After analyzing ABTL’s latest 10-K and listening to the latest conference call, we decided to sell our shares in the company for a small loss.

Though we didn’t think things could get worse at this consistent underperformer, we were quite amazed to see that the new CEO at Autobytel (ABTL), after nearly 12 months on the job, had actually succeeded in tripling the company’s cash loss in the current fiscal year. And losses should continue for at least the next few quarters, as the company ramps up its new web property at www.myride.com.

Frankly, we see no reason to be bullish on www.myride.com. In fact, the high costs associated with the development and marketing of the new website, seem completely unneccesary. Furthermore, we don’t quite understand why the company even needs to brand a completely new website, given the current traffic figures at www.autobytel.com and its already solid brand within the online auto industry.

It seemed to us that a few changes at www.autobytel.com, should have been enough to kick start revenue growth. This combined with overhead reductions, instead of the increased SG&A management currently forecasts, could have gotten the company back to profitability and positioned it for future growth.

Alas, management has decided on a different strategic plan, which in our view entails more risk for questionable upside. As we have stated in the past, with the Market remaining weak, we’d prefer to allocate cash to companies where the risk/reward is more favorable and where management maintains strong fiscal discipline. These are the types of companies that should reach new highs during the next Bull run. Care for an example of such a situation? Check out our post: Betting on a Flash Future

In addition, in our view the most important aspect of any turnaround is a stabilization of the business and reversal of the cash burn. When management focuses first on growth opportunities at a troubled company, rather than on the above two prior actions, it is generally a signal to sell and move on.