Management Turnover as Change Agent

Thursday, May 31, 2007

Arrow International Inc. Fires CEO and Bows to a Major Shareholder

Arrow International Inc. ARRO (NASDAQ) board of directors announced today the termination of its current CEO and chairman, Carl G. Anderson, Jr. The Board said that it had lost confidence in Mr. Anderson's ability to lead the company. In the interim, the board has brought back former president and chief operating officer of Arrow, Philip B. Fleck and made him interim President and CEO. The Company also announced that the Board elected R. James Macaleer non-executive Chairman of the Board of Directors.

The company stated,
"During this period the company has repeatedly failed to meet the sales and earnings targets provided to the investment community as well as projections Mr. Anderson has provided to the board,"
The company also stated that it currently expects fiscal year 2007 sales and earnings per share to be in near the low end of targets earlier provided in the Company's second quarter press release of March 27, 2007.

Both these announcements came on top of a notice from the McNeil Trust that was made public by Arrow International of the Trust's intent to nominate five persons for election as directors at the 2007 annual meeting in addition to the three persons it has already indicated it planned to nominate. In essence, The McNeil Trust seeks to elect 100% of the directors of the Company despite the fact that it only owns 10% of the outstanding shares. At this point, Arrow International has indicated it has no plans to block the Trust's attempt to take over the board and effectively the company.

What exactly is going on?

For more on the changes see the below story in the Philadelphia Enquirer on May 17 and articles published today, May 31:

Philadelphia Enquirer (May 17)*
Wall Street Journal (subscription req.)
Street Insider (subscription req.)
Houston Chronicle
Trading Markets

Another Online Marketing Firm Brings in New Leadership

Less than two weeks after revealing it is being probed by the Federal Trade Commission (FTC), ValueClick VCLK (NASDAQ) announced Wednesday that its board of directors elected Tom A. Vadnais as the Company’s new chief executive officer. Vadnais has been a member of the Company’s board of directors since October 2001 and has also held a number of senior management roles within ValueClick during this time, including his most recent role as president of U.S. operations. Vadnais succeeds James R. Zarley, who has served as ValueClick’s chief executive officer since 1999. Zarley has been named ValueClick’s executive chairman of the board of directors, focusing primarily on the Company’s strategic direction and the gradual management transition of the Company’s operations.
In a conference call, Zarley said the FTC investigation had nothing to do with the executive changes. He also said the selection of Vadnais as CEO is in no way related to the intense merger and acquisition activity in the online marketing industry.

"This is not something that's been a short-term process for Tom and I," said Zarley. "We discussed this and worked on it for at least a good year now, ever since Tom had taken over as president of U.S. operations... I plan on staying as a full-time employee so my status as a worker-bee is going to continue for whatever period of time Tom will have me around here."
Vadnais joined ValueClick in October 2001 through the Company’s acquisition of Mediaplex, where he was president, chief executive officer and a member of the board of directors. Mr. Vadnais became a member of the ValueClick board of directors in October 2001 and also has held general manager roles for the Company’s Mediaplex technology and Commission Junction affiliate marketing businesses. In June 2006, Vadnais was promoted to president of ValueClick’s U.S. operations. Mr. Vadnais’ experience prior to ValueClick includes positions as: president, chief executive officer and a member of the board of directors of Data Processing Resources Corporation; president and chief executive officer of Tascor, Inc.; a member of Norrell's board of directors; and a member of the board of directors of Vadnais also had experience in other management positions. He was a vice president of operations, during his 23-years with IBM.

Vadnais takes on his new position at the same time online advertising and marketing firms are being gobbled up by big players, e.g., Google, Yahoo, Microsoft. Keep an eye on the company. Not exactly sure what Vadnais is actually bringing to the table with his newest appointment to run ValueClick.

Related Articles:

Financial Times
Streetinsider (subscription req.)
Trading Markets

Wednesday, May 30, 2007

Talisman Energy Nabs Top Energy Executive

Talisman Energy TLM (NYSE), Talisman Energy, Inc., an independent international oil and gas company, engaged in the exploration and production of crude oil, natural gas, and natural gas liquids in North America and internationally, announced that John M. Manzoni, a top level executive at BP would become the company's new CEO later in the year. Manzoni will succeed Jim Buckee, who is retiring from Talisman. Manzoni has quit his position as head of BP's refining business effective August 31.

Earlier in the year, Manzoni, a twenty four year veteran of BP, was one of only a few executives that had been considered as a potential successor to John Browne as the company's chief executive. He was not chosen. Browne quit unexpectedly on May 1, after it emerged during legal proceedings, he had lied about how he met a gay former lover. He originally lied to prevent a UK newspaper from publishing details of the affair but failed in his efforts. It is likely Manzoni was eager to find a new position after being passed over for BP's top job.

During Manzoni's recent tenure at BP, the company experienced a number of major refinery related accidents -- an Alaska pipeline spill and a 2005 explosion at a Texas refinery, that killed 15 workers. An internal investigation was initiated. The report into the blast criticized the company's global management culture and recommended four executives be fired. The report did not call for Manzoni's removal. Except for this major potential blemish on his reputation, Manzoni has shown himself to be highly successful energy executive with the skills necessary to lead a major energy company.

His appointment to Talisman is a coup for the company.

Additional Articles:

Financial Times (subscription req.)

Rural Health Provider Transitions Management

Health Management Associates HMA (NYSE), a leading provider of acute care services in rural communities, announced the promotion of Mr. Burke W. Whitman to Chief Executive Officer, effective June 1, 2007. The current CEO and Vice Chairman, Joseph V. Vumbacco has served as CEO for over six years. Vumbacco will continue as Vice Chairman and will assume new responsibilities including consulting on construction projects, legal issues and Federal and state governmental relations.

Whitman's promotion appears to be a positive move for the company. He has had extensive experience in the health management related field successfully handling a variety of executive positions at different companies (e.g., Columbia/HCA Healthcare Corp., Triad Hospitals, Investment Banker with Morgan Stanley). He initially came to HMA back in January, the same time a major recapitalization program had been announced. Whitman was hired to be the company's President and Chief Operating Officer. In January, the company announced a sizable recapitalization of its balance sheet. The recapitalization was designed to reduce HMA’s overall cost of capital, enabling it to achieve a more optimal capital structure. As part of the recapitalization, HMA returned over $2 billion to shareholders through a $10.00 per share one-time special cash dividend that was payable on March 1, 2007 to shareholders. HMA’s common stock started trading on the ex-dividend basis March 2, 2007, the date after the payment date. The stock has followed a stable path since the dividend payment.

Whitman's promotion can be expected to be a smooth transition. Keep a close eye on Whitman and how Health Management Associates performs over the next six to twelve months.

Tuesday, May 29, 2007

Verisign Shifts Top Management

Verisign VRSN (NASDAQ), a provider of digital infrastructure for networked companies announced that Stratton D. Sclavos, who has been with the firm for twelve years, resigned as CEO, effective immediately. The Board elected William A. Roper, Jr. as President & CEO. He has served as the board's lead independent director and has been a member of the board since 2003. The board also elected Edward A. Mueller as Chairman of the Board.

As with so many other technology related companies, Verisign was caught up in the options backdating scandal. The company initiated its own investigation of its management which according to the company has been substantially completed. According to Verisign, the review did not find intentional wrongdoing by any current member of senior management, including Sclavos. The abrupt announcement was not however, a reassuring sign.

Sclavos' replacement, William A. Roper, Jr., nevertheless, appears to be a really solid choice. He had vast experience in different areas while at Science Applications International Corporation. He most recently served as executive vice president at the firm. He also served as the company's CFO and was instrumental in some of the company's acquisitions and also worked on the sale of specific parts of the firm.

Keep an eye on Verisign to determine why Sclavos left and how Roper and Mueller intend to run the company.

Related Articles:

Motley Fool (July 10, 2007)
Wall Street Journal (subscription req.)
Barron's Tech Trader Daily
Blogging Stocks
Schaeffer's Research
Verisign Gets Nasdaq Notice (May 17)
Seeking Alpha (May 30th)
InfoWorld (May 31)

More on Advance Auto Parts

As a further follow-up to Thursday's blog on Advance Auto Parts AAP (NASDAQ), the company announced on Friday an additional management change within the top ranks. Elwyn G. Murray, III, assumed additional responsibilities. He was chosen to serve as Executive Vice President, Merchandising, Supply Chain and Technology, effective immediately. Murray joined Advance in April 2005 as Executive Vice President, Administration. Prior to joining the Company, he served as Senior Vice President of Store Operations for Food Lion, based in Salisbury, North Carolina, with whom he was employed for 16 years. A the same time, Dave Mueller resigned as Executive Vice President, Merchandising and Marketing. Mr. Mueller joined Advance in March 2003 and had held his position since November 2004.

Stay tuned.

Thursday, May 24, 2007

Advance Auto Searches For New CEO

The well respected CEO of Advance Auto Parts, Inc. AAP (NYSE), Michael N. Coppola who had been with the firm since 2001, resigned May 5th effectively immediately. The company installed John C. Brouillard, a board member, as the interim chairman, president and CEO of the firm. Advance Auto Parts has initiated a search both within and outside the firm for a new CEO.

Check out Jerry Marks' ( May 23 piece on

Wednesday, May 23, 2007

Backdating May Have Led to Black Box CEO Exit

According to an article by Corilyn Shropshire of The Pittsburgh Post-Gazette, backdating of stock options may have been a reason for Fred C. Young, the CEO of Black Box Corporation BBOX (NASDAQ), May 22 resignation. For additional details see the article.

Tuesday, May 22, 2007

Series of Management Changes Hit Healthcare Firm

National Medical Health Card System, Inc. NMHC (NASDAQ), which provides PBM services to plan clients through its network of licensed pharmacies, has undergone a series of management changes over the last number of months. The most recent top management changes included changes in the CEO & President, CMO, General Counsel and CIO positions. The changes were supposedly based upon the recommendations made by NMHC's Chairman, Thomas W. Erickson who was just appointed the company's interim CEO & president and replaced James Smith. The recent changes were based on Erickson's work with the company since his selection to Board back on February 27th. Erickson, who shortly before his appointment to the board in February joined New Mountain Capital, LLC, the owner of the company's Series A Preferred stock.

Erickson previously played a role as CEO, interim CEO and chairman with six other businesses in the healthcare sector over the last 13 years. In the company's press release he stated, "today's actions commence what we hope will be an on-going process of cost and service improvements for our customers and shareholders." As mentioned above the other appointments were rather significant as well. Marty Magill the company's SVP for Sales became the Chief Marketing Officer for the company. George McGinn joined the firm to become the new General Counsel and Patrick Moroney became the interim Chief Information Officer.

It appears activist shareholders behind the scenes are playing a significant role in the company and are seeking to generate more value from the firm. Keep a watchful eye on how the changes implemented by the new team play out over the next few months.

Booz Allen Study Confirms Growing Power of Boards

May 22, Booz Allen Hamilton announced the results of its CEO turnover study. According to the study:

Global CEO departures have leveled off at a high plateau, and less than half of CEOs leaving office in 2006 departed under normal circumstances, according to the sixth annual survey of CEO turnover at the world’s 2,500 largest publicly traded corporations released today by management consulting firm Booz Allen Hamilton. The study found that corporate boards are quicker than ever to replace underperforming CEOs, as they focus more on grooming in-house leaders and turn to outsider and interim CEOs less often as outsider results continue to disappoint.

Booz Allen's conclusions are similar to those Liberum Research has been providing to our email subscribers for the last year and a half. For details on the Booz Allen study go to the firm's site.

For more on the study:

New York Times
International Herald Tribune
Press Release

Monday, May 21, 2007

Pfizer Recent Management Changes - Will it Help?

Pfizer PFE (NYSE), the pharmaceutical behemoth, announced over the weekend major leadership changes in two critical function areas, research and development and finance. Long-time head of research and development, John Mattina, will retire as soon as Pfizer finds a successor and CFO, Alan Levin, will retire immediately.

Pfizer continues to undergo management reorganization that first began back in July 2006, when Hank McKinnell CEO and Chairman resigned from his position after growing unease over his stewardship of the firm. McKinnell was replaced by a surprise appointee, Jeffrey Kindler the firm's in-house counsel at the time. Kindler, a non-scientist, is the first person to run the company who was not a scientist by trade. Under Kindler's short reign, there have already been a number of changes in management as well as the initiation of a plan to cut employee staff worldwide (10% cut by end of 2008). Kindler has not, however, made a significant mark on the firm. Since his stewardship and under the direction and promotion of Research and Development Chief Mattina, the company experienced a major setback with the recent cancellation of Phase III clinical trials for the firm's expected blockbuster drug torcetrapib which had been designed to increase good cholesterol. Torcetrapib was Mattina's baby. The company was forced to cancel the development of the drug after an unexpected increase in the risk of deaths and heart-related problems were directly attributed to the drug's usage during ongoing clinical trials.

Alan Levin, who had been CFO since late February 2005, appears to have resigned to allow Pfizer to find someone who will be better able to handle Wall Street.

Kindler seems to be searching for a management formula rather than relying on a overall strategic approach to get the firm back on track. His decisions have been slow in the making and generally dependent upon events rather than through an overall strategic focus. He continues to talk about the possibility of acquisitions and renewed focus on research and development and Many on Wall Street saw yesterday's changes as positive, but the real question remains, can Pfizer develop a long-term strategy to improve the company which may just be too large to operate efficiently in today's marketplace.

For more on the changes:

See Forbes
Financial Week Article
Daily Speculations
Hemscott Empowering Investors
Times UK online

Friday, May 18, 2007

Updated Information to Presstek's Selection of New CEO

Earlier today I was contacted by a representative for Presstek regarding my May 11 piece concerning the firm's selection of its new CEO, Jeff Jacobson. In the piece, I stated, "... the company found itself mired in an SEC investigation of its accounting methods. " Presstek's representative indicated I did not get the facts exactly right.

According to Presstek's representative:

The company did not have any accounting errors in the reporting of our 2006 results. In rebuilding our product line, we incurred certain costs and, in reviewing them with our auditors, were unsure of the best method of accounting to use in reporting them.

We decided to ask the SEC to review the situation and they agreed with our actions. This review process, however, caused delays in our filing the financial forms required of all public companies and also triggered a routine notification from the NASDAQ stock exchange warning us that failure to file our reports would result in Presstek being delisted from the NASDAQ stock exchange. As soon as the SEC provided its opinion, we promptly completed our filings, eliminating any risk of NASDAQ delisting. Due to these accounting issues, our auditors advised us that we needed to increase our accounting capabilities for the future, a process that our new Chief Financial Officer has well underway."

Surviving a CEO Change - Not Always Easy

In the May 17 edition of Business Week's Management IQ blog, Jena McGregor did a piece on the Harvard Business Review's lead article in the May edition entitled, "Surviving Your New CEO". McGregor states the authors speak to the individual, telling you how to make the cut after the new guy arrives. She even provides an outline of the tips provided in the piece.

Management change continues to remain a key factor to investors and employees.

Take a look at the tips.

Thursday, May 17, 2007

Cirrus Logic's Youthful In-house Appointment

Cirrus Logic CRUS (NASDAQ) announced the appointment of current vice president and general manager of Cirrus' mixed signal audio product line, Jason Rhode as the company's new CEO. The position became vacate in March after David French the company's CEO since 1999 resigned. French resigned following an internal investigation of options backdating that ensnared Cirrus like so many other tech firms. The company has said it will need to restate financial results dating back to 2001, and it expects to record $22 million to $24 million in additional stock option expenses.

After French resigned, the company founder and current chairman of the board, Michael L. Hackworth, took over as acting CEO and president. In its press release today announcing the selection of Jason Rhode as the new CEO, the Chairman Michael Hackworth stated, "we interviewed numerous external candidates for this position, but in the end the board of directors felt that Cirrus Logic is fortunate to have a number of strong leaders within the company," ..."Jason... possesses the vision, energy and commitment to drive the company into a new era of growth, built around the company's solid foundation as a leading supplier of analog and mixed-signal semiconductors." My take on the appointment is somewhat different and far more skeptical. Cirrus most likely had difficulty finding a qualified candidate from outside the firm to take on the challenge of running Cirrus.

Rhode is only 37 years of age and has never had top-level executive experience. He is an expert in his field with numerous patents to his name and a PhD in electrical engineering. He will most likely need time to come up to speed in his new executive duties. Whether he will be able to lead the firm to new heights and profits remains to be seen.

Tuesday, May 15, 2007

Out of Disorder May Spring Opportunity

Back in February Liberum selected Parlux Fragrances, Inc. (PARL - NASDAQ) as one of 13 - CEO related changes out of a total of 204 CEO changes for the month investors should re-examine for investment potential. Parlux, for a number of months prior to February, was engrossed in a fight with activist investor Glenn Nussdorf (who controlled 1,912,629 direct shares of the firm) and the company's CEO at the time Ilia Lekach (who controlled 2,182,949 direct and indirect shares of the firm) over board control and the direction of the firm. Lekach after a great deal of effort folded his cards in February and agreed to a 50-50 arrangement for board control as well as his resignation as Chairman and CEO. Nussdorf agreed that for two years he would not make any proposal to acquire Parlux, unless the offer includes all shares at a minimum of $11 per share.

The ongoing fight between Nussdorf and Lekach manifested itself while the company was facing possible de-listing from NASDAQ. The firm has so far managed to weather the controversy and appointed Neil J. Katz as interim CEO upon Lekach's resignation in February. Katz, an ally of Nussdorf, was also considered for the top position as part of the overall CEO search conducted.

Katz was formally appointed CEO and Chairman on May 14. He has over 30 years experience in the beauty business and has served as President of Liz Claiborne Cosmetics and President of Revlon Beauty Care Division. Parlux, despite continuing weak performance, may manage to find its focus. Today the company announced another major appointment, the promotion of Raymond Balsys to the role of chief financial officer, replacing Frank A. Buttacavoli, who will remain chief operating officer. The company said the separation of the COO and CFO roles will allow Buttacavoli to work closely with CEO Neil J. Katz on overall planning, management, and signing new fragrance licenses.

Keep a close eye on the company's operations.

Tolerance For CEO Misbehavior Wanes

Top executives and investors take note. Geraldine Fabrikant, a New York Times Journalist, wrote an article in today's New York Times entitled, One Misstep and They're Out the Door. The article outlined how and why companies find themselves far less forgiving of top executives who misbehave then they had been in the past. For details check out the article (registration required).

Friday, May 11, 2007

Note To Our Readers

Liberum's blog was recently noted in Business Week's Talk Show column . Just scroll down to Blogspotting - Watch the Revolving Door.

Management Turmoil at Presstek Turns to New Mix

Presstek, Inc. (PRST - NASDAQ), a manufacturer and marketer of digital offset printing solutions has been floundering for some time. On top of it middling performance, the company found itself mired in an SEC investigation of its accounting methods. Following these continuing problems, Presstek underwent a series of top management changes over the last few months concluding with a new CEO.

First, in March, Moosa E. Moosa, the firm's CFO resigned and was replaced by Jeffrey Cook, a former CFO and CIO of Kodak's Polychrome Graphics. Then in early April, the firm's SVP of Operations , William Keller, who had been in office for less than one year, resigned to pursue a career in private equity. The biggest change took place yesterday, when it was announced Edward J. Marino, the director, president and CEO would be leaving the firm to pursue other opportunities. In his place, the board selected Jeff Jacobson. Jacobson who was one of the founding managers of KPG , a joint venture between Eastman Kodak Company and Sun. He was most recently the chief operating officer of Kodak's Graphic Communications Group and a Vice President of Eastman Kodak.

Jacobson's decision to take the job, says a great deal. While he is being offered a highly incentivized package (he received a sign-on bonus of 300,000 shares of the company’s stock, and has an option to purchase another 1 million shares) which will require him to perform to make the new job worthwhile, his acceptance indicates he thinks there is real potential for the company. He is a strong choice. He knows the business and can be expected to bring a great deal to the table. He should work well with the new CFO, Jeffrey Cook who also had been at Kodak.

Going forward keep your eye open for a possible turnaround at the company.

Thursday, May 10, 2007

Falling on Your Sword - A New Option for CEOs?

Earlier today David Neeleman, the entrepreneurial founder and CEO of JetBlue Airlines (JBLU - NASDAQ), announced he was stepping aside to become non-executive chairman of the board. Neeleman, unlike most corporate CEOs, accepted responsibility for JetBlue's Valentine's day disaster back in February which cost the airline over $40 million but much more in bad publicity. On Valentine's day a major storm, which the company initially attempted to weather by avoiding flight cancellations, ultimately turned into a nightmare for customers and the company resulting in major delays, flight cancellations and more. Soon after the problem, Neeleman went into crisis mode. He was everywhere - TV, print and TV ads, announcements, advertisements, radio - accepting responsibility for the snafu and promising it would not happen again. He followed his announcements of contrition with a passenger bill of rights.

Ultimately, the buck stopped at Neeleman's desk, and unlike Alberto Gonzales, U.S. Attorney General and corporate and business leaders, he decided to resign. Neeleman's successor Dave Barger, the current president, was chosen immediately. In a prepared statement Neeleman stated, "As chairman of the board of directors, I will focus on developing JetBlue's long-term vision and strategy, and how we can continue to be a preferred product in a commodity business."

Neeleman so far is a rarity in America's corporate world, a CEO willing to accept responsibility for when things go wrong and at the same time pay the consequences. The real question is whether he has started a new trend or whether his decision to resign was just an exception to the rule. The implications from an investment perspective could be important if a new trend is evolving.

Stay tuned.

For more on the change:

AP Article
Washington Post Article

Tuesday, May 8, 2007

Year Old Biotech Pick Demonstrates CEO Significance

In March 2006 I selected a number of companies that experienced a CEO change that I suggested investors re-examine as possible investment possibilities. One that stood out was Allos Therapeutics (ALTH - NASDAQ). On January 16, 2006 Allos Therapeutics, a health and security imaging equipment manufacturer, announced that President, Chief Executive Officer and Chief Financial Officer Michael E. Hart, had notified the Company's Board of Directors of his intention to resign his positions once a successor CEO was named.

Just two months later, Allos announced the appointment of Paul L. Berns as the Company's President, Chief Executive Officer and a member of the Board of Directors. Berns brought close to 15 years of pharmaceutical industry experience to Allos. He previously lead Bone Care International, Inc. from June 2002 until its acquisition by Genzyme, Corp. in July 2005. During his tenure at the firm revenues increased nearly 14-fold, the company became profitable and market capitalization increased from approximately $40 million to a sale value of $719 million. Prior to joining Bone Care International, Inc., Berns held senior management positions at Abbott Laboratories, BASF Pharmaceuticals, and Bristol-Myers Squibb Company.

Berns was an extremely solid appointment for a struggling biotech seeking to find ways to grow and get its products approved by the FDA and into the marketplace. Berns, because of his previous experience and talents was the type of executive capable of hitting the ground running and making the necessary corporate adjustments to help the company succeed over the long term. So far, Berns has been good for the firm.

Monday, May 7, 2007

Product & Scandal Plagued Medical Device Maker May Have New Lease on Life

Cyberonics (CYBX - NASDAQ), the troubled medical device manufacturer that produces implantable medical devices that treat epilepsy announced the hiring of Daniel J. Moore, a senior marketing executive from Boston Scientific to be the company's new CEO. Moore will replace interim CEO, Reese S. Terry, Jr. who will return to his position on the board of directors.

Cyberonics going back to June of last summer found itself embroiled in the growing options backdating scandal. Many of the firm's top executives over time were forced to leave. The last major executives, the company's CEO (Robert Cummins) and CFO (Pamela Westbrook) resigned last November after an internal investigation found that unnamed insiders had incorrectly reported the dates of company stock options. While these problems were going on, the company after initial approval from the FDA for Medicare reimbursement had a major setback on the use of its newest implant device designed to assist people with severe depression. The FDA reversed its decision to allow the product to receive Medicare reimbursement. The reversal, plus the options backdating scandal was taking place around the same time that activist investor, Carl Icahn became involved. In September of 06' activist shareholders insisted it was time to change some of Cyberonic's board. After the company initially fought the request, in January activists succeeded in getting three of their own on to the board.

During this entire time period the company's stock has been on a roller coaster primarily in a downward direction. The latest appointment of Daniel J. Moore is just what the doctor ordered. There is a chance that Moore with his marketing background and understanding of the medical device business is just the kind of executive needed to help right the ship.

Investors need to stay tuned and watch what moves Moore and the company's board make over the next few months.

Is a New CEO Evolving?

Alan Murray, the well-known Wall Street Journal columnist as well Liberum think so. Recently Murray published a new book entitled, Revolt in the Boardroom published by Harper Collins. Murray, who seems to be in agreement with Liberum Research contends that CEOs and boards are more and more being forced to alter their roles as a consequence of previous corporate scandals (Enron), increased pressures for greater corporate governance (Boeing), a growth in the independent power of corporate boards (HP) as well as outside pressures from activist shareholders (Home Depot).

The book is worth a read. It can be useful to investors in understanding the changing roles of CEOs and corporate boards and what those changes might mean mean from an investment perspective.

For more:

Watch Revolt in the Boardroom video clip on CNBC
After the Revolt, Creating a New CEO - WSJ (subscription)
Cornered in the Corner Office - Businessweek

Thursday, May 3, 2007

Novell - A Contrarian View

June of last year had a large number of CEO related changes I recommended investors re-examine for investment possibilities. I recently reviewed two June 06' picks in the blog, International Flavor & Fragrances (IFF - NYSE) and L3 Communications (LLL - NYSE). Another large company selected last June was software laggard Novell (NOVL - NYSE). Novell seemed to have been past by its competition for awhile and was viewed by many as an industry tortoise who could no longer compete in the race.

Back in June, the company after continuing poor results, along with growing outside pressures replaced its CEO, Jack Messman with the company's number two man, Ron Hovsepian. At the time of his selection, Hovsepian was the President and Chief Operating Officer. Many analysts and people familiar with the industry were skeptical another CEO would solve the enormous problems facing Novell. I saw Hovsepian as an excellent choice, who had a reasonable chance to make a difference at Novell over the long-term. He had three years at Novell where he moved up the corporate ladder rapidly and over seventeen years at IBM.

Hovsepian had a good combination of skills to bring to bear for the
position. He understood Novell's business model and product base and more importantly, he knew how to deal with customers and the market. Messman was more an "engineer personality" and just was not able to easily articulate what he planned to do or how to work with customers. He ultimately failed to get the company to address the serious issues it had been facing. Neither Messman nor the previous CEO before him, Eric Schmidt were able to put the company on a sustained growth path.

Hovsepian, who has been making great strides since his promotion to the top, has yet to get it exactly right but he is moving in the right direction. So far, what he has accomplished has not impressed too many on Wall Street but he seems to be making the right moves. He has continued to cut costs, he has focused his efforts to make Novell a player in Linux for the enterprise taking a somewhat different strategic approach to Linux than that by Red Hat, its major Linux competitor. He was in charge when Novell began a controversial Linux partnership with Microsoft. In essence, Hovsepian has focused his efforts on the customer and if time manages to remain on his side, his latest prediction that 2008 will be the firm's boon year may actually come to fruition.

Keep watching Hovsepian and how he is managing Novell.

More on Novell:

May 7 - CBS News -
Dell Joins Microsoft, Novell Alliance
May 7 - Endgaget - More on Dell Joins Microsoft, Novell Alliance
May 7 - BloggingStocks Take - More on Dell Joins Microsoft, Novel Alliance

Wednesday, May 2, 2007

Knee Replacement Firm Promotes CEO Replacement From Within

May 1, Zimmer Holdings Inc. (ZMH - NYSE), an orthopedic implant maker, announced the promotion of David C. Dvorak to replace Ray Elliot. Elliot, who was with the firm for nearly twenty five years, announced late last year his plan to retire. The company immediately initiated a search for his replacement. Elliot, who has been very successful in running the company managed to build a top-notch management team. The stock dropped nearly 2.5% on the day of the Dvorak announcement but I believe the appointment should work out for the company.

Dvorak, a lawyer who has had experience in a number of areas within and outside the firm appears to be a solid choice. He is forty three years old and joined Zimmer in December 2001 following the spin-off from Bristol-Myers Squibb. He has moved up through the ranks quite rapidly. Prior to his promotion to the top job, Dvorak was group president global businesses and earlier served as the company's general counsel. Before joining Zimmer, he was Senior Vice President, General Counsel and Secretary for Steris Corporation, a medical products sterilization and contamination prevention products and services firm. He has also practiced law where he focused on corporate law, securities and mergers and acquisitions, all areas of major importance to an orthopedic device maker.

I expect the transition overall to be rather smooth. Keep an eye on Zimmer as Dvorak gets his feet wet and becomes more comfortable in his new position.