The bizarre world of Patrick Byrne's Overstock

A CEO Apart

This fire is out of control. I'm gonna Byrne this city

Without question, Overstock is going through some of the most massive growing pains that we've ever witnessed. When, for example, we pointed out that Overstock's customer service line hangs up on consumers, Blevins countered that eBay and Amazon don't even have phone lines, and Byrne said that "a huge spike in sales" caused "an unexpected minor technical issue to drop calls for a small number of our customers." We should have played lotto that week because Overstock dropped our calls 20 out of 22 times in a 7 day span.

Byrne does not appear to take Overstock's customer service problems seriously, downplaying the influx of complaints as minor issues here and small glitches there. "My bad" was his response to a horrible third quarter performance.

It's this attitude and Byrne's bizarre demeanor that have some financial analysts describing the CEO as a freak show.

On August 11, for example, Byrne hosted a teleconference with analysts to attack a group of people that he alleged were short selling Overstock's stock and causing damage "in the high hundreds of millions of dollars." To describe the call as odd would not do it justice. The far-ranging conference had Byrne discuss everything from his techniques for taping calls with reporters to whether or not he had done cocaine. Somehow, this all had to do with the conspiracy to destroy Overstock.

"It was the most bizarre hour and change I have ever witnessed on the Street," said Jeff Mathews, a hedge fund manager and close Overstock watcher, during a TV appearance.

Other pundits criticized Byrne's performance as well, but we'll, of course, let you judge for yourself.

Here are a few tidbits from that August call.

And I refused to talk to him without a tape recorder on because I’ve dealt with the Journal before and they’re just a bunch of dishonest reporters. Over and over and they’ll play this trick by the way where they say you - I mean - I’ll only talk to a Wall Street Journal reporter with a phone on because they’re such crooks, or with a tape recorder on.

And literally I’ve had them do that and then afterwards say - write me a little email that says oh, my tape recorder turns out to have been broken, but don’t worry, I took good notes. Well, they’ve done this once to a friend of mine and they did it once to me, so now I only talk to them with a tape recorder on.

And then a few minutes later.

Well, something else funny happened. My phone went dead, my phone went dead and a message came up in Spanish that said this has been diverted to some telephone company in Mexico and the line was out. The same hour that happened, you see, they got a hold of O’Brien’s cell phone record, they got a hold of O’Brien’s cell phone records and they started calling everywhere O’Brien had called.

And I know this sounds like a John Grisham novel, but bear with me. They started calling everywhere he had called. So for example, there is a woman, who she is a psychiatrist who has a patients only telephone number. That number started getting calls. Who was doing the calling?

Cooky cat, right? That's just the beginning.

And here’s the funny part. As this went on I started realizing that there was actually some more orchestration here being provided, by what I’m calling here is the Sith Lord or the mastermind. Now, can I tell you who that designated bottom feeder was who was supposed to end up with our company? Can I tell you? I can. But I’m not going to today.

The Sith Lord is, can I tell you who that is? Well, I could tell you it’s a name that everybody on the phone, every single person on the phone would recognize this person’s name. He’s one of the master criminals from the 1980s, and he’s back in business. But I’m not going to. I’ll just call him the master mind today.

During this call and on TV, Byrne keeps using two words that start with M to describe this "Sith Lord." In the call, for example, he placed emphasis on "master mind." Some have taken this to mean Bryne is referring to Michael Milken - the junk bond "king" who spent some time in prison. Why Bryne insists on making damning charges and backing away from them with childish words games is not clear.

We'll close on this note.

I want to go back a bit because I forgot to tell you about Kroll, how I tracked down Kroll. I had the feeling -- I’ve been seeing things that suggested in a very mild way somebody was intercepting communications. Now I’m going to tell a story that I’m not sure that this part was Kroll, but so... the way I tested that was I came up with one channel, Channel A I’ll call it, and I put information down there that I was gay.

And Channel B I put information down that I was a coke head. Now my apologies to my gay friends, both within and without, outside the company, I don’t mean to equate the two. I don’t care. I’m a libertarian and I don’t care at all. In fact I don’t give a hoot if anyone thinks I’m gay, but I thought that by keeping, by putting that information down on one channel and putting the coke head information down the other channel, I would then know if it leaked into the world that those channels were compromised and I know there’s no way that information.

I know that if that ever appeared it could only have come from channel A or channel B and I didn’t even mix the channels. Sure enough, within a short time I started seeing on the message boards, oh, Byrne’s gay, whatever.

Again, nothing decisive, but it was enough to peak my interest. On the coke head thing, and by the way, I’ve never, with one exception, I’ve never even seen cocaine in my life so in case you’re wondering, no, I’m not a coke head.

Anyone else have a tough time picturing eBay's Meg Whitman making a similar call?

Having exchanged a number of emails with Byrne - he wouldn't talk to us on the phone even though he has a recording device - and followed his statements, it's clear that the man is not traditional CEO material. Byrne now claims to have given up on pursuing the short-sellers day and night so he can better focus on his business. But even so, he seems easily distracted. Byrne claimed that Overstock had sent us five additional MP3 players on top of the seven we were already supposed to have received. This never happened, and no customer service representative claimed it had.

Only Byrne.

Now all companies have their rough times. Typically, though, the good ones try and counter mistakes by driving harder than ever to please customers. Overstock, by contrast, seems to take its customers for granted. The company's CEO does not appear to have the focus necessary to guide a company through the fast-paced online world.

Given Overstock's mounting losses, falling customer service quality and technology issues, the company has serious work ahead if it's to compete with savvy giants such as eBay and Amazon.

Web 2.0? Overstock isn't Web 0.35. ®

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