Amy Winehouse Andy Dick Angelina Jolie Anna Nicole Smith AOL Apple Architecture Art Ashlee Simpson Ashley Greene Auto Cars Avril Lavigne Ayu Oktasari Bai Ling Bank of America Barack Obama Beauty and Style Beauty-Style Bernanke Beyonce Bing Bobby Brown Brad Pitt Britney Spears Brittany Murphy Brooke Hogan Business Ideas Business News Calum Best Car News Car Photos Car Reviews Car Videos Carmen Electra Carrie Prejean Casey Johnson Celebrity Celebrity Nails Cheryl Cole China Chopper Lane Splitter Chris Rowe Christina Aguilera Christina Hendricks Cindy Crawford Clinton Clip COMEDY Coming Soon Comment faire un Avion en papier Companies Courtney Love Credit Cards Dalene Kurtis Daniel Baldwin Daniel Mica David Beckham David Hasselhoff Deborah Caprioglio DietFitness Drawing & Coloring Earthquake Economy Eirik Solheim Entertainment Eva Mendes Facebook Facebook-Games Farmville Fastion Forex Funny Game Game Info Game News General Motors Gold Golden Globes Haiti Halle Berry Heather Mills Heidi Fleiss Holly Madison Hot Girls Hot News Hot Women How To How To Read A Forex Chart HOW TOs Insurance International Investing Ipad Iphone Isaiah Washington Jamie Lynn Spears Jenna Jameson Jennifer Hawkins Jennifer Hudson Jesse Metcalfe Jessica Sierra Jessica Simpson Jobs Jocelyn Wildenstein Joe Weisenthal Jonathan Rhys Meyers Kat Dennings Kate Moss Kate Winslet Katie Price Katie Rees Katy Perry Keeley Hazell Keith Richards Kelly Brook Kelly Clarkson Kendra Wilkinson Kiefer Sutherland Kim Kardashian Kirsten Duns Kiss Style KT Tunstall Laetitia Casta Lauryn Hill Leah Marville Leona Lewis Leonardo DiCaprio lesbian Lesbian-Questions Lil Kim Lily Allen Lindsay Lohan Liz Pulliam Weston Loan Centre Louis Navellier Lynda Carter Make Money Mariah Carey Marisa Miller Mary Kate Olsen Mayim Bialik Megan Fox Mel Gibson Michael Jackson Michael Vick Michelle Obama Michelle Rodriguez Miley Cyrus Mischa Barton Miss World Mobile and Internet Molly Sims Movie Info Movies Mutual Funds Nadia Fazlini Sharip Nail Art Tutorial Nail Samples Nails Naomi Campbell News Nicolas Cage Nicole Polizzi Nicole Richie O.J. Simpson Oirigami Useful Origami Origami Airplane Origami Animal Origami Animal Easy Origami Animal's Face Origami Box Origami Flowers Origami Useful Osama Bin Laden Owen Wilson Pamela Anderson Paper Airplane Paris Hilton Paula Abdul Paula Sladewski Personal Finance Pete Doherty Pete Wentz Play Game Online Police Porsche Quotes about Life Rachel Zoe Real Estate Rihanna Roseanne Bar Sara Barelles Scandal Sean Young Sexual Health Shakira Shannon Elizabeth Sharon Stone Shocking Sienna Miller Star Stocks Strange Story Stupid Celebries Susan Boyle Taiwan Tamil Tiger Tara Reid Teens Tiger Woods Tila Tequila Today's Big story Tom Cruise Tom Sizemore Top Game Top Video Toyota Trading Trailers Travel Twilight Vanessa Hudgens Victoria Beckham Video Women Women-Family Women-Health Women'sHeath World Trade Center

Buffett's $50 million credit card blunder

10:21 PM
Buffetts $50 million credit card blunder

Peddling credit cards isn't so easy that a caveman can do it.

That seems to be the conclusion Berkshire Hathaway chief executive Warren Buffett reluctantly reached last year, when he shut down a money-losing credit card business he had dreamed up for Berkshire's Geico car-insurance unit.

The decision was disclosed in Buffett's annual letter to Berkshire shareholders, released Saturday. The letter called Geico's brief foray into credit cards "a very expensive business fiasco entirely of [Buffett's] own making."

Since Berkshire took over Geico in 1996, the company has grown rapidly, thanks to low prices and an advertising budget that has grown 25-fold to $800 million.

Geico is best known for a series of television commercials featuring a gecko that talks with a Cockney accent. Since 2004, the company also has run spots on TV showing preppy cavemen protesting the claim that buying insurance at geico.com is "so easy a caveman can do it."

Geico has been expanding fast -- it has added 4 million policyholders since 2002 and is now the top car insurer in New York, among other places -- and Buffett says he has long puzzled over which other products the company might dangle before loyal Geico customers.

Against the advice of Geico executives, Buffett said in the letter, he lit upon the idea of a Geico credit card. The Geico Platinum MasterCard was born.

"I reasoned that Geico policyholders were likely to be good credit risks and, assuming we offered an attractive card, would likely favor us with their business," Buffett wrote in this year's letter.

Buffett was so high on the idea a few years ago that he urged Berkshire shareholders to use the card.

"Sign up for the new Geico credit card," Buffett wrote in his 2005 investor letter. "It's the one I now use."

But it soon became apparent that people significantly less well off than Buffett were among the leading users of the Geico card.

The card business eventually ran up $6.3 million in pretax losses before Buffett pulled the plug. Berkshire then sold its credit card receivables for 55 cents on the dollar, resulting in additional losses, Buffett wrote.

All told, Buffett's credit card caper cost the company $50 million.

Of course, this is hardly the first time Buffett has called out a business mistake of his own. In his 2008 letter, he said he did "some dumb things in investments," including a purchase of ConocoPhillips stock with oil prices near their all-time high and a bet on Irish banks whose shares promptly fell 89%.

And a $50 million loss over half a decade is hardly worth mentioning for Geico. The insurance company posted a $649 underwriting profit for 2009.

Still, the shutdown decision wasn't a happy one for Buffett, who claims he had brushed off questions about launching the credit card by "subtly indicating that I was older and wiser."

By last year, that assessment had given way to a less uplifting one, Buffett said: "I was just older."

By Colin Barr cnn.com

Post a Comment

[facebook][blogger]

Author Name

Xin chào mọi người

Contact Form

Name

Email *

Message *

Powered by Blogger.