06 Mar 2007
Dime Brothers Announces Restructuring Plan
Dime Brothers, headed by twin tag-team Mark and Paul Nichols, has announced a bold restructuring plan in order to boost their long-term outlook in their target category. Part of this plan involves selling their vast holdings in international metal markets. Asked about the reason, Mark said, "We've diversified to the point where we've lost our focus." Dime Brothers plans on selling their holdings in Oxiana Limited, worth roughly EUR1.1 billion, and International Metal, worth roughly EUR800 million.
Also part of their stated restructuring plan is a complete redesign of their operations department. "Our supply-chain management has been lacking, with a slow product turnaround and not enough coordination between our marketing and inventory people," Paul said. "It's one thing to be able to brag about having the resources and products available for our clients - it's quite another to then realize those products are sitting on shelves rotting in French Guiana," he added.
A survey of analysts shows that this is a positive move for Dime Brothers. Upon hearing the announcement, Citigroup moved Dime Brothers (DBRO) from hold to buy status. "We see this as a very beneficial move for them - it liquidates a lot of cash and will allow them to market directly to their key demographics where we expect higher margins anyway. Metals, pharmaceuticals, commodities such as yams and plantains - those things just don't fall into their brand image," says Jim Rothman, senior analyst at Standard & Poor's.
The restructuring plan has not been well-received by some on Dime Brothers' board of directors. Board Chairman Stanley Worthington resigned over the announcement, citing the investment and earnings potential through an expanded brand. "Diversification means stability... I understand if Dime Brothers doesn't want to rock the proverbial boat anymore, though," he stated.
Other board members disagree, however. Tony Delaponte, a long-time board member with a career in marketing and brand development, states, "Diversification is fine as a personal investment strategy, but we've entered new markets where returns have not been as favorable as foreseen, and frankly, it's muddled the category where we are strongest - information management. This return to our roots, and potential expansion into categories that are similar, such as communication and IT, serves stock holders and strengthens the company."
Dime Brothers trades on the NASDAQ Stock Exchange under the symbol DBRO. Shares traded higher today, up $1 to 67 5/8.