Shareholder asks company to fire 20% of staff, add update and unify company products under eNom.
Rightside (NASDAQ:NAME) investor J. Carlo Cannell, who owns 7.32% of outstanding shares through investment funds, has sent a scathing letter to Rightside about its strategy.
Cannell is upset with the “unrelenting propaganda” about new TLDs while he believes Rightside’s core business is being neglected.
Here is the entire letter, as filed with the SEC:
I am troubled by the pivot toward, and unrelenting propaganda about, new generic top-level domain names (“GTLDs”). Whilst I concede that new GTLDs are one of many opportunities in the emerging market for second generation domain names, Rightside Group, Ltd. (“Rightside”, “NAME”, or our “Company”) is the second-largest domain name registrar, a business that is here and now. I don’t hear Rightside speaking to this strength. Our Company glosses over this critical revenue component and plays up new GTLDs at the expense of the revenue contribution made by the traditional registrar business.
The user interfaces at eNom and Namejet look and feel clumsy and stale. Looking past the main page of NAME’s sites, the logged-in front-end infrastructure is untouched and acts like time capsule to what existed half a decade ago. Most of our growth in names under management is coming from a reseller channel that is out-executing your own in-house registrar eNom.
While I am a believer in new GTLDs, it is going to be many years before their revenue in any way materially approaches the revenue potential of our registrar operations. In my view, NAME’s registrar has become like a crazy aunt kept in the basement, one that you refuse to adequately clothe or feed, but who steadfastly spins straw into gold used to subsidize a stable of largely substandard new GTLDs such as .democrat, .dance, .army, .navy, and .airforce. Most of these new GTLDs are irrelevant and will never be sold in material volumes. NAME is holding back the growth potential of your registrar by pushing garbage extensions to a user base that quietly knows better.
Rightside is a gem in that it has many assets which are unique or difficult to duplicate. Cannell Capital LLC would not have acquired 1,389,953 shares otherwise. We have some good new domain-endings as well, with .news being one example, but this particular domain-ending and a clutch of others like it do not constitute enough of a “front” to gloss over the majority of your extensions which are low in value and should be spun-off. I believe that we should sell or even abandon some of our worst extensions. They should not consume all the resources of our Company at the expense of the assets that are currently profitable.
The current members of the Board of Directors and indeed many of your shareholders don’t seem to recognize this. I do. Today I stand up to be that paladin. To wit, I submit both a plan and a request: (i) Unify all Company products under the eNom.com brand; (ii) Terminate no less than 20% of your weaker staff; (iii) Move the Name.com entity to Seattle under the eNom.com brand and close expensive ancillary offices; (iv) Rebuild and relaunch the front-end infrastructure at eNom.com to bring it to the current standard expected by consumers; (v) Refinance all debt; and (vi) Add two new board members with a suggestion, but not a requirement that two incumbents resign.
I would prefer to avoid waging an expensive proxy battle to elect my own slate of directors. Such a fight would be costly to both myself and our Company. It is my sincere hope that substantive discussions between myself and the current Board of Directors could result in the infusion of fresh blood without such a fight.
Best Regards!
Not familiar with their books but he must be and if so he likely makes valid points. Basically he wants the fat cut, offices, workers and dumping funds into crap gtlds that likely have no future return which likely make up that fat.
Rightside seems to be doing the exact opposite of what he wants, based on statements management made during the last investor conference call. It is harvesting eNom and focusing mostly on new TLDs. It also sees lots of potential in Name.com.
I don’t think rolling Name.com into eNom as a brand makes sense. Name.com has a good retail brand position, and Rightside can directly control its marketing message for new TLDs. eNom is a technical reseller system, and counts on resellers for growth.
+1 Andrew
I agreed in principal with much of everything he said. I would have left off the following statements: “NAME’s registrar has become like a crazy aunt kept in the basement, one that you refuse to adequately clothe or feed, but who steadfastly spins straw into gold used to subsidize a stable of largely substandard new GTLDs”, but otherwise you can tell he is really upset with the current business model and the way they are moving forward. I think that statement detracted from his other well-put statements.
I do support an updated interface, as it’s one of the most archaic ones I’ve used. As far as where GTLDs are going, I think some as we have seen are going to be high flyers, while others ones will be big losers.
From his tone, it looks like there will be some sort of action, as long as he is serious about moving forward with his threat for a proxy battle.
Rightside really does own the worst new GTLDs , they just have blinders on. J. Carlo Cannell just made a very bad investment. Looking at my stock portfolio, I can relate.
The company has potential, Name.com is worth a few bucks, enom is totally broken platform, but has a strong user base, probably because their names are stuck there. Namecheap part of this puzzle also, you have all the same staff doing the same thing within 3 different brands?
NameCheap is the big reseller the author mentions in his letter.
I seriously don’t understand: someone at rightside agreed to spend $185,000 on .army, .navy, .airforce, .haus, .degree, .rehab… Come on…
Working under one office would be good, those Name.com guys look like they are goofing off half the time anyways.
I tried calling them a few weeks ago, 30 minutes before closing, waiting 10 mins, then got a voicemail via long distance also.
Funny thing is, I don’t think he is a domainer, but he said the truth.
Enom is toally F’ED up the backend platform, so many domains have been stolen via backdoor loopholes. I placed so many EAP orders where their systems would not operate.
20% layoffs will add productivity, move it all to Kirkland, on Lake Washington nice view of the water.
New leadership, someone who can integrate, and innovate.
I will buy more shares, and give this guy my proxy for the fight.
There is a lot that sounds strangely familiar here.
Fixing the backend of eNom and finding ways to share the core tech platforms between eNom and Name.com has been needed for a long time. There is no need to close the Denver office nor to shutter the Name.com brand. The eNom retail business should be folded into Name.com and let eNom focus on the core wholesale registrar.
The relentless drumbeat of the O&O (owned and operated) TLDs vs everything else means chasing high margins while core infrastructure needs and customer feedback go unaddressed.
Think in the long term Rightside has a great opportunity with its TLDs but not if it abandons the basic product platform.
Steve, you are clueless. You and your cronies got all fired after mismanaging the company in less than a year. You never understood the customers or the industry.