Management Turnover as Change Agent

Friday, July 27, 2007

Is Gap's New CEO a Good Fit?

Can the Gap GPS (NYSE) manage to get its mojo back with a new CEO out of retailing rather than clothing? Investors and competitors are all wondering.

Yesterday, Gap's board of directors announced the surprise appointment of Glenn K. Murphy as it long awaited new Chairman and CEO. Murphy before his appointment had been the highly successful Chairman and CEO for six years of Canada's largest drug store chain, Shoppers Drug Mart from which he left in March of this year. Murphy, an experienced retailer, has no experience in clothing. Is his expertise and executive acumen enough to turn the languishing clothing icon around? Opinions are all over the map but at a minimum at least, the Gap has finally found a new leader.

The Gap has been undergoing an extensive six month search for a new CEO. In today's New York Times an article by Michael Barbaro stated:
"According to people briefed on the search process, Gap put out feelers to several highly regarded apparel industry figures, like the chief executive of Avon, Andrea Jung, a former Neiman Marcus executive. But these executives said they had little interest in the job."
The challenge to turn the Gap around is huge and it is not for the timid. Most clothing experts are probably skeptical about Murphy's appointment. According to a piece in the Los Angeles Times by Kim Yoshino and Leslie Earnest,
Murphy's appointment was greeted with skepticism by Marshal Cohen, chief industry analyst at NPD Group, a market research firm. ...."It's deja vu all over again' he said, 'where's the beef? Where's the merchant? I need to a merchant in this. Merchandise is such a critical component of the equation.... They're running out of chances here."
There was further negative comments in TheStreet's piece when the writer asked Howard Davidowtiz, chairman of Davidowitz and Associates, a retail consulting and investment banking firm, about the appointment. Davidowitz stated,
"...he is puzzled by Gap's choice of leadership.... The people who drive companies are fashion geniuses -- the people who fall on their face are people who are not."
There are many analysts, however, who have expressed their approval of the appointment. Don't expect quick miracles. Follow the moves and statements by the new CEO as he ventures into unknown territory. He has real talent and keen executive skills, the real question is will he be able to get his clothing merchandisers to bring back the excitement and reinvent the Gap and its other brands.

For more see:

BusinessWeek Update (Nov. 23)
MSNBC Slumping Gap jettisons 1,500 workers
Seeking Alpha
Motley Fool
TheStreet update
Schaeffer's Research
Globe and Mail
Women's Wear Daily
Toronto Star
NY Post

Wednesday, July 25, 2007

Aspreva Pharmaceuticals Reorganizes

A few weeks back, I highlighted the positive change at the top of Aspreva Phamarceuticals - the appointment of J. William Freytag, PhD as CEO. In just a few weeks since Freytag's appointment, Aspreva announced a restructuring the company claims is intended for long-term future growth. The current chief scientific officer, Dr. Richard Jones, will be leaving the company. His responsibilities will be assumed by Dr. Usman Azam, Aspreva's Chief Medical Officer. The company also plans to reduce staffing levels worldwide by 25%.

For more see:

Press Release

Tuesday, July 24, 2007

CEO Revolving Door at SM and A

Michelle Leder's latest entry into her Footnoted blog is worth a read. She focuses on the recent CEO drama at SM and A WINS (NASDAQ), a provider of business strategy and proposal development services. The company announced on July 19th that its Board of Directors entered into a multi-year agreement with Cathy McCarthy to become President & CEO of the company effective immediately. McCarthy's appointment follows Cynthia A. Davis' resignation from the Company as well as its Board of Directors, which was accepted a day earlier. Ms. Davis had served as CEO since April 2007. Ms. McCarthy was previously President and Chief Operating Officer of the Company. Obviously there is more here.

Princeton Review Nabs High Profile CEO

Princeton Review REVU (NASDAQ), a leading provider of test preparation services and educational support services, in press release today announced:

"... it has reached a definitive agreement with Bain Capital Ventures and Prides Capital under which the two private investors have made a $60 million of preferred stock investment in the company. The preferred stock will be convertible into common stock at $6.00 a share and for four years will accrue a six percent annual dividend. Additionally, in connection with the agreement, the Company will retire its B- 1 Convertible Preferred Stock. The Princeton Review also announced that Michael J. Perik, former CEO of The Learning Company, will become the new Chief Executive Officer of the Princeton Review, effective immediately. He succeeds the company's founder, John S. Katzman, who will remain as Executive Chairman."
The selection of Perik is a very positive choice. Perik has shown himself over the years to be a highly successful CEO. His background in developing the Learning Company into a powerhouse software company and his more recent and earlier work in private investment will only help him in his new position with the Princeton Review. He ultimately sold the Learning Company to Mattel at just the right moment. Keep a very close eye on the Princeton Review.

For more see:

NY Times Dealbook

Shareholder Activism - Management Impact

A recent article in Taking The Street attempts to analyze the impact of shareholder activism on management and overall corporate performance from an investment perspective. The pices is worth a quick read.

Monday, July 23, 2007

Novartis CEO Successor May Have Been Selected

According to an article in the Swiss weekly SonntagsZeitung, picked up by Forbes 7/23/07, Novartis AG NVS (NYSE) chief executive Daniel Vasella might propose current Vaccines & Diagnostics chief executive Joerg Reinhardt as his successor.

The Importance of Corporate Management

Liberum Research and its parent company The Wall Street Transcript are based on the importance of corporate management. Don't take our word on management's importance, check out Whitney Tilson's piece in The Financial Times on July 20th. Tilson quotes a number of top investors on why they think management is important as an investment tool.

Friday, July 20, 2007

Are Weeds Growing at Miracle-Gro?

Over the last few days Scotts Miracle-Gro Company SMG (NYSE) announced the immediate departure of two executives at the firm. Christopher L. Nagel, executive vice president of the Company's North American consumer business and David M. Aronowitz, executive vice president, general counsel and corporate secretary both departed the company without delay. In one of the announcement's the company indicated, "the departure was neither related to the Company's performance nor concerns about its financial controls". The back-to-back departures are somewhat curious and typically raise a red flag for Liberum. I would definitely keep an eye on the company. The dual departures were also highlighted in today's blog.

Thursday, July 19, 2007

Business Week Take on Motorola's Zanders Future

A story in BusinessWeek today by Roger Crockett is a superb take on the continuing viability of Edward J. Zander as CEO of Motorola. Zander and the board remain under intense pressure to turn Motorola around.

Take a look.

Tuesday, July 17, 2007

Starbucks Works Hard to Remain On Top

Starbucks SBUX (NASDAQ) reconfigures management to stay on top of its global development.

Martin Coles, current president of Starbucks Coffee International, was named chief operating officer, a new position at the company. Coles will manage global operations and be responsible for U.S. and international store operations and store development, Starbucks global consumer products group and supply chain operations. According to the Starbucks press release,

Coles served as president and ceo of Reebok International. His experience also includes senior management positions such as executive vice president, Nike, Inc.; senior vice president, international operations for Gateway, Inc.; and vice president, operations for one of PepsiCo, Inc.’s U.S. Bottling Operations. Coles also served in various management roles for Procter & Gamble both in the U.K. and later in the U.S.
Jim Alling, president of Starbucks Coffee U.S., will replace Coles as president of Starbucks Coffee International and Launi Skinner will replace Alling as president of Starbucks Coffee U.S. She is currently senior vice president of store development.

Starbucks continues to focus on management to stay at the top of its game.

Succession Planning for CFOs?

FierceSarbox highlighted an interesting article in CFO magazine talking about the need for CFOs to develop succession planning. Unlike CEOs, there appears to be very little succession planning for CFOs. The lack of succession plans for CFOs can often open the door to investment opportunities when a key CFO leaves a company. Investors should keep their eye on CFO changes that might impact a company short or long-term.

For more on the story check out

Monday, July 16, 2007

Financial Blogging - Hazardous to Your Job?

The saga of Whole Foods CEO's blogging exploits continues to grow. Last Friday The Wall Street Journal announced that the SEC has begun a probe into John Mackey's supposed anonymous postings on Yahoo's message board regarding his firm's competitor and acquisition target Wild Oats. Could Mackey's job now be at risk?

The motto of the story - think before you post.

For more:

Businessweek Management IQ blog 7/25/07
MSNBC 7/18/07 Whole Foods-Wild Oats Deal at Risk Now?
Timesonline 7/18/07 Subsequent Apology 7/18/07 Subsequent Apology
Seeking Alpha
Schaeffer's Daily Blog
Business Week blog

CEOs on Tighter Leash -Exemplified by Spartech?

Earlier today, the CEO of Spartech SEH (NYSE), Georg Abd, announced his retirement as CEO and member of the board for personal reasons. The company appointed Randy Martin, the current CFO, as interim CEO. Spartech, a compounder and sheet extruder, has been doing reasonably well over the last year but recently announced it would have to revise its earnings guidance lower and also failed to meet its quarterly sales goal for this most recent quarter.

Abd was appointed Spartech's CEO in May of 2005. During his tenure with the firm, he managed to restructure parts of the company which included the closing of a number of plants, the sale of certain operations as well as executed a number of acquisitions. Spartech's business is subject to the run-up in oil prices which directly impacts the company's raw material costs. While considered a leader in its field it has a number of challenges in this difficult marketplace.

It is hard to determine right now the real reasons behind Abd's sudden resignation. Investors should watch the firm closely for any dramatic changes in strategy or whether the company becomes a possible takeover target or private equity acquisition possibility.

For more see:

RTT News
Wall Street Transcript Interview (sub. req.)

Financial Week Turns to Liberum for CFO Turnover

Tara Kalwarski in the July 16 issue of Financial Week turns to Liberum for our take on CFO turnover. Take a look.

Wednesday, July 11, 2007

Growing Use of CFO Rentals Explored By Financial Week

Jeff Nash wrote an article for Financial Week discussing the growing use of CFO rentals. The article focused on Tivo's latest announcement:
Tiring of having changed CFOs three times in less than two years, digital video recording service provider TiVo has chosen to rent its new finance chief.
I have noticed for some time a growing trend in this space but Tivo's filing seems to confirm what is happening in this area.

Aspreva Pharmaceuticals Hires Top CEO

Aspreva Pharmaceuticals ASPV (NASDAQ) a pharmaceutical company focused on identifying, developing and upon approval commercializing evidence-based medicines for patients living with less common diseases announced the hiring of J. William Freytag, PhD to replace the company's founder and current chairman and CEO, Richard Glickman. Glickman in May announced he planned to depart the firm for personal reasons. Freytag's appointment is a terrific choice for Aspreva.

Aspreva, a small biotech company has been working hard through clinical testing to get FDA approval for its CellCept drug. Currently in Phase III testing, the drug may offer real advantages for people suffering with lupus nephritis and pemphigus vulgaris. Unlike many other biotech's, Aspreva has actually run a profit for eight consecutive quarters. Freytag's appointment to head up the firm could be just the right medicine for the firm as it moves forward.

Freytag has worked on the business side on a number of different pharmaceutical related firms and he is also extremely well-versed in the scientific-side of the business as well. In his most recent executive position, which started back in 2000 and ended in late 2006, he was the President, CEO and Chairman of Myogen, Inc. another publicly-traded development-stage biopharmaceutical company. Under his tutelage, Myogen was acquired by Gilead Sciences. Freytag is also currently on the board of a number of biotech related firm's as well organizations. He was in fact recently appointed Chairman of the Board of Immunicon another development-stage publicly traded biotech. Prior to Myogen he worked for a number of big and small pharmaceutical related companies.

Expect more positive changes at Aspreva and keep a close eye on its Phase III testing results.

Update on Aspreva

BloggingStocks 7/18/07

Monday, July 9, 2007

What Really Happened At UBS?

Last week's sudden and unexpected departure of UBS AG UBS (NYSE) CEO Peter Wuffli appears to be characterized by old fashioned Swiss secrecy. The bank remains silent on why Wuffli departed. Was he forced out after the Board went against the wishes of its powerful Chairman Marcel Ospel to make Wuffli his successor or did he jump ship after failing to get the nod for the Chairmanship? Whatever the reason, UBS has appointed Wuffli's deputy 42 year old Marcel Rohner to replace Wuffli immediately.

Rohner, a PhD Econometrician, has been credited with successfully running the bank's wealth management business. The bank's wealth management business has been responsible for a large portion of the company's operating profit. The big question that seems be difficult for the company to put to rest is whether Rohner will embark on a new business strategy possibly breaking up parts of the bank, specifically selling off the investment bank or continue on as things are now. So far the bank, and its new CEO, Rohner insist that corporate strategy will remain the same as it was under Wuffli. We will just have to wait and see.

The shakeup at UBS, nevertheless, remains a full-fledged puzzle. Under Wuffli's leadership UBS thrived for a number of years. Success continued both in its private banking and wealth management business while at the same time the bank performed exceptionally well in investment banking. This all changed over the past year. Investment Banking starting having some difficulties, on top of that the bank was forced to get out of a troubled hedge fund which tarnished its image, and there were a number of very high-profile defections from the firm, the most prominent being the departure of Ken Moelis, who headed up investment banking. Many analysts attribute these problems to Wuffli's sudden departure. The most surprising aspect of the management upheaval was the unanimous decision by the board not to follow the wishes of the bank's all-powerful chairman, Marcel Ospel to make Wuffli his successor. Then on top of this failure to get his hand picked successor approved, the board then went on to ask and get Ospel's agreement to continue on as chairman for another three years after he had already made his wish to retire well-known. The recent management turnover at UBS remains an unsolved puzzle.

Investors need to keep a very close eye on corporate moves coming out of the bank for the next number of months.

For more on the story see:

Financial News (July 11, 2007)
Financial Times (July 10, 2007)
Here is the City News
Financial Times (subscription req.)
UBS Press Release
International Herald Tribune

Monday, July 2, 2007

Slurpee Former Chief To Save Blockbuster?

Back in May, Blockbuster BBI (NYSE) forced its Chairman and CEO John F. Antioco out of office after pressure from outside investor Carl Icahn and the its board of directors. Today Blockbuster announced that it has hired James W. Keyes, a former CEO of Seven Eleven to become the company's CEO and Chairman. Keyes, who left Seven Eleven in 2005 after it it was bought, is known as a keen retailer who successfully ran a national network of small-box retail locations where he managed to introduce new products and new technology to an industry constantly under change.

At first glance, his appointment appears to be a very good choice. Blockbuster is currently working hard to make its latest strategy known as Total Access a success against its prime competitor Netflix. Through continuing marketing efforts the company has tried to convince consumers that its retail store network offers an added advantage for consumers when using Blockbuster's online rental service. Unlike Netflix consumers can go to their neighborhood Blockbuster store to return a DVD rather than wait for returning the DVD by mail. For now the concept sounds like a hard sell when you consider that Blcokbuster to stop the bleeding is closing many of its stores to remain competitive. Keyes does offer a background in technology and retailing which at a minimum can only be helpful to the company and an improvement overall Antioco. Keyes has a tremendous challenge ahead of him. Blockbuster does not even have a movie download system under development. Keyes does have one additional thing going for him, he appears to have the confidenc eof Carl Icahn and board.

We will just have to wait and see.

For more on the story:

Star Telegram (next day update)
CNN Money
Star Telegram