Monday, July 17, 2006

Waves of Warning 04

Surf for Sale

[ Also viewable in Word format by downloading:04%20-%20Surf%20for%20Sale.doc ]

It was an unusually gloomy day in the heart of the surf industry. The Catalina eddy was blowing a thick, dirty mist against the glass curtain walls of Wavelife International’s corporate headquarters in Newport Beach. The view from the top floor was anything but grand, and the mood in the executive conference room was just as gray.

Ian Clark was waiting outside the room, ticking off his pitch points, when the door opened and he was motioned to come in. There were seven people sitting around the table and they were all staring at him. No introductions were made, and no one said a word. The silence put him off balance. Then he realized that if he lost control of the meeting, he’d never get it back, and if that happened, he’d be walking out the door empty-handed. The very thought practically drained the blood from his gameface. But then his survival instinct kicked in, his mind switched to autopilot, and he began his well-rehearsed presentation to the people at the top of a corporation in trouble.

"Ladies and gentlemen, many thousands of miles to the southwest of this room there is a range of undersea mountains crowned with coral reefs that have been avoided by sailors for centuries. They are not on any maps, and are hundreds of miles from the nearest inhabited islands. Now, most open ocean reefs are too shallow and irregular to surf safely, but - - -”

“But what, Clark? My surfers aren’t about to surf some death reef in the middle of nowhere no matter what you try to sell us,” interrupted Roberto Mercante, founder of the company, from the other end of the table, “So why are we here?”

The interruption was just what Clark needed. He snapped out of his fear and the adrenalin kicked in.

“Times have changed, Roberto, so why don’t you just relax and pay attention? You might learn something,” said Clark, his tone of voice purposefully sharp.
"Global warming is here to stay, and for a lot of people that’s bad news. Of course, some are trying to reduce their contributions to this ecological disaster, although by all the chrome SUV’s I see down there in the parking lot, I’d say we still have a ways to go.”

Clark didn’t see the dirty looks he got from June Wilson, Wavelife’s Wall Street liaison, and Bill Massara, the company’s chief financial officer, who had both made a lot of money in recent years at Wavelife as evidenced by their ostentatious urban assault vehicles parked conspicuously near the front door.

“And who knows? Maybe Mother Nature will be able to absorb the excesses of our society and begin reversing the trend. In the meantime, the world ocean is becoming a stern judge of man’s folly, the sentence will not be commuted, and a parole hearing is a long way off. We have fallen from grace with the sea, or so the environmentalists would have you believe.

"The reality is, of course, that as long as you can sell t-shirts and trunks in Kansas, the consequences of rising sea levels won’t mean squat to your bottom line. Yet, somewhere in your cash-strapped conscience there must be a twinge of regret over the current situation – I’m referring to global warming, not the downturn in your stock price.”

The vibe in the room was now becoming really edgy, exactly as planned.

“Ok, so much for the tree-hugging. After all, in our wonderful world of modern surfing, is there anything more important than contests, big wave reputations and price points?” said Clark, daggers of sarcasm stabbing with every word.

Now he had their complete attention, and especially that of Cheryl Corlund, the CEO of Wavelife. With her blond hair cut short, piercing green eyes and a steel-trap mind, she intimidated everyone in the surf industry. And now here was a guy trying to yank her chain.

“Get to the point, Clark. I don’t have all day, much less another five minutes for this bullshit.”

“Ok, sorry for all the doom-and-gloom. I forgot, rising sea levels and global warning really have nothing to do with the sinking stock of a company drowning in debt. Or do they?”

Clark paused and made careful eye contact with each and every person sitting around the table. He had them right where he wanted them. He looked straight at Cheryl Corlund.

“So let’s get down to business. I’m here to offer you the chance to get in on the discovery of waves that could not have been ridden until global warming caused a rise in sea levels, waves that are now bigger and more perfect than anything ever seen in the history of surfing. It is my guess that such an opportunity may have some value to Wavelife International given your current situation.”

He took a disk out of his shirt pocket and sailed it down the table without breaking eye contact with the CEO.

“Here you go, Roberto, let’s take a look at this.”

Mercante’s dark Brazilian eyes glared at Clark. He inserted the disk into the DVD player and lobbed the remote control back to Clark. A color balance image appeared on the huge plasma screen mounted on the wall. Clark moved out of the way to reveal shaky images of a briefcase, a seat, a window, and then a zoom down from a plane flying at ten thousand feet over a vast blue ocean.

The group watched in silence. Forty-five seconds later, Clark hit stop as the camera turned away from the plane’s window. Nobody said a word. Clark sensed he had exactly what Wavelife needed. A second later, he knew he was right.

“Where is this place? And when can I go there?” demanded Mercante.

Clark’s smile was just this side of a smirk. The bait had been swallowed. Now he’d set the hook.

“All in good time, my friend. Let’s talk about the surf for a moment, why don’t we? The waves are twenty-five feet high, maybe bigger, coming in every twenty seconds, and the ride will be almost a mile long. Oh, it also looks like the wind is straight offshore.”

“Show it again,” said Heath Larson in a commanding tone backed up by his reputation as the best big wave surfer in the world.

Ian Clark sensed the challenge and confronted it directly.

“What for?” he asked with disdain, “You can’t see anything anyway.”

“So what the hell are we doing here, Clark?”

Mercante’s temper was at the boiling point. He had been one of the pro circuit’s hottest surfers until his favela roots took hold and he began to compete in the surf industry. But he quickly found out that in the garment business, surf savvy was nowhere near as important as bean counting. That was why his wife continued to use her maiden name, and that was why a quick darting look from her green eyes was all he needed to know he was to shut his mouth immediately.

Clark saw the silent exchange and played off it perfectly to take total command of the room.

“I’ll tell you what you’re doing here, Roberto. You’re trying to save your company, and you’re listening to me because I know how you’re going to do it. Now stop wasting everybody’s time and just pay attention.”

He tapped two clicks on the remote and up came Geosurf’s logo and a column of icons, each containing moving images of perfect waves from Geosurf’s exclusive surf zones. At the bottom of the menu was a final selection labeled “Under Development” with just a generic icon and an “X” on it. Clark scrolled down to it and clicked the remote.

The last frame from the original clip began to grow as if through an unlimited zoom lens, simultaneously coming into perfect focus until the frame was full of swells arrayed around the reef like spokes on a wheel. Then they began to move.

Swell after swell came from the top of the screen, splitting into matching perfect waves marching in formation around both sides of the reef, their smooth faces rolling over into huge tubes with perfect precision.

“Hey”, said Sonny-boy Noaloa, winner of pro surfing’s world tour two years in a row, “that mo like it, brah. You show dat one again, yeah?”

“Hold on there, champ,” said Clark. “Wait till you see what’s next.”

* * *

After his last conversation with L.J. Merrill, Ian Clark knew exactly what he had to do. Merrill never divulged the locations of new surf zones until they met face to face. This time, however, that meeting would never take place.

Clark quickly called Trans-Pacific and told his contact that a Geosurf employee had seen what looked like good surf on a flight from Tahiti to South America. Was it possible that the flight recorder could provide the GPS position, and the altitude, just before the plane had experienced some turbulence about two hours into its flight? The airline executive was only too happy to oblige Geosurf’s owner, and with the GPS data on its way, Ian Clark started working on his pitch to Wavelife International.

He had sold surf tours for years using real video, but all he had was Merrill’s distant footage compressed into a data file, and that would not be good enough for his purposes. So he sent the file to a CGI company that had done a lot of work for Geosurf enhancing surf video images. He remembered discussions he’d had with them about the state-of-the-art work the company had done for NASA using software developed to simulate landings on Venus and Mars. He got on the phone to the VP of the company, and an hour later, Clark was in business.

The last frame of the image stream showed a shadow angle on the tail stabilizer. Combined with the GPS and altitude data, that single frame would help the programmers to reverse engineer a series of calculations, similar to sea captains using sextants and trig tables, to determine the sun’s precise position when Merrill had shot the images. This would give them a exact reference angle for the almost imperceptible shadows of the wave’s hollow tunnels. With the ability to then extrapolate the geometry and dimensions of the forms on the sea’s surface, the programmers and computer graphics artists could then create a three-dimensional digital tour of the waves. The VP assured Clark that it was quite doable, and in seventy-two hours Clark saw a rough of exactly what he needed. In the end the two-minute tour cost almost thirty thousand dollars, but that was cheap considering the bet Clark was placing on his future.

* * *

All eyes in the conference room were glued to the screen displaying a perfect vision of some of the most, if not THE most, extraordinary waves they’d ever seen. The “video” was not real, but Clark was almost certain that neither the executives nor the surfers would ask questions about the stunning images.

They didn’t.

Although Mercante and Corlund were used to cutting-edge pitch meetings, neither they, nor anyone else sitting around the table had ever seen anything like this. The “camera” seemed to drop until it stopped just above the surface of the water facing a wave that filled the screen. The wave started breaking. The “camera” did not move, and the waterfall/avalanche got closer and closer until it finally closed right over the “camera”.

There was a stifled gasp from the lone female surfer in the room.

Aleja Gracellen caught her body involuntarily responding to something outside the boundaries of her skills. She was the woman who danced with the sea, but deep inside, she knew riding such a wave would be no dance.

The “camera” went underwater as the liquid mountain rolled overhead. Then it came up to the surface into the sun only to have another wave fill the frame.

The “camera” panned slowly to the right. Now they were looking directly into a hollow tunnel big enough to swallow a school bus. The arc of the wave curved out into space like a nautilus shell. It was a ruler-edged waterfall peeling perfectly like the honing blade of a lathe.

The “camera” pulled back as the power roared forward, all the time maintaining the view into the tube. Ten meters back in the tunnel a maelstrom of certain death was clearly visible.

“Nice wave,” said Larson.

“I thought you’d like it Heath. That’s why I want you to be the first to ride it.” Clark felt confident enough to lay it on a little thick even though both he and Cheryl Corlund knew what was really going on had nothing to do with anything other than a lot of money.

The “camera” floated up to a safer position. The low angle of the sun gave the thirty foot waves an ominous look, their concave, translucent faces glowing a deep blue before feeling the reef and breaking perfectly.

It was nothing but a sophisticated illusion, but the visceral reactions of the people around the table were anything but digital. They were like awestruck climbers looking at Mt. Everest as the jet stream blew a plume of snow off the summit, their hearts and minds transfixed by a hypnotic vision of glory and danger.
Roberto Mercante mind-surfed the waves, lost in delusions of surfing at a world-class level. Sonny-boy Noaloa imagined himself shredding turns and getting big air all over the huge walls as if he was skateboarding giant half-pipes. Heath Larson saw himself so far back inside the tunnels that he couldn’t be seen at all. Aleja Gracellen was wondering if she’d ever be good enough to ride what she was seeing, and both Wilson and Massara were wishing they knew how to surf just to be able to appreciate what was on the screen.

But to Cheryl Corlund, however, it was like watching a person screaming behind soundproof glass. There was just too much raw energy for her to absorb, and she didn’t bother trying. By the reactions of the surfers, she didn’t need to know anything more about Clark’s find. Unnoticed by the others, she opened up a laptop screen built into the conference table, clicked an icon, and began to study a spreadsheet full of data. Her mind went into high gear, knowing she would have to strike a deal with Clark to integrate his find into her plans for Wavelife’s future.
The “camera” began to fly free and clear above the swells revealing a mirror image set-up on the other side of the lagoon. Just as perfect and powerful as the “rights”, the “lefts” peeled like Pipeline, with two important exceptions: instead of stopping abruptly after one quick tube section, they kept going for almost a mile. And they were much bigger than anything ever ridden at Pipe, second reef included.

The POV pulled back up to ten thousand feet. A seamless edit brought them back to the real images shot just before the camera angle became impossible. The screen went blank for a second. Then the Geosurf logo appeared.

Ian Clark and Cheryl Corlund locked gazes. She knew he needed cash, like a prospector needed a grubstake, in exchange for the promise of a bonanza based on a mere forty-five seconds of reality and two minutes of simulation. He knew he’d successfully made his pitch as if each frame was a grain of gold found in the sand of a creek bed leading to surfing’s “Treasure of Sierra Madre”. There was no misunderstanding between them. Each knew exactly what was on the table: Wavelife needed a shot in the arm.

* * *

Waves have always been at the heart of a multi-billion dollar industry because their wild energy makes them an endless source of wonder and respect. Dozens of companies used man’s fascination with waves to sell apparel to everyone from awestruck tourists to veteran surfers. For years, Wavelife International had done it better than anyone else.

When Roberto Mercante founded the company, he understood firsthand the unique affect of waves on human emotions. He knew the world of surfing to be a truly awesome place of raw energy, where waves are like wild beasts roaming at will across the vast curved liquid space covering much of the planet. He’d found a lot of romance in man’s relationship with the seven seas, but he’d learned more than once that no one can ever take their hospitality for granted as long as waves move across their surface. Their beauty can be inspiring, but at the same time, he knew that waves are, in a purely primal sense, an enemy.

Wavelife’s success was based on this paradox, and another paradox as well. Surfing is the antithesis of business, and sharp as Mercante was about how to use waves as a marketing tool, he quickly learned he wasn’t going to be able to make real money without the smarts of an MBA. Though it wasn’t a marriage of convenience by any means, Mercante had found the perfect match in Cheryl Corlund, Harvard grad, looking to make millions and finding fertile ground in the world of her husband. It was a dream team that took the surfing world by storm.

The early advertising campaigns emphasized the power and subliminal terror of big waves. As the company grew and began to target non-surfers, marketing experts were brought in who designed campaigns around the carefree joy of children letting the gentle surf chase them up and down the sand. Then, when sales numbers began to slack off, Wavelife went back to its “core surf” identity. One campaign traded on the survival instincts triggered when tourists are caught unawares by rogue waves. Mercante re-branded waves as if they were sharks shattering the complacency of a day at the beach. “Never Turn Your Back on the Ocean” took on a “Jaws”-like resonance in the media - and sales soared.

When the fear angle began to wear thin, Wavelife went back to fun in the sun and sales jumped again. Within a few years they’d perfected a marketing strategy of constant motion across a broad spectrum from panic to joy, trading on the fathomless natural power of waves that can elicit primal instincts from dread to ecstasy.

Wavelife mined these veins of fear and fun, refined them into sophisticated branding campaigns, and marketed quality clothing at premium prices. It worked like a charm, and revenue went through the roof. The company became the most powerful in the surf industry and, almost like a diamond cartel, eventually controlled supply and demand of surfing’s media identity as if they were the anointed gatekeeper of “genuine surf” to the New York apparel industry. Corlund’s excellent management kept the profits rolling in, and when the company went public, Wavelife International was an instant hit on Wall Street.

But as with every trend in the rag trade, what once was coveted eventually became commonplace. Garmentos who didn’t know Heath Larson from Frankie Avalon realized that they could move product simply by slapping surf lingo on their stuff. They flooded distribution channels with cut-rate knock-offs at hard-to-beat price points. They knew there was plenty of business to be done selling to people who didn’t surf but wanted to be cool because nothing could be sold as “cool” as easily as surfing. And as long as they were paying less for the same image that kept the kids happy, parents were happy to save a buck at the expense of Wavelife’s “core authenticity” branding campaigns.

At the same time, management ran into problems keeping shareholders happy by selling strictly to surf shops and better clothing stores. Executives of publicly traded corporations always need ever-increasing volumes to keep the share price up, and Wavelife was no different. Mercante and Corlund had to start doing business with big box chains and off-price outlets. That drove the surf shops crazy and incensed the buyers from the up-scale retailers.

Within a year Wavelife’s “core surf” credibility began to erode. Wavelife had strip-mined its way to all-time highs on Wall Street – by sinking to retail’s rock bottom world in the cut-rate bargain bins. But that meant there was nothing special about the brand anymore, and investor analysts and institutional shareholders began to lose interest in Wavelife as a “hot” buy. A day of reckoning was now on the horizon like a set of swells that would soon turn into waves of problems that threatened to overwhelm Mercante, Corlund, and the company they’d built from scratch.

Ian Clark learned of Wavelife’s dilemma over a year ago while on the golf course. Word was the stock, once a status symbol in the surf industry, had been downgraded from “buy” to “hold”, and if analysts began to issue “sell” recommendations, rumor had it the consequences would be quite serious. Clark knew the rumors were based in fact because like all the clothing companies in the surf industry, Wavelife borrowed heavily each season in order to pay cloth and sewing contractors upon delivery so that garments can be shipped to the retailers. The problem was Wavelife didn’t get paid until the garments “checked through”. Until a sale was rung up, Wavelife didn’t get paid. From his days with the magazines and late-paying advertisers, he’d learned that banks lending to apparel industry corporations keep a close eye on sales figures, and loans covenants are very strict. The banks always got their money first, and depending on the amount of orders placed at trade shows versus sales projections, even Wavelife had sometimes been unable to get working capital during times of economic uncertainty – or marketing ineffectiveness. That time had finally come for Wavelife, and Corlund had been forced to take a drastic step to secure working capital.

It became common knowledge that she had to start borrowing from “factors”, who work exclusively in the clothing business and who charge extremely high interest rates and often are nothing if not heavy-handed. She had no choice, even though she knew the dangers of working with factors. If they called in her loans for any reason whatsoever, Wavelife would have to pay in full on the spot, and she’d seen what happened to other companies when they didn’t: offices were padlocked, liquidators showed up the next day with moving vans, and a company was out of business in a heartbeat.

Corlund walked the tightrope like a pro for several product cycles, but in a strange-but-true version of how things sometimes worked for publicly traded corporations, even though revenue was up, the value of the company was down. All her efforts to appease Wall Street had only created a whirlpool of diminishing returns. By trying to compete in mass-market channels, she’d only diluted the brand, which forced her to try to sell even more, which only cheapened the brand. And when the stock began to sag, she knew something had to be done, and fast.
Although Wavelife owed hundreds of millions of dollars to a consortium of banks and factors, payments had always been made on time. But now the stock price was making everybody nervous, including the Orange County brokers who had made fortunes recommending Wavelife stock. Meetings with investment analysts and creditors were growing testy, and the word on the street was not good. The bankers were seriously considering reductions in the amount of money they were willing to loan Wavelife, and the factors were upping their interest rates. Unless something direct and tangible was done to keep the creditors happy, the wolf would soon be at the door.
When Clark asked his broker buddies what they thought Corlund was going to do, they told him how corporations in trouble often find new waves of cash to ride down Wall Street. Everything depended on perception, they said. Shareholder enthusiasm had to be ignited one way or another, and the easiest way to do that was to re-define the company with a fresh and powerful branding campaign. Clark had that skill set wired from his days at the magazine, and in his growing desperation for cash, he thought of how he could work up a pitch to Corlund that would hold up under her scrutiny and net him a fat consulting fee. He knew he’d have to come up with an ingenious and innovative publicity campaign and unparalleled market penetration, but to do that he would need something extraordinary and unlike anything ever seen before in the history of surfing.

And then one day he saw exactly what he needed.

* * *

“What’s to stop us from simply finding this place ourselves?”

“C’mon Roberto, if it was that easy, I wouldn’t be here. The South Pacific is a big place, and even if you found a reef that looked like it might have potential, who knows how long you’d have to wait for the right combination of swell, weather and wind. No, Roberto, you’d be better off working with me, because I know where it is and I know when the waves will be good.”

"What do you want out of this?" asked Cheryl Corlund.

“The honor of your presence when I open the place up.”

Corlund smiled. She knew this was just a smokescreen and she didn’t say what she was thinking because she knew what was coming next.

“Plus expenses,” added Clark, “and future considerations.”

As in buying Geosurf when the time comes, thought Corlund. She, too, had done her homework and knew all about Clark’s money problems and what kind of deal he needed to make, and soon, to extract him from the financial vise that gripped him.

Heath Larson felt tension fill the room like a set of huge waves coming in from the horizon. So he did the same thing he always had when, despite his true courage and determination, he sensed he was out of his element. He relaxed and let discretion be the better part of valor.

“Hey Sonny-boy, we go check surf, yeah?"

Larson was born on a ranch in Wyoming but had grown up in Hawai’i and spoke pidgin easily, though only to Hawaiians. He knew that Noaloa liked confrontation and would want to watch the deal go down, but he knew the hot-headed Hawaiian could only make things more difficult for Mercante and Corlund.

“C’mon, brah. You need recover if you want party tonight like last night,” teased Larson.

"Uh, yeah, okay, Heath,” said Noaloa reluctantly.

“How about you, Aleja?” asked Larson. Although he’d had problems with women all his life and a bad divorce to show for it, he knew when to be a perfect gentleman, and he was nothing less to Gracellen.

“Want to go for a run?”

Aleja Gracellen glanced at Cheryl, who nodded.

“Yeah, but I don’t know if I can keep up with you guys.”

The three surfers got up from the table and walked past Clark without shaking hands. He did no more than nod to them. There was no point in being social with the surfers when he was about to face off with Mercante, Corlund and her two lieutenants.

The doors closed behind the three surfers and silence filled the room. Clark knew he was in good position and felt even better when Cheryl Corlund spoke first.

“June, I think you and I can talk later this afternoon. Bill, I’ll come over to your office as soon as we’re finished here.”

The stock market expert and the chief financial officer stood up from the table. Clark thought to make some points, so he stood up, too.

“Nice to meet you both,” he said.

They nodded to Clark, and walked right past him. Suddenly Ian Clark didn’t feel so confident.

The door closed, and Clark sat back down. He didn’t know what to say, and it showed. Corlund sensed his nervousness and played off it.

“Roberto, please give the disk back to our friend here.”

Mercante ejected the disk and nonchalantly skimmed it down the table like a Frisbee.

The disk stopped well out of Clark’s reach. Mercante’s carelessness was not
accidental. The future of surfing’s biggest corporation was on the line. It was time to play hardball.



Coming up in Chapter 5:

The largest corporation in the surf industry is dominating the marketplace – and yet has problems on Wall Street that threaten the very existence of the company. Wavelife International needs something new, something revolutionary, something that no one has ever seen before - to ignite investor interest in surfing and get the numbers growing again. And Ian Clark has exactly what they need...

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