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AMD (NYSE:AMD) must have read our earnings synopsis and must have finally read enough times over and over about canning Hector Ruiz. He's finally out, albeit not 100% of the way as he should be.
The company just announced that the board of directors has FINALLY elected President and COO Dirk Meyer as the company's new chief executive officer.
Continue reading "HECTOR RUIZ OUT AT AMD AS CEO!!!! (AMD)" »
Credit Suisse Group (NYSE: CS) has announced that Erin Callan will be joining the bank as a Managing Director and Head of its Global Hedge Fund Business in a newly created position based in New York. Her effective employment date is September 2, 2008.
Ms. Callan is the recently deposed CFO of Lehman Brothers (NYSE: LEH), who many feel got a bad shaft upon her termination. She will join the Investment Bank Management Committee and the Global Client Steering Committee.
Callan will spearhead Credit Suisse's strategic advisory and coverage efforts serving the hedge fund community where she will partner and coordinate closely with the businesses that support the Bank's hedge fund clients, including Prime Services, the Financial Institutions Group and Global Markets Solutions Group.
Jon C. Ogg
July 15, 2008
There have been light rumors floating around that Jerry Yang was going to resign from Yahoo! Inc. (NASDAQ: YHOO).
We just put in a call to the company and this is a strong denial of any such rumor. We spoke with Brad Williams in investor relations who said in response to "Is this a false rumor?" and he responded "Definitely! There's no basis." He also said they have no idea where the rumor came from.
There is good news here and bad news here. If Carl Icahn gets his way, Yang (and current friends) won't have to worry about whether or not he (or they) intend to resign or not. It could happen for them against their wishes. It also shows that Yang is going to fight for his agenda, whether some shareholders like it or not.
Yahoo! shares are down 1% at $24.39 today, and there is not even abnormal trading volume.
Jon C. Ogg
July 9, 2008
VMware Inc. (NYSE: VMW) has made an announcement of a significant management change this morning. Diane Greene is departing as the company's President and CEO.
VMware's Board of Directors has appointed Paul Maritz as President and CEO of VMware effective immediately. Maritz was also named to VMware's Board of Directors.
Greene is one of VMware's founders. Maritz is a former Microsoft employee noted as one of the builders of their Windows franchise, and he founded cloud-based solutions company Pi Corporation in 2003. Pi was acquired by EMC in February 2008.
The company is also sneaking in some guidance, while it says it isn't. "While VMware is not updating guidance for Q2, we expect revenues for the full year of 2008 will be modestly below the previous guidance of 50% growth over 2007."
VMware shares are down literally about 20% at $42.50 in the initial reaction. Expect a drop in EMC Corp. (NYSE: EMC) as well as it is the majority owner of VMware.
Jon C. Ogg
July 8, 2008
Perhaps this will be the year when replacing corporate boards hits a record level. Carl Icahn wants to do it at Yahoo! (YHOO). Several large investors have been taking a run at AIG (AIG). Now, InBev, which is trying to buy Anheuser-Busch (BUD) wants to replace the representatives of the shareholders there.
To rub salt into the wounds of BUD's management, the "alternative board includes Adolphus Busch IV, the great-grandson of the Anheuser-Busch founder and the uncle of the current Anheuser-Busch chief executive, August Busch IV, according to MarketWatch.
Perhaps InBev does not need to go that far if the current board will do the right thing. The InBev bid has taken the BUD stock up to over $62. Over the last five years, the 200-day moving average of the shares has usually been well below $50.
Perhaps it seem simplistic, but a bird in the hand is worth two in the bush. That becomes even more true when the economy gets bad. BUD faces a very significant increase in its transportation costs as the price of gas moves up.
BUD's earnings have not been outstanding over the last three years. A recession would make that worse, especially if the element of rising inflation is added. Moving up beer prices may be hard to do if the consumer has a dwindling supply of money. He may have to turn to cheap wine of moonshine.
The BUD board has the chance to drop the company's problems into the lap of someone else. It should sell out to InBev as soon as possible.
Douglas A. McIntyre
Most people think of Jerry Yang as the Chief Yahoo! over at Yahoo! Inc. (NASDAQ: YHOO). But there is another Jerry Yang role, and we aren't talking about him living up to the branding of "chief Yahoo!" in more ways than one. We have gone over and over how Jerry Yang and kids managed to destroy value for shareholders. If there had been a long-standing record or a current path that was working this entire situation and reasoning would have been different. But those suppositions include the "IF, THEN" factor and the truth is now the exact opposite.
The role of Jerry Yang that he currently holds that gets very little attention is his role as a member of the board of directors at Cisco Systems, Inc. (NASDAQ: CSCO). He has actually been on the board of directors over there since July 2000, according to Capital IQ.
We looked over the other anti-takeover provisions at CapitalIQ to see what else was there. We also looked over the corporate governance section over at Cisco's website. Yang is on the investment/finance committee of the board at Cisco. But CapitalIQ notes that Cisco does not have a classified board, its member terms are for 1 year, and it lists its "removal of directors only for cause" as NO. Shareholders do have the ability to act by written consent, although it may be a far stretch to believe that this represents any such issue that shareholders would want a special meeting.
The company has sent out the general proxy materials to shareholders in September for each of the last two years for the annual shareholder meeting to be held in November.
It is probably doubtful that John Chambers or today's board of directors would go out of their way to make any direct actions on an interim basis. Yang also isn't in the position to sink Cisco either as an independent, even if he is on the investment/finance committee for Cisco. The one thing that may save Yang and keep him valuable is that the competition for Cisco with Yahoo!'s merger adversary at Microsoft (NASDAQ: MSFT) may now have enough forward competition that the company could keep him on for that matter.
Sometimes it is good to clean house a little, and keeping a Jerry Yang around for 2009 probably isn't as attractive and probably doesn't offer quite the same insight as in many of the years before.
In today's world of the Internet, anything is possible. Reinvention is possible. New business segments that didn't exist are possible. And even redemption is possible. Either way, the Doubting Thomas analogy is a hard one to get past.
Jon C. Ogg
July 2, 2008
Almost every financial news outlet and website ran the news that Yahoo! (YHOO) was realigning its management. The portal company said "The moves support its strategy to be the starting point for the most users, the must-buy for the most advertisers and the platform of choice for developers." It is hard to say what that means, but it would be equally hard to say that it is anything other than vague.
The market is wise. Its reaction to the announcement was nothing. Yahoo!'s shares moved up a few pennies, but volume is running very light--about half its normal daily trading.
Yahoo! said a few people would get new jobs. A few positions are being created, but the company has not appointed people for these. Perhaps the decisions were hasty and they could not locate the appropriate bodies.
Shareholders don't care about the news. It does not show any indication that the board or management have a plan to improve the company's revenue or to cut costs to increase margins.
A month or two from now, it will be hard to find Yahoo! in the financial news. It will have simply have become less than ordinary again.
Douglas A. McIntyre
With the trading year almost half over and results from the first quarter out, 24/7 Wall St. has created the latest installment of its Ten Worst Managed Companies In America list.
This analysis is based on: 1) one year and five year stock performance relative to the major indexes and other companies in the industry, 2) the company's position in its industry both now and over the last five years, 3) whether management made identifiable and critical decisions which hurt the company, 4) a change in the company's relative market strength compared to its competition, and 5) whether the company could have identified mistakes and changed course quickly enough to avoid a catastrophe.
Some readers will think it is not fair to include companies which have had a recent change of management. While it may be true that a new CEO gets a "honeymoon", if his early, significant decisions do not create a substantial change in the company's fortunes there is little reason to hope for later improvement.
There was interesting event in a 13D filing today right after the close, and that will be worth some news and gossip alike. An investment firm called Amalgamated Gadget LP, which is roughly a 6.6% shareholder of XO Holdings Inc. (NASDAQ: XOHO), has sent a letter to billionaire activist investor Carl Icahn. The group has said that Carl Icahn is in clear violation of his fiduciary duties to minority shareholders and further is calling for Icahn's resignation from the board of directors.
Amalgamated also said Icahn and his affiliates act to give their XO debt and holdings an advantage and preference at the detriment of XO Holdings' minority shareholders. Further, Amalgamated wants Carl Icahn and his affiliates to place their common holdings of XO Holdings into a blind voting trust and to refrain from exercising any managerial control of the company.
On a fully diluted basis, Carl Icahn and affiliates own or control close to 60% of XO Holdings.
We have frequently wondered how Carl Icahn is managing all of these efforts ourselves, despite the fact that his career has been a huge success. His activist activities in biotech stocks seems more than odd, particularly in Biogen Idec (NASDAQ: BIIB). His Motorola (NYSE: MOT) efforts have been a dud and his Yahoo! (NASDAQ: YHOO) play is looking like a total bust now. Despite Jim Cramer recently endorsing those names based upon Icahn the issue of a huge loss being a huge loss speaks for itself.
Jon C. Ogg
June 12, 2008
If you thought things couldn't get weirder in the brokerage firm stocks, guess again. Lehman Brothers Holdings Inc (NYSE: LEH) has essentially fired its CFO Erin Callan and its COO Joseph Gregory. Technically Callan is going to another department, although it doesn't take a rocket scientist to figure this out.
This report comes within 72-hours of its $2.8 billion quarterly loss expectations and after a large financing.
Ian Lowitt, the current chief administrative officer, will become CFO; and Bart McDade, global head of equities, will become the COO of Lehman.
This isn't the way to instill confidence in Wall Street. Shares are down over 8% at $21.75 right at the open and we've already seen over 17 million shares.
Jon C. Ogg
June 12, 2008
SourceForge, Inc. (NASDAQ: LNUX) announced after the close that its President & CEO Ali Jenab has resigned from the company, with an effective date of today. Interestingly enough, Ali Jenab had been at the company for nearly eight years.
The company's board of directors has appointed Robert Neumeister, Jr. as the company's interim President and CEO. Neumeister is a not only a current member of the board of directors, he's the Chairman. The company does note that this is an "interim" basis as it has formed a search committee and will start the process of looking for a new CEO immediately.
SourceForge said it intends to take aggressive steps to accelerate the growth of its core Internet properties: Slashdot, SourceForge.net and ThinkGeek. For those of you who are tech-web addicts you know these, but if you do not then you will be interested to know that these properties are all widely watched and have long-standing readership numbers. In fact, if you look below we are showing you the US-rankings for Alexa and the overall measured ranking from Quantcast:
Alexa Quantcast Est. users
Slashdot 1,404 3,562 693,964
SourceForge.net 133 949 2.0 Mil
ThinkGeek 1,181 12,117 186,413
While these numbers might not sound like the rankings of Google, Yahoo!, MSN, or others, these are very large numbers for advertisers looking for targeted audience ads.
This hasn't been the greatest time for SourceForge as a stock. Shares closed down 2.2% at $1.32 today, another 52-week low. The prior 52-week trading range was $1.35 to $4.45. This also puts the company within basic striking distance of 5-year lows. Shares were even under $1.00 back in early 2003 and late 2002, but they were exponentially higher back in the bubble days.
the company did swing to a net loss last quarter after results. Is market cap is roughly $90 million, while its last quarter showed cash and investments were about $61 million and all liabilities were $11.068 million.
Jon C. Ogg
June 10, 2008
Yahoo! Inc. (NASDAQ:YHOO) has filed its own proxy materials for its August 1 shareholder meeting, and it is essentially asking shareholders to follow it 100% with no concessions to activist and raider Carl Icahn. Jerry Yang and friends are seeking a re-election of all of its directors and is not including any of the Icahn-selected director candidates.
As the company noted, "...we are executing on our strategy to create value that is gaining traction. In addition, in responding to Microsoft Corporation’s proposal to acquire the company and exploring strategic alternatives, Yahoo!’s board has been focused on one central goal: how best to maximize stockholder value."
The company is still maintaining that it is open to a transaction with Microsoft if it maximizes shareholder value. The company is also still maintaining that it is seeing gains from Panama. It also noted that the purchases of Right Media, BlueLithium, Zimbra, and Maven Networks have all helped advance core strategies and that it is winning new or expanded relationships to the likes of WPP, Wal-Mart, CBS, and more than 770 newspapers in its newspaper publishing consortium. It is also still looking for its new advertising management platform called AMP! from Yahoo! to grow its ad presence.
What is perhaps most important is that this says in big bold letters, "Carl Icahn Has No Credible Plan To Create Value" and even noted further, "In our opinion, Mr. Icahn and his slate are not the right individuals to guide Yahoo! as a standalone company."
Jerry Yang and friends might be right about Carl Icahn not offering any value, and they might not be right. It is very understandable that they wouldn't step down just because a billionaire like Carl Icahn gets up their you what.
In the end the company should consider some of the nominees like Mark Cuban or Frank Biondi, at least if it wants to bring in new ideas and have some checks and balances. Don't bet your retirement money on it though. That suggestion may be like asking the wolves to protect the sheep from predators. The truth is that Yahoo!'s current board doesn't want any of Icahn's nominees regardless of who they are. The bad news is that Yahoo! needs more shaking up even if Icahn is overstepping his boundaries.
Before the end of summer it is likely that one of these parties will make some concessions, with the key word being "some."
Our own verdict before the trial has even started is that Microsoft (NASDAQ: MSFT) saved untold billion of dollars by not acquiring Yahoo!. We recently compiled a list for our Special Situation newsletter subscribers of eight other software, tech, and new media companies which Microsoft could acquire for close to or roughly the same amount of cash over the next twelve to eighteen months. The company also wouldn't find itself in as deep of regulatory reviews with any of the companies.
Jon C. Ogg
June 9, 2008
Syntax-Brillian Corporation (NASDAQ:BRLC) is up to some more changes today. The company has appointed Greg Rayburn as Interim-CEO with an effective date of June 4, 2008. It says that Rayburn will replace James Ching Hua Li on an interim basis, who will take an indefinite leave of absence from the company to address personal issues.
Under Board approval granted on June 4, 2008, Mr. Li will be compensated according to the original terms and conditions of his employment agreement during his leave of absence and will continue to serve as a director of the Company.
Rayburn was appointed Syntax-Brillian's Interim Chief Operating Officer on April 16, 2008 and is a Senior Managing Director and the Practice Leader of FTI Palladium Partners, the interim management practice of FTI Consulting, Inc.
He has previously been CEO of International Outsourcing Services, LLC from 2007 to 2008; Chief Executive Officer of Muzak Holdings LLC from 2005 to 2006; Chief Operating Officer of aaiPharma Inc. from 2004 to 2005; Chief Restructuring Officer of WorldCom, Inc. from 2003 to 2004; and Chief Executive Officer of Sunterra Corporation from 2000 to 2002.
Syntax-Brillian shares are down some 5% at $0.70 today in the first 25 minutes of trading and shares met the 52-week low this morning. Its 52-week trading range is $0.69 to $7.14. Eighteen months ago this was a $10.00 stock.
The Company also announced the resignation of two directors:
Man Kit (Thomas) Chow, effective May 28, 2008;
and Christopher C.L. Liu, effective May 30, 2008.
This stock is one we have had under question for far too long to think much good is happening there.
Jon C. Ogg
June 5, 2008
The top story at WSJ.com today is that Bill Gates and Steve Ballmer, heads of Microsoft (MSFT), had a series of fights over control of the company. That was eight years ago. It may be a nice human interest story. But, Ballmer is CEO and Gates is "retiring" to give his money away to worthy causes.
The financial paper writes that "Things became so bitter that, on one occasion, Mr. Gates stormed out of a meeting in a huff after a shouting match in which Mr. Ballmer jumped to the defense of several colleagues." That must have been an Aha! moment. The two men have know each other since 1973 when they were both at Harvard. It is hard to imagine that, over the decades, they agreed on everything.
The story goes on to say that the duo struggled over who would run the world's largest software company and that the argument went on for almost a year.
Over the period since the big blow-ups, shares of MSFT have gone from $53 to $27. There was a special dividend in there, so that comparison is not entirely fair. Nonetheless, the stock has not done terribly well. But, Gates and Ballmer are still friends.
Douglas A. McIntyre
Boston Scientific Corporation (NYSE: BSX) is making a move which may be a questionable one if you have followed this stock for a while. The company said that President and CEO Jim Tobin will be extending his tenure at the Boston Scientific and he plans to remain in his role for the foreseeable future. Back in December we named Tobin on our list of CEO's that need to go, and shares have only recently come back to the levels seen then.
But there is a management change that Wall Street seems happy with so far. Paul LaViolette, Chief Operating Officer (COO), will be retiring from the Boston Scientific. He is only about 50 years old, so retirement is a stretch. LaViolette joined Boston Scientific back in 1994 and he has been COO since 2005. Fred Colen will become the President of its Cardiac Rhythm Management.
Pete Nicholas, Co-founder and Chairman of the Board of Boston Scientific: "I am very pleased to announce that Jim Tobin will be extending his tenure as President and Chief Executive Officer of Boston Scientific." Nichols also noted that Tobin has been involved in mainly integrating Guidant since his first extension two-years ago, and LaViolette has managed much of the day-to-day operations at the other operations of the company. This will put Tobin back in charge of the entire company.
Boston Scientific shares are up 1.5% at $13.33 today, so Wall Street is making the first vote that this is the right call. Shares are also up over 20% from their 52-week lows of $10.76, but down from the 52-week highs of $16.67 and way down from the old $40+ highs of early 2004.
Maybe a CEO can blame the COO for missteps, but only for a while. If things don't improve very soon then Tobin is going to need to call LaViolette and see where he's working in his "retirement."
Jon C. Ogg
June 3, 2008
Yahoo Inc. (NASDAQ: YHOO) submitted and SEC filing today after the close that Edward Kozel resigned from the board of directors. This filing said he had originally intended to leave in February but decided to stay on after Microsoft (NASDAQ: MSFT) made its offer for the company.
It would be nice to know if Mr. Kozel was one of the board members that had allegedly sought independent legal counsel after it became known that Yang was going to turn down Ballmer's buyout offer.
As a result of this exit, Yahoo! has cut the size of its board of directors from 10 down to 9. If Mr. Yang doesn't take this opportunity to add on one of the Carl Icahn designates, then he is just asking for even more trouble while he sticks his head in the sand.
It's up to you whether or not to believe the company on the timing and more. Our bet is that more board members look for an exit.
Yahoo! also filed to delay its annual meeting to around the end of July. It cited the Icahn proxy fight.
Jon C. Ogg
May 22, 2008
Dell Inc. (NASDAQ: DELL) has announced that Don Carty, Vice Chairman and CFO, will step down from the company. He will remain a board member, but will end his direct duties on the effective date of June 13.
This is obviously something that wasn't an overnight development because of the transition announcement. Dell is naming Brian Gladden as the new CFO with the same June 13 effective date. Gladden was President & CEO of SABIC Innovative Plastics Holding BV. If that sounds familiar it is because this was formerly GE Plastics before General Electric Co. (NYSE: GE) took that out of its portfolio.
Gladden also commented that he's joining Dell at a time of transformation.
Jon C. Ogg
May 19, 2008
One of the great traditions in American business is to punish the few for the sins of the many. It a sort of Scopes Monkey Trial for the subprime mess, the president of Moody's (MCO), one Brian Clarkson, has been pushed out. The credit rating agency is being vilified for not seeing the crisis coming sooner.
According to The Wall Street Journal, the announcement of Mr. Clarkson's departure was characteristically vague "While much of the criticism aimed at Moody's is unfounded, Brian believes that the time is right for new leadership to drive forward the changes we have been making in recent months."
Clarkson did have a great deal to do with the unit of Moody's which covered subprime paper, but so did scores of other analysts. CEO Raymond McDaniel must have been on a leave of absence while the mortgage derivatives were being evaluated.
The news does not end Moody's problems. It may be a sign that they are just beginning and that the company want to be see as "doing something" about its issues. Moody's was the gatekeeper for the credit worthiness of investment vehicles which were extremely dangerous. It did not catch that, and many people beyond Clarkson are likely to suffer the consequences.
Douglas A. McIntyre
The hallmark of some of the most successful companies over the last fifty years is that the CEOs spent a great deal of their time with customers and at company locations around the world. Probably the two most famous travelers were Willard Marriott and Sam Walton. At one point, Walton visited hundreds of stores a year. If these CEOs wanted to know how they were doing with the consumers who spent money with them, they did not have to check with anyone else in management.
Which CEOs get out often enough and which don't? Here is the 24/7 Wall St. 2008 list:
Those who should get out more often:
Eddie Lampert, chairman of Sears (SHLD), is pretty busy at his hedge fund. Sears and K-Mart have fallen apart over the last year. Lampert did show up at the annual meeting. He spent most of his time talking about cost cuts and stock buy-backs. A check of Sears PR shows that his comments about his stores and quality of merchandise are very, very rare. Maybe that is because billionaires don't spend much time at discount chains.
Howard Schultz, CEO and founder of Starbucks (SBUX) is a great one for writing memos about what is wrong with his stores. The most recent letters from headquarters in Seattle were about the company missing earnings. Schultz puts out a series of PRs called the company's Transformation Agenda Communications. 24/7 has visited a lot of Starbucks over the last year. No one has seen Howard. Maybe he should stop in more often and find out why his same-store traffic is so bad.
Alan Mulally of Ford (F) spends a lot of time talking about downsizing and his new crossovers. The most recent news out of the car company has to do with its commitment to human and labor rights. Tell that to all the people who have been sacked at Ford. If Mulally spent some time with farmers and construction workers he might find out what he could do to help sales of his flagship F-150 pick-up. 24/7 asked some dealers if they had ever heard of Mulally kicking the tires at dealers. None of them even know what he looks like. Sales at Ford could not be running much worse than they are now.
Julian Day at RadioShack (RSH) has a stock that trades near its 52-week low. He also has 4,500 stores. Based on how things are going, his potential customers are going into Best Buy. RadioShack's website makes a big deal of the fact that Mr. Day was part of the turnaround at Sears and Kmart. That did not turn out too well. One of the company's recent PRs was about the fact that RadioShack stores are helping consumers make the transition to digital television. Maybe Day should spend more time with customers going over how to "obtain a DTV converter box that will allow an analog television to receive digital signals."
Michael Dell of Dell (DELL) has started selling PCs in retail outlets. The old business model of using the internet and phone to order Dells was not working well enough. Dell does get around the world and has been to Asia and the Middle East to set up new resale chains, but that is not the same as walking through the local Wal-Mart to find out why customers are buying HP or Lenovo PCs instead of his. He did give a nifty speech on "green IT" recently. That should bring people into the Dell retailers.
Joe Moglia of TDAmeritrade (AMTD) may want to hit the sidewalks. His firm fell behind companies like Schwab and Scottrade in the JD Power discount broker rankings. The company has over 100 locations. Schwab's stock has also done better in the last year. If he can’t get out, perhaps he could take orders from investors in the call center.
Sprint (S) had some great news. Its CEO Dan Hesse put together a deal with Clearwire (CLWR), Google (GOOG), Intel (INTC), Comcast (CMCSA), and Time Warner Cable (TWC) to build a national WiMax network. Unfortunately, many Sprint customers still hate the company. Sprint finished last in the JD Power wireless customer care ratings. It also finished last in the retail sales satisfaction survey. It is nice that the wireless company has put together a plan for its future, but, in the present, customers are walking out the Sprint doors at a dizzying pace. Hesse may want to get out in the field and find out if he can staunch the flow.
Palm (PALM) CEO Ed Colligan better hit retail outlets which carry his smartphones today if he can catch a ride. 24/7 visits to AT&T mobile stores indicated that the RIM (RIMM) Blackberry and Apple (AAPL) iPhone are selling like mad but no one will touch the Palm products. This company is falling apart at the seams. Colligan may want to move from store to store and pitch the product himself. It's that desperate.
A lot is amiss at Target (TGT). Its stock is down 10% in the last year. Shares of its rival Wal-Mart are up close to 20%. CEO Gregg Steinhafel may want to do what Sam Walton did and have rallies in a couple of stores a day. March comparable store sales at the retailer fell 4%. The company did sell some credit card receivables to JP Morgan (JPM) and that may have been a good use of management time, but poor sales are not going to be offset by smart financing packages.
And, those who must be getting out enough:
Wal-Mart (WMT) may be one of the best turnaround stories in the last year. Same-store sales are actually running up, which is rare in the industry. Sam Walton invented the "CEO store tour". Does current CEO Lee Scott get around as much? No one could match Walton's travel schedule. But, you can find video of Lee at a store visit on the Wal-Mart site. And, the store managers and customers are treated like royalty. They are quoted in the company PRs more than Scott is.
Apple (AAPL) CEO Steve Jobs may not visit retail outlets or Apple stores, but don't tell that to the people who stand in line for hours to get an iPhone or the latest Mac. The Apple faithful believe that Jobs is a deity who lives in every product and outlet. That seems a bit "Zen" but why try to convince people otherwise. He gets out enough "in spirit."
Mark Hurd of Hewlett-Packard (HPQ) has helped build the king of store-sold PCs. That has helped the company be the largest seller of computers in the world and kept them high on customer satisfaction surveys. HP was recently named one of Wal-Mart's "Supplier of the Year". Why? Over the course of 2007, Wal-Mart’s sales of HP printer and ink products grew at three times the rate of the industry, and profit in this segment doubled over the prior year. Hurd has to be spending a lot of time on retail. No one gets that good at it otherwise.
James Skinner of McDonald's (MCD) has been beating the competition to within an inch of its life for two years. McDonald's is growing faster than the industry, which is hard when you are the largest player. The company has been launching products which carefully target the breakfast and coffee crowd and has been "spot on" when it comes to competitive pricing. Skinner's picture at the McDonald's site shows him standing in one of his stores, not sitting behind a desk. If he is not in that store on a regular basis, he certainly knows what goes on there.
Charles Schwab of Schwab (SCHW) may or may not spend time in the company's retail offices. He actually does something better. He puts his name on almost every piece of marketing the company does. "Ask Chuck". Schwab makes sure every customer knows it is his company, they are investing at a firm where his is responsible because his name is on the door. He even puts a letter online telling people why he is on the side of the investor. Hokey. Maybe. But, it works.
James Sinegal of CostCo (COST) isn't just in the stores. After a fashion, he is the stores. He started the company in 1983. According to the company, he tries to visit every one of the CostCo stores at least once a year. He gets the gold medal for CEOs who spend time in the field.
Douglas A. McIntyre
Not all of the institutional money involved in the Yahoo! (YHOO) rejection of Microsoft's (MSFT) bid are happy to sit on the sidelines. Several may launch a campaign to push out the current board at the portal. It could become a good, old-fashioned proxy fight.
According to Reuters, "Ironfire Capital, is talking to other firms about running a director slate, according to Eric Jackson, who heads the firm." The idea is to accumulate a 5% interest in Yahoo! and then put up board candidates who favor a Microsoft bid.
Good luck. Even with all of its money, Microsoft wouldn't go forward with a proxy war. The cost would eat up most if not all of the potential profits of the transaction.
Douglas A. McIntyre
iRobot Corp. (NASDAQ: IRBT) shares are seeing their share of sellers today. The company posted a loss of -$0.16 EPS on $57.3 million in revenues, while First Call estimates were -$0.16 and $55 million. Unfortunately, despite the stock well off of highs this story doesn't get much better.
The company's guidance for fiscal-2008 is now $0.12 to $0.17 EPS on revenues of $295 to $305 million, while estimates are $0.23 EPS and $298 million.
The company also lost its CFO Geoffrey Clear, who is resigning to pursue opportunities with emerging companies with $50 to $300 million in revenues.
To add insult to injury, shares are down about 13% pre-Market to $13.90, and that will mark a new 52-week low if that holds. The prior 52-week range was $14.51 to $24.30.
Jon C. Ogg
May 1, 2008
After today’s close we saw earnings out of NutriSystem Inc. (NASDAQ: NTRI) with $0.42 EPS on $216.468 million in revenues. The estimates from First Call were $0.41 EPS on $214.52 million in revenues.
The company gave guidance of $180 to $190 million for the quarter ahead, with adjusted EBITDA of $36 to $40 million. Next quarter estimates are $0.60 EPS on $183.29 million in revenues. As far as fiscal-2008 guidance, the company put revenues at $700 to $720 million, with adjusted EBITDA of $125 to $135 million. Estimates for fiscal Dec-2008 are $2.23 EPS on $718.89 million in revenues.
Joseph Redling, President & COO, will succeed Michael J. Hagan as Chief Executive Officer, effective May 1, 2008; Hagan will stay on as non-executive Chairman.
The company also repurchased and retired 3.3 million shares, or approximately 10% of total outstanding shares for $44,557,000. NutriSystem also declared the its first quarterly dividend of $0.175 per share, payable May 15, 2008 to shareholders of record as of May 5, 2008; although this will be subject to determination each quarter ahead.
Shares closed up 3.2% at $21.13 in normal trading today, and shares are down modestly at $21.00 in after-hours trading. This CEO departure is keeping shares from running most likely.
We recently ran a large list of stocks that could double from their lows by the end of the recession, and NutriSystem was one of those stocks. This stock has one of the more crowded short sale trades out there with 19.23 million shares (60% of float) listed as being short. After a near 70% drop so far over the last 52-weeks, these numbers would otherwise be very acceptable.
Jon C. Ogg
April 23, 2008
Things were bad at HP (NYSE: HPQ) three or four years ago. The company's stock did fall from $25 in early 2004 to $16.50 that August. The computer firm ended up kicking out its CEO and bringing in Mark Hurd, who saved the company. HP trades at almost $50 today.
According to the FT, top management at Citigroup (C) has turned to HP for advice about how to turn around a company, and how to make it run well without breaking the firm into pieces. The newspaper writes "People close to the situation say Citi officials see parallels between their situation and that faced by HP in February 2005."
The situations are not really like one another at all. Some HP investors wanted the company broken into parts. The same is now true with Citi. The comparisons end there.
Even when things were "tough" at HP, the company was making buckets of money. In the hard year of fiscal 2005, revenue at the tech company rose to $86.7 billion from $79.9 billion the year before. Concerns focused on the drop in operating income from $4.22 billion in 2004 to $3.47 billion in 2005. It was hardly a crisis. By 2006, operating income was back to up to $6.5 billion.
In 2004, HP had cash of $12,7 billion against long-term debt of $4.6 billion. The company was more than solvent and there was never any risk that it would lose money.
Citi is in 10x the trouble that HP was earlier in the decade. There is not any advice to be had from HP because the computer and printer company was not struggling with multi-billion losses. Citi faces the real chance that it may have to raise another $5 billion or $10 billion in capital to stay independent.
Citi management would be better off trying to reach Peter Drucker from beyond that grave.
Douglas A. McIntyre
Many people think of Jim Cramer as being MAD MONEY on CNBC now, but his full-time gig is still at TheStreet.com, Inc. (NASDAQ: TSCM). The company gave an SEC filing this morning that shows the company has secured his contract ahead. After all, he is the co-founder and chief voice of the company. Many would argue that he IS the company.
Jim Cramer has entered into a new employment agreement with a retroactive effective date of January 1, 2008 to author articles for the ad-supported and paid publications (Action Alerts PLUS) product and to "provide reasonable promotional and other services..."
Cramer will receive an annual salary of $1,300,000, $1,560,000 and $1,872,000, respectively, for the three successive years of the agreement. Cramer will also receive a signing bonus in the amount of $100,000 and will be eligible for an annualized target bonus equal to 75% of salary based upon achievement of company determined financial targets.
Continue reading "TheStreet.com Signs 3-Year Cramer Contract (TSCM)" »
Well, now we have a better idea as to why the CFO of video game publisher Electronic Arts (NASDAQ: ERTS) was leaving the company. McAfee, Inc. (NYSE: MFE) just announced after the close that its CFO Eric Brown is resigning from the company to become CFO of Electronic Arts.
McAfee was the one caught off guard it appears. The company said it has begun a search for a permanent CFO from internal and external candidates.
Jon C. Ogg
March 27, 2008
Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Less than a month ago, 24/7 Wall St. put the awful performance of Level 3 (NASDAQ: LVLT) at the feet of the two men who have run the company for over a decade and also wrote that the board was asleep at the wheel.
This morning, the company's president, Kevin O'Hara left the company. Shares are down 7% on the news. They should be rallying.
Douglas A. McIntyre
KLA-Tencor Corporation (Nasdaq:KLAC) has announced that Jeffrey Hall, its CFO, will resign effective March 31, 2008. Normally we look further into CFO resignations since they are the final ones who "sign off on the books" but this reasoning has been disclosed as "to pursue an opportunity closer to his mid-western hometown."
The board of directors has also appointed John Kispert, KLA-Tencor's president and chief operating officer, as the interim chief financial officer, effective March 31, 2008. Kispert will also retain his duties as president and chief operating officer. It also appointed Virendra Kirloskar, its vice president and corporate controller of KLA-Tencor, as chief accounting officer, effective March 31, 2008.
Besides an obvious slowing chip market, this doesn't look like anything ominous that would need to be thoroughly questioned. It looks like he joining Express Scripts (NASDAQ: ESRX) as its CFO. Shares closed down 0.9% at $41.63 in normal trading, and shares are down almost 1% more at $41.22 in after-hours trading. KLA's 52-week trading range is $39.86 to $62.67.
Jon C. Ogg
March 3, 2008
Gap Inc. (NYSE: GPS) is losing its President of its Old Navy brand. Dawn Robertson, 52, is leaving Gap effective immediately, and Tom Wyatt of the Gap Outlet division will become acting president while a search for a permanent replacement is conducted. This was said to be a mutual decision.... Do you believe it was mutual, and more importantly does it even matter?
We don't usually like to bash a brand nor do we like to bash people. We noted prior management changes were not enough, and this is no different. The problems at Gap and at OLD NAVY were not caused by Dawn Robertson and the new CEO Glenn Murphy has no fault here either. We panned Paul Pressler as one of our first CEO's THAT NEED TO GO, and all of these officers are inheriting what his regime left behind. It is very unlikely that the OLD NAVY brand will miss her after 16 months. For that matter, she probably won't miss it either.
If any president in corporate America wants to run any brand out there, the chances that it would be OLD NAVY might be as little as 1 in 1000. This is the cheapie brand for Gap. Glenn Murphy should take this as an opportunity here. He is still a new CEO there and frankly he could get away with anything short of a capital crime if it would fix a company and fix a brand. Gap didn't do well with its more upscale womens fashion line Forth & Towne so it closed it. But OLD NAVY is so cheap that acts as a mental drag to even a casual apparel store like Gap and Banana Republic.
We doubt seriously that Gap would jettison its brands or break itself up. But the one brand that could make a difference is for it to unload its cheapie brand. It could go out and strike new design contracts for say the 2010 product lines and run as an independent company. Jim Cramer last year used to say "GAP WILL BE TAKEN PRIVATE IN A YEAR!" before the private equity meltdown happened. The problem is that Gap's market cap is over $14 Billion as of now, and private equity firms are having a hard time borrowing even a couple billion dollars. It has also been a dead stock and longer-term shareholders who had gotten used to making 10% and 20% in share appreciation year after year may want more than just an at-market buyout. We have had this up for review in the Special Situations letter, but it has yet to make the cut.
OLD NAVY in North America generated a same store sales drop of -8% this January, and -10% in January 2007. The problem isn't the economy, it's that this OLD NAVY brand is complete garbage and barely appeals to the lowest rungs of society. This brand is so bad that it is extremely difficult not to address it with offensive language. Go get your new president, but make it a challenge that a CEO or president would actually want. The job ad could read "Crummy company about to spun-off, needs brand improvement, major stock options package, needs visionary."
Gap was already weak before the September 11, 2001 put another nail in its coffin. While shares did recover from those lows, the reality is that Gap stock has been dead money for almost 5-years. We noted long ago about needing a headcount cut and brand revamping. This would even allow the company to stop wasting its cash on share buybacks when it needs the cash for its brand. There is an opportunity to jettison its cheapest brand here, and it might actually make a difference to shareholders.
We are looking mostly at the North American stores for comparison here. As of November 3, 2007, there were 1,188 domestic and 90 Canadian GAP brand stores. There were 997 domestic and 65 Canadian OLD NAVY brand stores. When you consider that BANANA REPUBLIC had 519 location in the U.S. and 30 in Canada, you can see why we would note a potential powerful "unlocking value" here.
Jon C. Ogg
February 19, 2008
Liberty Media, the controlling shareholder of Barry's Diller's IACI (IACA) wants Mr. Diller to know that the company is not really his. Liberty has filed suit to take away Mr. Diller's rights to vote its shares. Liberty wants Mr. Diller and the majority of his board out on the streets.
In a response to Liberty's actions, Mr. Diller said in a statement: "After reading this new salvo, I am beginning to think these people are insane. Everything they cite is hogwash. First of all, we have never asked the board to take action on any specific proposal high, low or no-vote. What we have done, which we thought was the responsible thing to do given this conflict, is to go to the Delaware court and ask them to tell us what rights IAC has or doesn't have," writes The Wall Street Journal.
Insane, indeed. Mr. Diller now thinks he is a psychiatrist. He may need a new line of work.
Douglas A. McIntyre
Shares of online auctioneer eBay (NASDAQ: EBAY) are trading lower today to a new 52-week low on reports that CEO Meg Whitman will be stepping down. The WSJ led this reporting and it actually took the back seat in order of magnitude because of what was going to be one ugly day had the Fed not intervened.
Whitman had previously noted that no CEO should stay for more than a decade because of new challenges and changes in an industry. That appears to be the case now with eBay having matured (we didn't say peaked) in the U.S. The company has a dominant auction in the U.S. by far and it has been making its entrances internationally when and where it can garner an edge or acquire a large auction property.
The acquisition of Skype has been written down further by roughly $1.4 Billion and its "Neighborhoods" foray into social networking hasn't gotten much press since the press releases and so-so coverage around its launch. It appears that the easy growth days have been seen and the low hanging fruit has been grabbed. Maybe it is time for a new leader that can grow the business in an environment that is going to be more challenging. Amazon.com (NASDAQ: AMZN) has also made much progress into online retail, although that hasn't killed the "Buy It Now" aspects of eBay at all; but in theory Amazon could offer an auction platform on certain used goods either via eBay or against eBay now that it is a virtual storefront for anything and everything.
Shares are down more than 30% from 52-week highs over $40.00, and average analyst price targets look to be just under $41.00. Meg Whitman was once thought to be a candidate for the head job of Disney (NYSE: DIS), although the company has done quite well under its current team. Whatever she ends up doing, you can bet she isn't retiring from corporate America entirely. ebay also is reporting earning after the close Wednesday, so if she is truly leaving then you can expect the formal announcement tomorrow.
Shares today are down 3.6% to $27.31, and the 52-week trading range before today's drop was $27.44 to $40.73. The intraday lows before the post-Fed recovery are recorded at $26.02.
Jon C. Ogg
January 22, 2008
There was one small bit of good news last night out of Symatec (NASDAQ: SYMC). The data security and storage leader announced that it was actually selling a unit. San Francisco-based private equity firm Vector Capital is acquiring its Application Performance Management unit and this will operate as a new company under the name Precise Software Solutions Inc., and the deal is expected to close this current quarter.
Greg Butterfield, interim group president of Storage and Server Management Group at Symantec: "Selling the APM business will allow the Storage and Server management team to focus on securing and managing information."
It is no secret that Wall Street wasn't impressed with the Veritas acquisition that killed the stock. We even noted that Chairman & CEO John Thompson may be up against the ropes in 2008 and may have to relinquish his CEO title for some new inertia there at Symantec. It is too bad because we actually like this CEO and even liked the strategy, and there is nothing wrong with Thompson's qualifications or street credibility.
The strategy just isn't working and the culture needs a shakeup. Wall Street is a "show me" demanding beast that must be fed. The company suffers from low growth, no real cost cutting initiatives, buybacks that failed to bolster share prices, and more.
But this may be an interesting ploy from Symantec. We dug around to see what this would result in since terms weren't spelled out. Precise Software was acquired in 2003 and it looks like it became a non-core operation faster than it was bought after an integration between Symantec and Veritas. This looks like it will trim approximately 300 employees out of Symantec and because this is non-core may incrementally add to margins this year.
This may attract attention after the stock has been battered and after numerous traders have constantly discussed a somewhat bloated structure that needs a shakeup. Without knowing the brains behind the machines there, it is hard to know if this will mean that more sub-units are up for review. But that is what some on Wall Street will be hoping for.
Thompson has also made some recent additions to his immediate staff. Earlier this month the company also promoted Enrique T. Salem as its new chief operating officer who will be responsible for product development, sales, services, marketing and Information Technology (IT) activities. Salem came to Symantec from a 2004 acquisition of Brightmail, where he was president & CEO. Gregory W. Hughes, who had been group president of Symantec Global Services, was named chief strategy officer. Hughes is now responsible for corporate development and strategy and will focus on new business incubation, such as the Symantec Protection Network, the company's software-as-a-service (SaaS) platform, and other areas of internal investment.
We don't like having to call CEO's out on the street, particularly when we like them. These efforts are probably hard to ignore and it is looking like Thompson is now making some positive moves in the right direction. The stock market and its stock chart may be the stock's biggest problem now, but that is no fault of management and bad times never last forever.
Symantec shares were up almost 2% to $15.55 in thin volume pre-market trading The 52-week trading range is $15.15 to $21.32, and it had reached $30.00 before the Veritas giant acquisition. It looks like at the last minute before the market open there were sell orders so we'll have to look around to see if the stock took a downgrade.
Jon C. Ogg
January 18, 2008
Ambac Financial Group, Inc. (NYSE: ABK) has finally come clean, but this coming clean is so brutal that it will be dirty. Below are some of the summary changes, many of which are substantial:
AMBAC is actually claiming a new book value of $21.00 per share as of December 31, 2007. How many people will now try to use that number as a share price ceiling is as good of a guess as any. Analysts were not surprisingly expecting a profit for the quarter.
Shares closed at $21.14 yesterday and initial pre-market indications had put this around $19.25 to $19.50 in early hours pre-market trading. Shares are actually trading down under $18.00 now. The 52-week high is $96.10. This is actually weighing on other bond insurers and guarantors as MBIA Inc (NYSE: MBI) is indicated down 9%.
Jon C. Ogg
January 16, 2008
Recessions are no good, no fun, and we are for all practical purposes in one. The government numbers just aren't yet there. But if you are a CEO that was in trouble, a recession could end up becoming your best friend as far as the keeping your job that you are under pressure over.
Take Advanced Micro Devices (NYSE: AMD) for example. It is no secret that we have been calling for Hector Ruiz to get the axe as CEO of AMD. We could go on and on about the blunders this company has made. But in a slowing economy Ruiz might just be able to say that he can guide the company through the hard times better than when everyone else was doing well. After all, it isn't solely Ruiz's fault that a slowdown in the sector and the broad economy is hitting and a slowdown could even mask under-performance to plan even in the graphics side of AMD. He might even now have an excuse to be able to back away from those projections that no one believed last month at the analyst day.
Symantec (NASDAQ: SYMC) is another example. We actually like CEO John Thompson and understand that he's well liked and he definitely has a great resume. But we recently called him as a CEO that may want to just keep the Chairman role and bring in a replacement CEO. The problem here is that this stock got slaughtered after his huge Veritas acquisition ruined the stock trajectory. Then after the huge sell-off the stock has never recovered even with more small deals. The stock is now half of its pre-merger glory days and has been just dead money. If this slowdown gets too bad we aren't even sure the $15.00 post-merger lows will hold. But this company was already expected to have low growth now and Thompson might actually escape the Turk if the economy can be blamed for an inability to act like a growth stock. Maybe a slower economy even gives him the excuse to trim down the number of jobs that Wall Street would have liked to have seen as a post-merger opportunity.
A slowing tech environment might actually even save Alcatel-Lucent (NYSE: ALU) CEO Patricia Russo, if you can imagine it. 2006 to 2007 were the years of Cisco Systems as John Chambers was in the sweet spot with a full end to end offering. The combined Lucent and Alcatel hasn't gone well but as telecom and communications spending is still there the company might actually be able to claim that its offerings might be more attractive on price even if the entire solutions aren't packaged quite as well as Cisco. It seems hard to make the call here, but Cisco has run into what Wall Street sees as some peaking issues itself, and it could give Russo the out she needs to be able to say, "See, even the best in the business is in trouble." Earnings warnings affect even good companies in bad times.
Circuit City (NYSE: CC) CEO Philip J. Schoonover might have been praying for a recession as early as last Spring when the real troubles started pounding the company. Almost no retailer does well in a recession and he could say that Wal-Mart and Best Buy are simply more powerful. Even if this company is technically a retail play, it does sell technology products as its mainstay and if technology slows down more than other areas of the economy this could be the excuse Schoonover can use to keep from changing his name to Scootover. It might even justify the boondoggle of the employee firings in favor of the $8.00/hour employee model that took away anyone who knew more technology nuances than elsewhere. A recession would even allow him to have an excuse for warning of a loss in the Holy Grail retail fourth quarter holiday season.
Continue reading "Recession May Save CEO's In Trouble (AMD, ALU, C, SYMC)" »
Mr. Clegg,
As a member of the AMD (AMD) board, you know how deeply disappointed the market is with the performance of the company's CEO Hector Ruiz. AMD shares hit another 52-week low today at $5.77. Wall St. has lost faith in the company's ability to release products on time and improve gross margins.
Wachovia Capital Markets recently wrote "design problems have prevented AMD from making its quad-core chips broadly available, leaving Intel (INTC) with "essentially no competition" in the quad-core market."
With shares at a five year low, AMD needs a new leader before investors will believe that the company can be turned around.
Douglas A. McIntyre
It seems that all of a sudden corporations are deciding to do the right thing by getting rid CEO's that have put the companies and shareholders in untenable positions.
We called CEO James Donald of Starbucks (NASDAQ: SBUX) last week as a CEO that needs to replaced by founder Howard Schultz. Yesterday that happened.
Yesterday evening there were also reports from CNBC, The WSJ, The Financial Times, CNN, and many others that James Cayne (Jimmy) was being replaced as CEO at Bear Stearns (NYSE: BSC). He was our replacement in December for another CEO who got the ax so we'd still have our 10 CEO's TO GO FOR 2008. At midnight EST there was no official statement from the company but these reports when this widespread are almost never "an oops" where everyone is wrong (even if Dewey didn't really win). It appears that Cayne is staying on as Chairman, but keep in mind he's in his 70's.
Cherkasky of March & McLennan (NYSE: MMC) was the one that was fired in December and he was one of our 10 CEO's to go, and one of the top ones.
But we comprised a list of "actionable events" where a CEO being fired or "retiring" would likely act as cause for a stock rally so long as the companies have a replacement and action plan in place. Bear Stearns shares were down 3% again Monday, but rose 2.3% in after-hours. We aren't just trying to point out CEO's, and we even gave a GUIDELINE FOR CEO's TO GO. We looked for stocks where we think new leadership would propel the shares. So here is a summary of CEO's we still believe need the ax headed their way:
There is also a whole slew of technology companies in need of a new regime. Here are the 247WallSt.com Technology CEO's Who Need to Go in 2008 (ALU, AMD, BBND, CC, SYMC). Out of these two we can't decide which one of two is more deserving to get the ax nor which will be the first one marched out. Hector Ruiz of Advanced Micro Devices (NYSE: AMD) and Philip Schoonover of Circuit City (NYSE: CC) have done in their hearts what the best thing and their efforts and leadership ended up being the bomb. Military pilots turned investors would say their tenable positions are now FUBAR. They should both meet on the golf course this weekend and see which one can score a better exit package. Ruiz will probably have a better exit package as his pay with options is potentially huge. Both of these guys are probably done.
If you want a potential list of other CEO's or key managers that could face choppy waters you can see our master list of TURNAROUNDS THAT HAVEN'T TURNED AROUND.
Join our open email list to hear previews about other management changes, value stocks, special situations, IPO's, restructuring, M&A, merger-arb spreads, and more.
Jon C. Ogg
January 8, 2008
On January 2, 24/7 Wall St. suggested that Starbuck's needed to replace its CEO with founder Howard Schultz. And,today the company did.
Douglas A. McIntyre
