The segment, titled “Shutterfly out of Focus?” centered on two issues: 1) A key member of Shutterfly’s board, Jim Clark, a “legend,” as Greenberg called him, left the company in January.  He was Shutterfly’s Chairman.  “(Clark) said as a technologist this was a manufacturing company and didn’t need his type of skills,” reported Greenberg.  2) A large portion of Shutterfly’s profits comes from sources atypical of a photo processing company. 

“This is a company that actually processes pictures, and does that type of thing, like picture books and all,” said Greenberg.  “But what I found interesting in the story is that nearly a quarter of the revenues don’t come from processing pictures or products at all.  It comes from shipping…shipping…revenues.  Their contribution to revenues, year over year, 2006 to 2007 has increased.

“When you look at Amazon.com, 5% of revenues come from shipping, and they lose money on it.  Plus, they disclose it, they break it out in a special supplement, which (Shutterfly) has actually stopped breaking out on a quarterly basis. 

“I think the fact is shipping is not the business they’re in.  They’re in the business of making products, processing pictures, and things like that.  And when something like shipping, something as nebulous as shipping, as unpredictable as shipping, is where you’re getting a quarter of your revenues, and you’re trading at 82x this year’s expected earnings, 50x next year’s, you’re trading like a tech stock, not a manufacturing company.

As of the time of the report, Shutterfly shares were down 2% on the day.