that he plies Wall Street analysts and mutual fund managers for useful tidbits. Maybe it's the cool head he has exhibited during a tumultuous period on Wall Street. (On paper, he's lost about $175,000 on Sykes this year, having paid an average of $17 for each of the approximately 60,000 shares he said he's bought since late January.)

Most likely it's the experience LeDell brings from his 32-year career at Prudential Insurance Corp. of America. LeDell, whose online alias is "oldpruguy," tells war stories about the brilliant maneuvers and grave missteps he made as a high-level executive, such as the time former Federal Reserve Board chairman and Prudential board member Paul Volcker chewed him out for making an overly optimistic earnings prediction.

LeDell retired from Prudential in 1997 but is still something of a legend at the Roseland, N.J., company. "He created a lot of things, some of which worked, some of which did not. He was literally an entrepreneur within an old-fashioned company," said Scott Schnuckle, who, as head of Aetna Dental, inherited much of LeDell's old turf.

LeDell's "crown jewel" was Prudential's Dental Maintenance Organization, an HMO for dental care, according to Schnuckle. He created, trademarked and ran the DMO, which had revenues of approximately $800-million by the time he left. "The DMO was built on my kitchen table," LeDell said. "I was employee zero-zero-one."

LeDell also was the brains behind Prudential Service Bureau, a third-party employee benefits management company, said Steve Detweiler, who worked for LeDell there. LeDell first learned about Sykes when the Tampa company bought PSB in 1997, eventually changing its name to SHPS Inc.

Retirement could have been isolating for LeDell, who contracted polio at age 2 and walks with crutches. But the Internet has proved a perfect way for him to stay involved.

So how has he used the power of his virtual soapbox? On the one hand, he has encouraged fellow Sykes investors to avoid panic selling, advice he admits serves his own interests. "Jademann," a 39-year-old engineer in Stockholm, Sweden, and frequent contributor to the Yahoo message board, said LeDell's analyses have convinced him to buy more Sykes stock.

But the desire to profit hasn't stopped LeDell from criticizing the company's mismanagement of its relationship with Wall Street. Sykes has disappointed analysts and investors during the past year by embroiling itself in an unseemly accounting problem and by promising more earnings than it could deliver.

"I thought it bordered on fraud," Le-Dell said of Sykes' June 13 press release, which revealed that the company would miss its second-quarter earnings projection. Actual second-quarter results will be released July 30. "When you took off the covers, they had a disaster on their hands. It looked like an amateurish attempt to cover up the real story."

His most recent posts have urged aggressive action to boost the company's stock. He wants Sykes' board of directors, which is currently in a meeting set to conclude Saturday, to approve a stock buyback plan. Such a move might boost the stock's price because it would tell investors that the company can think of no better way to invest its own cash.

LeDell also wants founder and chief executive John Sykes to go on a road show. "John is very charismatic. If you sat him down in the room with his management team and in a small group of some key fund managers, he would wow them, absolutely blow them away. They'd be salivating to buy this stock," LeDell said in an interview.

The problem, he said, is that Sykes resents having to prove his company's value to outsiders and to answer for miscues. Sykes took the company public in 1996 but still owns 42 percent of its shares. "Inside, it's still John's company. He's the big kahuna, God love him," LeDell said.

A more radical approach would be for the CEO to take the company private again, fix it up, and go public a second time, hopefully at a much higher stock price. "There would be people that would give John the financing in a heartbeat," LeDell said. At $20 per share, the CEO would need to raise $500-million.

If nothing else, LeDell said, Sykes needs to do a better job managing its quarterly earnings projections. Aim low, he suggested, and use every permissible trick necessary to meet those targets.

"How do you think a company like Cisco meets its earnings estimates every quarter by plus one penny?" he said. "That's called managing earnings. . . . Mike has to do a little bit more of that."

That free advice is for Mike Kipphut, Sykes' chief financial officer. When asked about LeDell, Kipphut said the name didn't ring a bell. Later, he recalled several telephone and e-mail conversations the two had but said he knew nothing about LeDell's role on the Yahoo message board and that he treated him like any other small investor.

"I would put a lot more credence in what the analysts have to say than on any message board," Kipphut said. "Sometimes you've got disgruntled ex-employees, you've got day-traders who are trying to make a profit and will hype something. None of it's reliable whatsoever."

But LeDell is determined to at least break even on his investment in Sykes, which he calls "a much better company than it is a stock." And perhaps to dispense some hard-fought wisdom along the way.

Through the wringer

• At 8:53 a.m. on June 13, Sykes Enterprises Inc. announced it would sell SHPS, a subsidiary, for an unexpectedly high price. Buried in its upbeat press release was news that the company would fall short of its second-quarter and annual earnings projections. Sykes' stock promptly fell 18.4 percent. Following are excepts of online messages posted that day by John LeDell.

• 7:19 a.m. Patience, patience, patience.

• 9:23 a.m.Well, big news out this morning and it's going to provide a mixed message to the investment community. On a positive note, they got an unbelievable price for SHPS. . . . However, even with the write-offs and restructuring, operating earnings are weak. Hmmm.

• 3:39 p.m.Taking out all the B.S. slung around in the conference call (there was a lot), the key numbers that emerged were 90-cents earnings per share in 2000. . . . My confidence in management has taken a severe beating.

• 4:25 p.m. I want to emphasize that Sykes is building excellent long-term value into their enterprise. . . . Nonetheless, John Sykes has got to learn that this company is no longer his personal playpen. He simply has to learn he cannot continue to blindside the Street.

• 4:42 p.m. Don't read too much into the fact that I'm p---. While I am a gracious and humble winner, I am also a terrible loser. . . . Remember, the key element is my unemotional holding onto every one of my shares for the long haul. . . . Just give me a night to calm down.

Source: Yahoo

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