Management Turnover as Change Agent

Friday, August 29, 2008

Gamestop Gets It. - Reorganizes Top Management for Growth

Gamestop GME (NYSE), the red hot video game retailer, has taken tangible steps to handle its tremendous growth and effectively deal with its growing international expansion.  Earlier in the month the company reported outstanding results.  According to a recent report by Zacks,
(Gamestop's) second quarter sales were $104 million above the consensus forecast, and EPS beat the consensus estimate by $0.04, which is about 19x our 2009 EPS estimate.
Yesterday the company announced it would split the chairman and CEO positions.
  An unusual change for a company performing so well.  The company has recognized that to go to the next level it would need to improve its bench and delegate more authority (see press release).  The longtime chairman and CEO, R. Richard Fontaine who has maintained his dual role since 1996 agreed to give up his CEO position and remain as chairman.  In his place, the company promoted Daniel A. Matteo the chief operating officer.  According to an AP story that appeared in Forbes,
As part of the changes approved by the board, R. Richard Fontaine, chairman and CEO since the company's inception in 1996, will relinquish his CEO title to the company's operating chief, Daniel A. DeMatteo, 60, who has been the chief operating officer since 1996 and vice chairman and COO since 2004.

Fontaine, 66, will focus on international operations, acquisitions and strategic development as executive chairman.

... In addition, J. Paul Raines, 44, the former executive vice president of U.S. stores for The Home Depot Inc. will become the company's new COO, effective Sept. 7. 
Gamestop seems to be way ahead of the curve when it comes to management change and corporate functioning.  The management changes make a great deal of sense and should serve the company well as its moves forward.  Keep a close eye on the company.

Recommended Reading - Sears' Quarterly Profit Falls 62% As its Struggle Continues

Today's New York Times DealBook contained a piece on the continuing struggles Sears SHLD (NYSE), (which today means hedge fund investor Eddie Lambert), has been facing.  Lambert, who at one time was viewed by many with the midas touch, has continued to fail in his efforts to make something out of his huge investment in Sears Holdings. According to The Times piece,
The continued slack performance by the firm had Breakingviews calling for Mr. Lampert to fire himself as chairman. Noting the investor, has not been shy about pushing for the ouster of other executives at firms his hedge fund invests in, the column argued Thursday that he should turn some of that acumen toward his own lackluster performance at the helm of Sears.
While it is unlikely Lambert would fire himself, he really needs to find new and particularly strong top management with heavy retail expertise, unlike himself, to run the show.  Such a change would mean he would have to cede a good part of his power and agree to put in more funds to get the operation going again, if that is even possible.

Stay tuned.

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Wednesday, August 27, 2008

As Ship Takes on More Water Fannie Mae Jettisons CFO and CBO

Fannie Mae FNM (NYSE) struggling to stay above water announced a late in day management shakeup that left the top of the firm CEO, Dan Mudd, still in place.  The current CFO, Stephen Swad, was leaving the company.  According to the company press release,
The executives include Peter Niculescu, who has assumed the duties of Chief Business Officer, as well as the appointments of David C. Hisey as Chief Financial Officer and Michael Shaw as Chief Risk Officer.
"After setting forth our capital and credit plan August 8, we are now putting a senior management structure in place to drive this plan across the company," Mudd said. "This team will be responsible for meeting the dual objectives of conserving capital and controlling credit losses while Fannie Mae continues to provide crucial liquidity to the U.S. housing and mortgage markets. As we move through the bottom of this cycle, maintaining capital, managing credit and driving revenues are the priorities — and we have to organize and staff accordingly."

..."The Board of Directors is firmly committed to Dan Mudd, the management restructuring, and the strategic objectives around capital and credit he set forth on August 8," Stephen B. Ashley, Chairman of the Board, said. "The Board will continue to work closely with Dan and his management team to guide the company and support the housing finance system through a very challenging period."
While Fannie Mae desperately needs management change it still appears to be too little and possibly too late.  Mudd may still ultimately be forced to leave.  Stay tuned.

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CEO Watch - Sir Fred Goodwin - Royal Bank of Scotland

Back in April I alluded to the pressures Sir Fred Goodwin, the CEO of the Royal Bank of Scotland was facing.  Goodwin has for a long time been considered a terrific CEO.  Then the credit crisis evolved and he too became ensnared in the difficulties facing many other banks.  Goodwin has found himself under increasing pressure from shareholders as RBS began seeing cracks in its invincibility.  In fact, the bank recently announced its first loss in forty years as a public company.  As the pressures grew Goodwin and the bank's current chairman, Sir Tom McKillop found themselves forced to make room for for some new blood on the board.  According to a story by Julia Kollewe in the Guardian,
Royal Bank of Scotland has strengthened its board with the appointment of three non-executive directors, including the deputy chairman of Northern Rock, in a move designed to pacify investors.
Stephen Hester, who is also the chief executive of property group British Land, will join the RBS board when he steps down from Northern Rock on October 1....

... John McFarlane, a former Standard Chartered and Citibank executive, and Arthur Ryan, the former chairman and chief executive of US financial services firm Prudential Financial, will also join the RBS board as non-executive directors on October 1. Last year McFarlane retired after 10 years as the chief executive of Australia and New Zealand Banking Group. Ryan retired from Prudential Financial in May. He previously spent 22 years at the former Chase Manhattan Bank, where he served as the chief operating officer and vice-chairman and also ran the worldwide retail bank.
Speculation has been heightened with the selection of the above three new members that Hester may be in line to succeed Goodwin. Keep a close eye on RBS and the moves made over the next number of months.  Management remains on the hot seat and cannot afford to make more mistakes.

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Unconfirmed Reports Indicate Alcatel-Lucent Will Name New CEO

Alcatel-Lucent ALU (NYSE), which forced its CEO, Patricia Russo and Chairman Serge Tchuruk to resign back in July, is rumored to be ready to announce the appointment of former president of science technology and strategy, Mike Quigley as its new CEO.  Quigley, who at one time was considered a prime candidate for the CEO position of Alcatel, left the company back in August of 2007 and moved back to Australia.  According to a story by Mary Lennighan for Total Telecom,
Former Alcatel-Lucent executive Mike Quigley will likely succeed CEO Patricia Russo, having secured the backing of the vendor's nomination committee, it emerged Wednesday. 

Quigley, who held the position of technical chief at Alcatel-Lucent until he resigned last August, is the favourite to replace the outgoing chief executive, Reuters reported, citing a piece in French weekly Le Canard Enchaine.
The market has responded positively to the rumor. 

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Monday, August 25, 2008

More Rumors, More Pressure - Lehman's CEO, Richard Fuld, Remains at Risk

Colin Barr of Fortune reported today on the continuing rumors surrounding Lehman and now specifically Richard Fuld, Lehman's embattled CEO.  According to Barr,
The big Lehman Brothers (LEH) story Monday is that CEO Dick Fuld is on the ropes. The Observer (U.K.) newspaper, citing “well-placed sources within the bank,” reported over the weekend that Fuld faces a “planned coup” that will force him out by year-end. The paper said operating chief Bart McDade, installed in June as Fuld sought to restore faith in the firm after a big second-quarter loss took Wall Street by surprise, has taken over many of Fuld’s responsibilities.
There is nothing new here but so far, Fuld has not managed to find a way to defuse the crisis facing Lehman and it remains unlikely he can survive all that much longer.  The real question is, can Lehman?

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Friday, August 22, 2008

Recommended Reading -Turnaround Kraft (KFT): New management 'shakes things up'

Steve Halpern of Bloggingstocks wrote a piece today highlighting the ongoing management changes and what they have meant for Kraft KFT (NYSE).  Most of Halpern's piece refers to a story written by George Putnam of the Turnaround Letter.  Back in 2006, Kraft brought back Irene Rosenfeld to Kraft to run the company.  From the time she came back she has been working hard to strengthen the company's key management. Just as an aside, back in February of 2008 it was revealed that Warren Buffett's Berkshire Hathaway accumulated a 8.6% stake in the company, another possible show of confidence in Rosenfeld's plans (see CNBC).

Additional Follow Up on The Gap

Surprise, surprise, The Gap GPS (NYSE) the well-known struggling retailer announced its quarterly earnings yesterday and they were up 51% from the same period a year ago.  Yesterday, I wrote a post about recent changes at The Gap.  I specifically focused on The Gap's new designer, Patrick Robinson and his potential to help the firm.   The Gap's CEO Glenn Murphy who was met with a good deal of skepticism when initially appointed back in July 2007 (see post) may actually be succeeding in making a real dent in resolving some of the troubles the retailer has been facing.  There actually may be some light at the end of the tunnel for the firm.

Stay tuned.  

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Thursday, August 21, 2008

More Changes at The Gap - Is there Light at the end of the Tunnel?

The Gap GPS (NYSE), the struggling clothing retailer, is expected to announce quarterly earnings today after the close of the markets.  One potentially positive note is the new vigor and style Gap's newest designer, Patrick Robinson, has infused into the Gap's fall collection.  According to a story by Eric Wilson in the International Herald Tribune,
Robinson, 41, is the third designer to attempt to pull the sword from the stone since Gap began to publicly acknowledge its creative personnel in 2003, and the most closely watched because of his popularity with industry insiders and his finesse with casual American sportswear.
His fall designs have generated promising reviews, but also concern about whether a single designer - one with a mixed track record - can revive a brand with 1,155 stores in the United States in the midst of an economic crisis.
Robinson's input into design for the Gap was followed today by the company's announcement that acting President Tom Wyatt of the Gap's subsidiary Old Navy who had temporarily replaced Dawn Robertson as president back in February was formally made the President of Old Navy today.  According to the company's press release,
"In the last six months, Tom (Wyatt) unified the organization and brought renewed focus to our customer target, while making the tough changes necessary to get the brand back on track," Gap Chief Executive Glenn Murphy said.
Glenn Murphy, the Gap's CEO, has been working feverishly to find a formula that could work to turn the retailer's fortunes around.  It's tough right now, but maybe, just maybe, he has a real winner with the Gap's newest designer.  Old Navy on the other hand, is a far more difficult situation.  

Stay tuned expect more to come both good and bad.

Wednesday, August 20, 2008

OfficeMax CFO Resigns and Joins Allstate

Struggling office supply company, OfficeMax OMX (NYSE) announced the resignation of its CFO, Dan Civgin effective August 29, 2008.  Civgin had been OfficeMax's CFO for nearly three years.  Shortly after today's announcement of Civgin's resignation, Allstate Corporation ALL (NYSE) announced Civgin would be joining the company as its new CFO replacing acting CFO, Samuel Pilch.  News of Civgin's resignation put further downward pressure on OfficeMax's stock which had been trading in early 2007 around $55 dollars.  Today the stock was trading at $11.93 down from its initial open.  

Civgin an experienced CFO who prior to working for OfficeMax had served as CFO for General Binding Corporation.  He will join Allstate as CFO and Senior Vice President on September 8.  Allstate has also been suffering of late and appears to have made a solid choice for its new CFO.

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Motorola Continues to Make Changes

As Motorola MOT (NYSE) continues to struggle and find ways to right itself, more executive changes are afoot. Dan Frommer of the Silicon Alley Insider wrote a short piece today on the latest changes at Motorola's struggling cellphone division.  According to Frommer,
Rob Shaddock, the SVP responsible for consumer mobile products, has resigned.  ... His replacement: John Cipolla, a 30-year Motorola vet, will lead consumer products and report directly to new mobile devices CEO Sanjay Jha.
There are likely more to come.

Friday, August 15, 2008

Recommended Reading - P and G can tap deep bench when its time for new CEO

Lisa Biank Fasig wrote a piece that appeared in the Business Courier of Cinncinnati that talked about growing speculation about Procter and Gamble's PG (NYSE) highly regarded CEO, A.G. Lafley.  Lafley has thrived as the company's CEO but he is now in his 60's and has completed the acquisition and integration of Gillette and thus, the firm may be getting ready for a possible successor.   

Wednesday, August 13, 2008

Recommended Reading - Finding and choosing a new CEO, Business Week

Business Week recently provided a quick and useful video of a presentation by Beverly Behan, Managing Director of the Hay Group entitled, Finding and Choosing a new CEO, How a board avoids CEO succession issues. Check out the video. 

Monday, August 11, 2008

CEO Watch - Rick Wagoner, General Motors Update 7

As the news  General Motor's performance and sales continues to send tears down the cheeks of General Motors' shareholders, I find myself in a surprising position. I am in total agreement with Henry Blodgett, the former analyst and now successful writer in chief, CEO and co-founder for New York City's Silicon Alley Insider.  While I was on vacation last week, Blodgett wrote a short piece about the horrendous job Wagoner has done for GM as CEO and the surprising fact that his board continues to provide him with "solid support". The piece appeared in the Huffington Post.   According to Blodgett,
In the past three and a half years, General Motors (GM) has lost more than $67 billion. In the past eight years, the company's market cap has dropped by $37 billion. Add the two numbers together, and GM's shareholders have lost more than $100 billion so far this decade.
I rarely find myself in agreement with Blodgett, but his views on Wagoner and mine are exactly the same.  If you are interested in GM or the auto industry, I suggest you check out Blodgett's piece and the other journalist stories he refers to.  

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Friday, August 1, 2008

House Cleaning Continues at Wachovia

Wachovia's new CEO, Robert Steel, continues to clean house (see earlier blog).  Today the bank formally announced that the bank's chief risk officer, Donald Truslow would resign as soon as his replacement was found.  Truslow had been with the bank since 1980.  According to Paul Davis of the American Banker,
Wachovia's top risk management functions have attracted mounting scrutiny since the company's October 2006 purchase of Golden West Financial Corp., an Oakland thrift that specialized in adjustable-rate mortgages. The company has also gotten unwelcome attention from regulators on other issues.
Steel is working hard to make the impression he is in charge and intends to turn the ship around. There is probably more management changes to come.  The real question remains, what can Steel and his team do to help the struggling bank?  Stay tuned

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