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WWE Wrestling Against the Economy and Its Killer Wallet Crush

RWWE vs. Economy
Last week's death of Randy "Macho Man" Savage was just the latest piece of bad news for World Wrestling Entertainment (WWE) and its fans. In 2009 the company's CEO resigned. This February the COO quit abruptly. The stock has dropped 39 percent just in the past 12 months and WWE slashed the quarterly dividend by two-thirds. CEO Vince McMahon says re-branding will help it rebound. Right now the company seems just an atomic knee-drop away from elimination.

WWE has always had a hard time getting attention for its business and not its antics. In part this is due to the fact that most investors -- if they know WWE is a company at all -- can't take it seriously. Not surprising, given the WWE's product -- "wrestling matches" featuring cartoonishly muscular men and hyper-sexualized women following scripts that would make a soap opera writer blush.

This isn't helped by WWE's demographics: 60 percent guys, most under 34 (and half of those under 18) almost all of who are in households with incomes of less than $75,000.

Hey, WWE is actually a real company
That said the company has frequently been very profitable. Even in its current state is has generated $87 million in free cash flow (the cash a company can generate after paying to maintain or expand its asset base). Until this quarter WWE paid reliable dividends.

It's still seen by some as an undervalued investment, with one firm citing it as one of the most undervalued high dividend stocks when judged by analyst target price. And though rev­enues fell over the last year, the company's prof­its rose as it cut expenses and boosted margins.

Still, the plan to iron-claw itself back into better earnings via re-branding doesn't seem particularly muscular. One key part: WWE announcers will now call the performers "superstars" instead of mere of wrestlers.

"I think every brand has to re-create itself," McMahon told the Los Angeles Times. "I want everyone to look at us in a vastly different way than they have."

What? The WWE is going to become NPR? Maybe it will go for Oprah's old niche. Whatever vastly different means, it's going to take a lot more than feather boas, sequined tights and bombast now being offered.


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