Management Turnover as Change Agent

Friday, June 29, 2007

Bank Visionary Forced to Resign - Is there more?

Commerce Bancorp CBH (NYSE) CEO and Chairman Vernon Hill was forced to resign after the company reached an agreement with federal regulators to bar transactions between company directors and outside vendors. Hill as well as others in the company came under scrutiny for their business dealings with insiders. Just as an example, Hill's wife, who owned an architectural design firm, was getting business from the bank for years. The company announced today it had settled two federal regulatory probes.

Hill, the bank's founder, was often referred to as a bank visionary. He was responsible for the bank's tremendous growth and success over the last number of years.

Commerce promoted three executives to the new office of Chairman for the bank subsidiary to replace Hill. As part of its agreement with regulators, the company stated it will continue to cooperate with any regulatory investigation of insider and insider-related transactions.

A number of analysts believe the loss of Vernon at the helm has made Commerce Bancorp a potential takeover target. In early trading the stock responded positively to the agreement and Vernon's resignation.

Speculation has also been raised that Hill's problems have not ended with his resignation. Stay tuned.

For more on the change and the agreement see:

Philadelphia Business Journal (July 6)
CNN Money
SEC 8K filing
Philadelphia Inquirer
Wall Street Journal (subscription req.)

Thursday, June 28, 2007

Sub-Prime Market Woes Impacts Management Turnover

Management under the gun today seems to respond a bit more quickly than in the past. Beazer Homes USA BZH (NYSE) one of the housing related stocks getting hammered, fired its chief accounting officer, Michael Rand yesterday. According to published reports he was fired for attempting to destroy documents while the company was under investigation. The announcement came after it was made public that the FBI and other agencies were investigating the firm with regard to fraud in its mortgage lending practices. Back in March, Business Week did a story indicating that Beazer was one of a number of companies under investigation by the FBI and U.S. Attorney's Office in North Carolina.

Beazer back in May agreed to cooperate with the authorities undergoing the investigation. The company appears to have acted quickly after its own internal investigation found possible wrongdoing by Rand.

For more on the story see:

Bloomberg Update 3
Atlanta Journal Constitution
CNN Money

Wednesday, June 27, 2007

Sprint Nextel Hires Strategic Planner To Help Direct Ship

Sprint Nextel S (NYSE), the current weak sister of the major wireless carriers, today announced the hiring of Keith Cowan to serve as president, strategic planning and corporate initiatives. The hiring comes as pressure continues to grow on Sprint's top management. Cowan's appointment is a recognition by the company that it needs to get new blood and ideas into its strategic planning process. Management hopes it can find ways to get shareholders in a better frame of mind on the company's future. Cowan appears to be a good pick. He has had extensive experience previously working for BellSouth for over ten years where at one time he was in charge of planning and most recently, was executive vice president for Genuine Parts, an automotive supplier.

Sprint's CEO,Gary D. Forsee said,
"Keith is a results-oriented individual and will be a strong addition to the Sprint Nextel leadership team,...He has a track record of performance in communications and technology that will be a tremendous asset to our company as we continue to seek ways to unlock shareholder value."
Keep a close eye on Sprint Nextel's strategic plans going forward.

Tuesday, June 26, 2007

New Take on JetBlue Founder's CEO Job Loss

Chris Isidore, a writer for CNN's in an article today addressed the changes at the top of JetBlue back in May. Isidore interviewed former CEO and founder David Neeleman on his views regarding his loss of the top spot at the airline. We covered this change in our blog back in May. More food for thought.

Friday, June 22, 2007

A.P. Moeller-Maersk Sweeps Out Top Management

A.P. Moeller-Maersk MAERSKb.CO (Copenhagen), the shipping company, announced major management changes. Jess Soederberg, who has led the company since 1993, unexpectedly announced his retirement. His announcement appeared to be related the company's profit decline for 2006. In his place, the company appointed Danish brewer Carlsberg A/S's CEO Nils Smedegaard. Smedegaard has headed Carlsberg since 2001. The scheduled change will occur on December 1. The announcement came at the same time two other key executives at A.P. Moeller-Maersk announced they would be leaving, Tommy Thomsen and Knud Stubkjaer.

Chairman of the Board Michael Pram Rasmussen stated the following when discussing the new CEO appointment:
“Through his previous work Nils Smedegaard Andersen has gained as well as proven the skills which the Board finds necessary in an ever changing world and in addition he possesses the personal qualities matching the values of the A.P. Moller - Maersk Group."
The announced changes were unexpected and could have a real impact on the firm. A number of analysts have already raised concerns about the Andersen appointment and the significance the three executive changes could have on the firm. For more on the change, check out the following:

Financial Times

Thursday, June 21, 2007

Update on Pep Boys New CEO

Back in April 13 I highlighted the newly appointed CEO to Pep Boys PBT (NYSE), Jeffrey C. Rachor. So far, Rachor has shown his stripes and is working hard to turn things around. Check out the June 21, Associated Press article.

For more see:

Philadelphia Inquirer (Dow Jones article)

Wednesday, June 20, 2007

Barron's Comments on Liberum's May Picks

Last week Barron's ran a piece on Liberum's monthly C-level management change statistics and its list of 22 CEO changes during the month that investors might wish to review for investment consideration.

See Barron's (subscription req. for full access)

Nissan Net Profits Decline 1st Time Under Goshn - What's in Store?

Nissan savior, Carlos Goshn has refused to resign as CEO of Nissan Motors Company 7201 (JAPAN) after the company registered its first net profits decline since he took over the firm. Goshn originally came to Nissan in 1999 when the automaker was on the verge of bankruptcy. He has been repeatedly cited as a miracle worker. According to an article on France 24 Goshn, who has recently found himself under growing pressure, stated at a shareholders conference in Japan,
"As long as I have the shareholders' trust and the employees' trust, I will remain..."
Goshn went on to say,
"The problems we are facing today are very small compared to the problems we had in 1999."
Goshn remains a mythic figure in the industry but you might want to stay tuned to how things play out. Shareholders have less and less patience and the industry continues to change dramatically.

See more:

Financial Times

Tuesday, June 19, 2007

Eddie Bauer Takes Next Step in Turnaround?

Eddie Bauer EBHI (NASDAQ) was first mentioned in the blog back in April when the company appointed Howard Gross, a member of the board, to serve as interim CEO. Gross was appointed interim CEO after the company essentially forced Fabian Mansson to resign after he failed to sell the company to private equity firms. On June 15, Eddie Bauer announced the hiring of Neil S. Fiske as the new CEO. Fiske, a highly successful retailer, was in charge of the Limited's Bath and Body Works, a company that had been languishing before his appointment as its CEO. Fiske helped turn the company around. Fiske's appointment is a good sign that Eddie Bauer is looking to turn itself around or get a good price for sale of the firm. Fiske is an exceptional retailer who brings necessary talent to the firm.

He did not come cheap. His compensation package was quite high. According to Craig Harris a reporter for the Seattle Post-Intelligencer,

"Fiske will receive a compensation package worth at least $3 million in his first year to take over struggling clothing retailer Eddie Bauer Holdings Inc., according to a securities filing.

And the turnaround expert persuaded Eddie Bauer to pay for his legal costs in negotiating the deal."
Despite the high salary, Fiske seems to be a good choice to head the company. Keep a close eye on how Fiske manages the firm over the next 3 - 6 months. There may be some real upside potential if he makes the right steps.

For more:

Marketing Daily

Wednesday, June 13, 2007

Telecom CEO Pushed Out in Europe

Swedish-Finnish telecom operator TeliaSonera AB TLSN (SWEDEN), the biggest in northern Europe, forced its chief executive Anders Igel to resign, effective July 31. Igel had been CEO of the firm since 2002 when Swedish Telia and Finnish Sonera merged in 2002. For some time now, Igel has been under pressure from shareholders, employees and members of the board. A key criticism has been speed with which he has moved to set new priorities and the pace he has followed in carrying out existing goals. One area that continues to rankle the board and shareholders has been Igel's failure to resolve ownership disputes with two of the company's key markets, Turkey and Russia.

TeliaSonera announced it might take 12 months before a suitable CEO is appointed. In the interim, CFO Kim Ignatius will hold the chief executive role. In announcing the change in management, the chairman, Tom von Weymarn and the board said,

"TeliaSonera needs a CEO who can improve the spirit and commercial drive..... make acquisitions and speed up efforts to cut costs and jobs ... We are looking for strong and motivating leadership focused on growth.... We're looking for someone who can speed up execution of strategy and can drive growth in addition to cost efficiency."

He went on to say, "we are still focused on our home market, our investment in Spain, and our Eastern positions..." referring to Russia, Turkey and the Baltic States." "We urgently need solutions to our Eastern positions."
Analysts Sally Banks and Mark Giles at Ovum, a European telecom consulting company, offered a few possible choices to take Igel's place.
There are a couple of obvious external candidates, who as far as we are aware are currently unemployed and could potentially fill the gap. From Deutsche Telekom Group's recent clearouts - Elek Straub, ex-CEO of Magyar Telekom and Kai Uwe-Ricke, ex-CEO of Deutsche Telekom might possibly be interested in a new challenge. Whoever succeeds as the new CEO will face some seriously tough challenges ahead as the soon to be ex-CEO has suggested that the company needs heavy re-engineering to get it on track.
Initial market response to the change has been positive but the company has a great deal of work to fix its current difficulties and get the right management in place.

For more on the change see:

The Local Sweden's News In English
Financial Times (registration req.)
Daily News & Analysis

Tuesday, June 12, 2007

Qwest Board Has Tough Job Ahead

Yesterday the chairman and CEO of Qwest Q (NYSE), Richard Notebaert, unexpectedly announced he planned to resign his positions as soon as the board finds a replacement. Notebaert's surprise announcement comes in the wake of two other major management changes that occurred recently. Oren G. Shaffer, vice chairman and chief financial officer, resigned effective April 1. And Barry K. Allen, executive vice president of operations will retire, effective June 29.

Notebaert made a real name for himself taking over Qwest in 2002. At the time the company was mired in an accounting scandal and an investigation by the SEC. He joined Qwest as chairman and CEO in June 2002 soon after Joseph Nacchio resigned. Nacchio was recently convicted of insider trading and is scheduled to be sentenced this summer. The SEC later charged the company and key one-time Qwest executives, including Nacchio, with orchestrating a financial fraud at the company between April 1999 and March 2002.

At the time of Notebaert's appointment many people thought his task to turn the company around was nearly impossible. Notebaert managed to get costs under control. During his tenure at the helm, he launched some bold efforts. He succeeded in acquiring a strong position in the federal government's large Networxcontract. On the other hand, he was unsuccessful in his very public attempt to acquire MCI. In a bidding war for MCI, Qwest lost out to Verizon Communications.

The recent triple management losses at Qwest will put severe pressures on the firm. Qwest remains a small-fry in the telecommunications space when compared to its rivals. The board has a truly difficult task ahead to find the right person to run the company and more importantly, one that would be willing to do it. Qwest remains, however, a potential takeover target and could even be right for a potential acquisition by a private equity firm.

Keep a close eye on the company's board for the next few months.

For more see: (second article)
Financial Times

Friday, June 8, 2007

Another Major Auto Parts Retailers Makes Major Management Change

CSK Auto Parts CAO (NYSE) one of the largest automotive parts and accessories retailers in the United States, selected Lawrence N. Mondry its new President and Chief Executive Officer. Mondry will succeed Maynard Jenkins, who had previously announced his intent to retire upon the Board’s selection of his successor. Mondry will begin work immediately and is expected to assume the President and CEO positions in early July, upon Mr. Jenkins’ retirement. He will also join the Company’s Board of Directors at that time. The Company also announced that James B. Riley, Senior Vice President and Chief Financial Officer, resigned to accept a position as CFO with Ormet, an aluminum production company. The Company expects to appoint an interim Chief Financial Officer in the near future and to commence a search for a qualified replacement for Mr. Riley.

The company has been facing some problems related to their regulatory filings.

The announced change in top management at CSK Auto comes in the midst of intense pressure from Karsch Capital, an activist shareholder, who currently holds over 9% of the company's common stock. The head of Karsch Capital, David Karsch, just yesterday in a letter to the board urged CSK's Board to take action to enhance shareholder value. In the letter to CSK Auto's board Karsch stated,

"we believe the Board should conduct a review of strategic alternatives in which it weighs the relative merits of selling the Company versus giving a new management team time to turn around the business. It is increasingly evident that, under the right management team, such a turnaround should be relatively easy to achieve because of the tremendous opportunity to improve CSK Auto's operating margins".
In the letter Karsch goes on to state,

"having reviewed the recently released financial statements in which historical operating results were revised upwardly, we recognize the merit in considering the alternative of turning around the Company under a new management team and potentially receiving a much greater premium. With the leadership and vision of an above-average CEO, we believe CSK Auto could execute a very achievable operating margin of 9% in 2009 and retain its current8x forward multiple on our EBITDA projections, which would result in a stock price well above $30 per share over the next 18 months. Depressed operating margins should swiftly return to 2004 operating margin levels of 8.3% given that the unsuccessful integration of Murray's has temporarily reduced EBITDA from that unit and prevented the full realization of synergies, the 2006 EBITDA includes one-time integration costs, associates have been distracted by significant senior management turnover and a commensurate lack of direction,and difficult trends in the auto parts industry in 2006 resulted in de-leverag eof fixed costs.

Under the direction of a high quality CEO, the company should be able to surpass the 8.3% operating margin levels it generated in 2004 under a subpar management team given that its category management efforts are inferior to competitors, direct sourcing and private label penetration stand below peers,buying from vendors can be improved, sales mix can be shifted more toward higher-margin hard parts versus lower-margin discretionary and front-end product, and below-peer sales per store can be enhanced through better merchandising, marketing, adjacencies, attachment rates and store-level compensation programs. Lastly, we believe an 8x forward EBITDA multiple is very reasonable given the quality of the auto parts business and the valuation of relevant competitors. Auto parts is a large, fragmented, predictable industry with very little influence from Wal-Mart and rational, margin-focused companies that do not use price as a weapon to gain market share, all of which beget high margins, returns on capital and free cash flow. This unique type of industry backdrop provides turnarounds with a greater probability of success and less risk whereas industries with heavy promotional activity such as home furnishings have witnessed a number of failed turnarounds."
Karsch continues on to say,

"A sale of CSK Auto may still be the best option for shareholders, depending on where the bids fall, given the time value benefit of receiving a solid premium today versus an even better premium in 18 months, the execution risk that a new CEO could fail to improve operating margins, and the additional returns for CSK Auto shareholders if they were to possibly receive stock in one of the high-quality strategic buyers, whose stock should appreciate significantly in the years following the transaction given the notable earnings accretion and strategic value. Therefore, we believe a strategic review should be initiated so that both options can be properly considered and evaluated.

We believe the board has a very poor track record given two accounting probes,a near bankruptcy and a stock that has dramatically underperformed its key competitors, and therefore, we cannot presume for certain that the Board can execute hiring a high quality CEO. We expect to meet the new CEO immediately after that person is hired. If the Board hires a CEO that we do not believe is adequate for the turnaround, and does not conduct a strategic review, we will strongly consider all of our options including a proxy fight to replace some or all members of the Board."
The new CEO may end up being acceptable to Karsch but from a quick look does not appear to bring any extraordinary skills to bear for the firm's success. Mondry had previously been CEO of CompUSA from November 2003 to May 2006, a period of time when the retailer performed reasonably well. He began his retail career back in 1983 with Highland Superstores, a multi-regional consumer electronics retailer, where he held various merchandising positions including Vice President, National Merchandise Manager. He currently serves on the boards of directors of Micron Technology, Inc. and Golfsmith, Inc.

I would recommend investors examine Mondry's background carefully and keep on eye on Karsch Capital to get a sense on exactly how they intend to proceed with the firm with regard to their demands.

For more on CSK Auto Rumor Pipeline (Feb. 26, 2007) 13 D Tracker

Thursday, June 7, 2007

Iannuzzi Making His Mark at Monster

Back in April, Monster Inc. MNST (NASDAQ) brought in Sal Iannuzzi to head the company. Iannuzzi, the highly rated former CEO of Symbol Technologies until Motorola bought the firm, appeared a terrific pick for Monster (see earlier blog piece). Iannuzzi was also a former investment banker. At the time of Iannuzzi's selection in April, many analysts expected the appointment would lead to a potential sale of the firm. So far, it has not played out that way but it is still early.

On Wednesday, Monster announced what appeared to be the next step in Iannuzzi's ascendance to Monster's corporate throne. The company announced another management shakeup - Lanny Baker, the CFO, resigned to "pursue other interests" and in his place the company appointed Timothy T. Yates, the former CFO at Symbol Technologies, (Iannuzzi's former company). Yates was originally named CFO of Symbol Technologies back in February 2006. In addition to the Yates appointment, Monster announced a number of other changes within the top ranks. The market did not initially take kindly to yesterday's management shakeup. Give the company a little time to shake off the market's jitters. Iannuzzi's is trying to work his magic.

Time will tell.

For more on the management shakeup:

Blogging Stocks (new take)
Wall Street Journal (subscription required)
Seeking Alpha

Wednesday, June 6, 2007

Walmart Family's Support of CEO Lee Scott?

Is Wal-Mart WMT (NYSE) CEO, Lee Scott, feeling a little like Senator Thomas Eagleton in 1971? At the time, then Democratic Candidate for President, Senator George McGovern, announced he continued to support his decision 1,000% to have Eagelton as his Vice Presidential candidate. McGovern's backing came despite the news that Eagleton had previously been treated for severe depression and had undergone electric shock treatments. For those who do not remember or were not even around yet, one might think Scott is in a similar boat to Eagleton. As an aside, Eagleton left the ticket and was replaced with Sargent Shriver.

As Walmart's star continues to fade a bit and shareholders constantly moan about the company's performance, Scott seems to find new ways to get himself embroiled in problems he does not need.
At last week's annual meeting, Wal-Mart Chairman Rob Walton said, "The board and the Walton family have absolute confidence in your leadership, Lee. We appreciate you and we thank you."
Continuing corporate strategy failings, labor problems, environmental related problems, spying controversies and the Julie Roehm firing fiasco all point to a possible change at the top, despite protestations from the bigwigs.

Stay tuned.

For more on Scott's fate and problems check out:

Blogging Stocks
CNN Money/Forbes
Seeking Alpha