HP Selection of New CEO Slammed by Analysts and Market

Yesterday’s long awaited announcement on who would replace Mark Hurd as Hewlett Packard’s HPQ (NYSE) CEO went down with a thud. The selection of Leo Apotheker, a former short lived CEO of SAP, was not hailed by the market nor many analysts. I am on the other side of the fence on this appointment. I think HP’s board has come up with a surprisingly excellent choice.While Apotheker was not very successful while CEO at SAP he faced a great deal of opposition within the organization and more than likely learned what he would need to do to be successful a second time around. SAP’s culture did not fit his needs for change. He should be able to make more change at HP than he was able to accomplish at SAP.

HP’s board appears to have gone strategic in its appointment. Its decision to go outside the firm for its selection should in the long run work out. Apotheker has the right background to help HP move into the software side of the industry in a big way without seriously jeopardizing its current bread and butter businesses. Who knows he might even move to go for an acquisition of SAP or some kind of alliance. If he can manage to keep many of the key players currently at HP and work with them to get the firm’s overall strategy right, he has a great chance at being very successful. He is a strategic thinker and he understands technology.

Shareholders and investors need to give him time to get up to speed. Stay tuned this latest selection may turn out to be a really winner despite the conventional wisdom.

For more:

Gigaom

CEO Watch - William C. Weldon, Johnson and Johnson, Update #1

Johnson and Johnson’s JNJ (NYSE) longtime CEO, Bill Weldon remains on the hot seat. The numerous problems J and J has had with recalls and manufacturing oversight through its huge network of subsidiaries particularly its McNeil Consumer Healthcare firm continues to plague the firm and particularly the firm’s CEO. Weldon will be testifying later today before a House Congressional Committee. All eyes will be on weldon today to see how he responds to the criticism the firm has faced for its response to the continuing problems at McNeil as well as other parts of the firm. Despite the recall related problems, J and J overall has continued to remain very profitable but J and J more than most drug firms has relied on its reputation as a means for success all these years. Investors and analysts are beginning to question whether Weldon’s response to the problems were adequate. More importantly whether he managed the crisis sufficiently to protect the firm’s reputation. According to piece by Johanna Bennett in Barron’s Blog entitled J and J Reputation on the Line,

… a recent survey by CLSA analyst David Maris indicates that the company’s reputation among mothers and doctors may need a Band-Aide.

When 136 mothers and 50 pediatricians and general practitioners were asked to rate J and J’s formerly unassailable reputation before and after the recalls on a scale of one to 10 (1=horrible and 10=perfect), J andJ’s score fell 26% from an eight to a 5.9, according Maris.

And for some respondents, the recalls have permanently dented their regard for the the health care titan.

Weldon has a difficult task ahead of him before Congress and his shareholders. Despite his long reputation for fine management his survival as CEO may be an uphill battle as this problem continues to have legs. Stay close to the news on this one.

For more:

New York Times

Seeking Alpha

Wall Street Journal

CEO Watch - Nokia CEO Olli-Pekka Kallasvuo

Over a month ago Ibriefly examined the continuing problems Nokia NOK1V, the world’s largest phone manufacturer, has found itself facing with the explosive growth of the smartphone market. Nokia unlike Apple and even Motorola, HTC, Samsung etc. has been a true laggard in this marketplace. With this growing competition in the smartphone marketplace Nokia’s share price has declined a whopping 67% in the three years since Apple introduced the iPhone (according to an article in Bloomberg). For some time some shareholders and analysts have been calling for the CEO, Olli-Pekka Kallasvuo’s head. The CEO has recognized the problems facing Nokia and recently has made some internal management changes to address the issues. Time is running out as shareholder and now possibly board member patience is dissolving. It is hard to see at this point in time as the iPhone4, Google Android phones, Blackberries and other sophisticated smartphones are coming into the marketplace what Nokia can do to reverse its problems. Nokia needs a big winner and it needs it soon.

Fair or not it, looks as if Olli-Pekka Kallasvuo’s time as CEO may be limited. It may be the right time for the Finnish based firm to hire a seasoned CEO from outside the firm.

For more:

Business Insider

CEO Watch List- Steve Ballmer, Microsoft Update #1

Microsoft MSFT (NASDAQ) and particularly Steve Ballmer, the firm’s CEO, continues to find itself on the hot seat. More and more analysts and tech pundits are beginning to question the firm’s direction and leadership. Yesterday, Kara Swisher of the Wall Street Journal’s All Things Digital examined some of the problems facing Microsoft and it’s chief executive in her piece entitled, What to make of the Microsoft-Is-Falling-And-Can’t-Get-Up Meme. Swisher is by no means in the camp seriously worried about the firm’s immediate future but she suggests there is a real need for some change at the firm. According to Swisher,

Microsoft, as all tech companies do, needs to change, and a lot faster than it has so far; the company has been trying mightily to do so in search and recently, in mobile, where it is woefully far behind; its leadership under Ballmer, who took over from co-founder Bill Gates, has been meh enough to keep its stock moribund.

But, by no means recently–even if there is a better CEO for Microsoft out there than Ballmer–have I found the company execs ignorant about the tougher issues or unwilling to consider changes needed.

In fact, in its high-flying days, Microsoft did have a tin ear to criticism. No longer, and I would call its execs appropriately concerned about fixing its issues, although their efforts do suffer from the company’s massive size and inertia in making the right moves.

Thus, they certainly might not be successful at innovating, although these are the very kinds of problems Apple CEO Steve Jobs solved when he returned to a rotten company in what, in its current glory days, seems eons ago.

And Microsoft has been getting the same questions that are beginning to be asked about Google.

… That’s why–at this point–I can see no need for panic to set in about Microsoft…

… As for today, even though we are all terminal, the sky looks like it will remain intact at Microsoft for a little bit longer.

Swisher is rather pragmatic about Microsoft’s situation but pragmatism does not always reign particularly when you are talking about one of the largest and formerly most successful tech firms in history. Keep a close eye on Ballmer and Microsoft.

CEO Watch Ken Lewis, Bank of America, Update #8

It's official, Ken Lewis, Bank of America's embattled CEO announced his planned resignation for the end of the year. Lewis in a letter to Bank of America employees explained his reasons for resigning. The letter included in the WSJ's Deal Journal stated that Lewis' decision to resign was his alone and that he was not pressured to do so. Whatever the reason, his planned exit is the end of a sad chapter at the bank and hopefully the beginning of a new era for the bank, an unlilkely scenario at this point.

CEO Watch - John Mackey, Whole Foods

John Mackey, the chairman and CEO of Whole Foods WFMI (NASDAQ), has found another opportunity to put his foot in his mouth. Mackey, Whole Foods’ controversial chairman and CEO, recently wrote a highly publicized op ed piece in the Wall Street Journal criticizing President Obama’s plan to reform healthcare. Many shareholders and shoppers at Whole Foods were quite distressed by Mackey’s comments in the piece. This is not the first time Mackey has found himself on the hotseat. Back in 2007 he nearly destroyed his company’s efforts to acquire Wild Oats one of his firm’s key competitors. Mackey was discovered to be writing negative comments about Wild Oats under an assumed name on Yahoo’s Finance Message board. The controversy nearly cost him his job. Then recently he was quoted during an earnings call in which he said,

“We sell a bunch of junk.”

Mackey now finds himself under pressure from activist investor CtW Investment Group. The firm recently wrote a letter calling for his dismissal as chairman and for the firm to develop a succession plan for his CEO position. I think the latest controversy will not disappear quickly and it is quite possible his time is numbered.

For details:

The Deal.com

Slate Big Money

Is BofA's Lewis Getting to the end Game?

Ken Lewis, Bank of America’s embattled CEO, continues to oversee more executive management changes. Over the last few days a number of major management changes have been announced. In response to the growing number of top management changes speculation continues to grow that a potential successor is being developed for Lewis’ job. According to a story by David Mildenberg for Bloomberg,

Bank of America Corp., under pressure to overhaul management and reduce risk, set up a five-person competition to replace Kenneth Lewis as chief executive officer.

The bank yesterday shuffled senior management… Liam McGee, who headed consumer banking, left and was replaced by Brian Moynihan in a division that has provided most of the Charlotte, North Carolina-based bank’s revenue and profit.

Moynihan, 49, who ran wealth management and corporate and investment banking, is the top CEO candidate, according to analysts including Richard Bove of Rochdale Securities. Possible successors include ex-Citigroup Inc. executive Sallie Krawcheck, hired yesterday to head wealth management, home-lending chief Barbara Desoer and Chief Financial Officer Joe Price. Also in the running is Tom Montag, a Goldman Sachs Group Inc. veteran.

The speculation on who may take Lewis’ place is just that — speculation -- but it is very likely he is getting close to the end. Keep a close eye on the top players and what next steps take place.

For more:

Financial Planning

Boston.com

CNNMoney.com

Time.com

CEO Watch - James McNerney, Boeing Update #1

Boeing CEO, James McNerney, just received another body blow. Yesterday the Seattle Times reported that due to the newly found wing flaw that was first discovered in May Boeing’s 787 Dreamliner would be unable to undergo a test flight in 2009. This information only complicates the ultimate delivery and success of the new plane which Boeing has been relying on to help maintain their lead over their prime competition European Airbus. McNerney may ultimately take the hit for these problems. Stay tuned.

For more:

Daily Tech

CEO Watch - James McNerney, Boeing

Boeing’s CEO James McNerney may be in some trouble. Even though the company announced an increase in earnings greater than what Wall Street expected the continuing difficulties facing the airline manufacturer with regard to its delivery of its 787 Dreamliner model continues to place undue pressure on the CEO’s management status. I would suggest investors keep a close eye on Boeing and its management.

For more:

Chicago Tribune

Seattle Times

CEO Watch- Jeffrey Peek, CIT

Jeffrey Peek, CIT’s CIT (NYSE) CEO since 2003 appears to have entered a status similar to many of the financial CEOs that were forced out during the financial crisis over the last year and a half, e.g., Stanley O’Neal of Merrill, Sir Fred Goodwin, Royal Bank of Scotland, Martin Sullivan, AIG … CIT has been in free fall of late and is looking to the government for help. It is unlikely Peek will remain as CEO after the company’s crisis manages to come under control. According to a story by Paul Tharp in the New York Post,

The White House is “in advanced talks” trying to extinguish a sudden financial wildfire that could swallow CIT Group, the financial firm that bankrolls the nation’s small businesses.

… The company, which reported more than $3 billion of losses in the past eight quarters, said it hired Skadden, Arps as an adviser. Skadden is known for its work in mergers and acquisitions and bankruptcies.

CIT warned yesterday in internal documents that it’s in danger of running out of cash unless it can get a second round of federal bailout help like that of Wall Street’s banks and other cash-strapped financial firms.

Peek can be expected after the crisis is handled to find himself a lightning rod for the company’s risky business decisions. Keep a close eye on how Peek handles the current crisis and how he is ultimately portrayed by institutional investors and the government. In a story by Ari Levy and Linda Shen of Bloomberg they examine the difficulties Peek and CIT are facing. The writers quote Sean Egan, president of Egan-Jones Ratings Co. in Haverford Pennsylvania,

“You could make a cogent argument that senior management didn’t have a good grasp of the financial storm that was on the horizon,” … “CIT has been through a number of near-death experiences. This time they cut it too close.”

The Bloomberg reporters go on to say,

… On Peek’s watch, the shares soared to a record $61.59 in February 2007 before plunging 98 percent as the company reported eight straight money-losing quarters. CIT’s debt rating was cut by Standard & Poor’s yesterday to seven levels below investment grade, as the ratings firm cited company requests to draw down on credit lines.

Moody’s also slashed its rating yesterday, to B3 from Ba2, or six levels below investment grade, because of “inadequate progress” toward improving liquidity. CIT, which lends to 950,000 businesses, warned that a collapse would put manufacturing and retail clients at risk.

It is only a matter of time for Peek.

For more:

Financial Times (update July 16)

New York Times (update July16)

CEO Watch - Vikram Pandit, CitiGroup, Update #2

Damian Paletta and David Enrich wrote an article in the Wall Street Journal about growing pressure from the head of the FDIC, Sheila Bair, on executive management at CitiGroup. According to the reporters,

The Federal Deposit Insurance Corp. is pushing for a shake-up of Citigroup Inc.’s top management, imperiling Chief Executive Vikram Pandit, people familiar with the matter said.

The FDIC, under Chairman Sheila Bair, also recently pressed a fellow regulator to lower the government’s confidential ranking of Citi’s health — a change that would let regulators control the firm more tightly.

It is really difficult to determine how all these forces will ultimately play out and what they will mean for Pandit as well as a number of the executives under him. It is certainly possible his tenure may not extend much longer, we will just have to wait and see.

For more:

Reuters

CEO Watch - Ken Lewis, Bank of America, Update #6

Ken Lewis lost his battle today to continue as both CEO and chairman of Bank of America. Shareholders voted to rest the chairmanship away from Lewis. Lewis has been under a cloud ever since the Bank of America acquisition of Merrill Lynch and in some people's minds since the bank's acquisition of Countrywide the mortgage company. The real question many people are asking is whether or not Lewis will continue as the bank's CEO much longer. According to a story by Louise Story for The New York Times,

... the vote to separate the chairmanship from the company’s executive leadership raised questions about how much longer Mr. Lewis could steer the bank as shareholder anger mounts over his handling of the bank’s takeover of Merrill Lynch.

Mr. Lewis has worked at the bank and its predecessors for 40 years and run it as chief executive since 2001.

It is very unlikely this is the end of the story. The bank replaced Lewis as Chairman with Walter E. Massey, a longtime board member and former president of Morehouse College.

For more:

SEIU blog
Economic Times
Wall Street Journal
Huffington Post
Financial Times
Los Angeles Times

CEO Watch - Vikram Pandit, CitiGroup, Update #1

As the government’s bank stress test results come closer to being released, rumors continue to fly that Citi’s CEO Vikram Pandit may be forced to become a sacrificial lamb. While not over impressed with the results he has had over his short stint as CEO, Pandit was never dealt a good hand from the beginning of his tenure. He has certainly made a serious effort to address the bank’s problems. Mark DeCambre wrote a story that appeared in today’s New York Post entitled CEO STRESSED OUT, TREASURY’S TEST MAY FORCE OUSTER OF CITI’S PANDIT. According to the story,

… sources tell The Post that regulators think they might have to make the bold move of removing Pandit to signal Washington is taking as hard a line with the banks as it did with General Motors when it effectively ousted GM CEO Rick Wagoner.

While DeCambre may be correct, I suspect Pandit will keep his position for awhile. The risks of changing him right now while his tenure has been so short may actually make the situation worse. Time will tell. Stay tuned.

CEO Watch - Ken Lewis, Bank of America, Update #4

The ratchet continues to turn a notch on Bank of America CEO, Ken Lewis. According to an analysis by Elinor Comley of Reuters,

The government may now add to the pressure from shareholders, analysts said. The sudden departure of Wagoner after nine years in the top job at GM signals the Obama administration is looking for management changes at bailed-out companies.

“His longevity in the job is probably very much in question,” said Keith Wirtz, chief investment officer of Fifth Third Asset Management and a former CIO at a Bank of America subsidiary. Fifth Third holds shares in the bank.

The bank disagreed with the assessment. “We do not see the parallel with the U.S. auto industry,” said a Bank of America spokesman, noting that since 1991 the bank has been profitable in every quarter except one, and made a $4 billion profit in 2008.

Still, shareholders say Lewis is in a precarious situation, citing both the government bailout as well as the fourth-quarter losses at Merrill, which suggest Bank of America did not perform adequate due diligence.

Lewis’ time as CEO of Bank of America may finally be coming to an end. As the pressure continues to grow, Lewis and the board will find it more and more difficult to justify his position as CEO. Keep a close eye on B of A.

For more:

The Plum Line

The Washington Post

CEO Watch - Ken Lewis, Bank of America, Update #3

Henry Blodget wrote a piece for Clusterstock today that questions (as I have been doing for quite some time) why Ken Lewis continues to remain as the CEO of Bank of America. Blodget stated,

Ken Lewis may be an excellent banker. He may be the pillar of his community. He may be a kind, considerate, and fair boss who is admired by his troops. He may, generally, be a real asset to his company.

But Ken Lewis just screwed up. Massively.

Ken Lewis screwed up so massively that he single-handedly demolished at least half of the value his shareholders’ spent decades accumulating–through a knee-jerk decision to buy the sinking super-tanker known as Merrill Lynch. Six months ago, in one tense weekend, Ken Lewis let himself get duped into thinking that if he didn’t bid now and bid high for an imploding Merrill Lynch, he’d lose the prize he’d had his eyes on for years.

Lewis continues to have the “confidence” of his board which seems to defy reality. He continues to try and redeem himself in the eyes of the public. Today, before meeting with President Obama, he was quoted by Bloomberg making what appears to be a valuable suggestion. Lewis stated,

… the U.S. should consider separating commercial lenders from investment banking activities.

While he is probably correct his suggestion is not enough to give him a pass on the damaged he overseen to BofA. Stay tuned.

CEO Watch - Ken Lewis, Bank of America, Update 2

Ken Lewis, Bank of America’s BAC (NYSE) embattled CEO, found himself today under added new pressure.  CTW Investment Group which works with Union-affiliated pension funds just wrote a letter to the bank calling for Lewis’ ouster.  The text of the letter appeared in today’s Charlotte Business Observer.  CTW has often been a thorn in the back of top executives perceived as failing in their executive duties.  According to a Reuters story CTW said,

if Lewis is not removed, shareholders should vote against the reelection of Lewis, Sloan and corporate governance committee chair Thomas Ryan to the board. Ryan is chief executive of CVS Caremark Corp (CVS.N).

Bank of America’s annual meeting is scheduled for April 29…

The real question remains what could a replacement for Lewis do at this point?  Stay tuned.  

For more:  

Charlotte Business Journal   

Forbes 

Portfolio.com  

CEO Watch - Ken Lewis, Bank of America, Update 1

Ken Lewis, Bank of America’s embattled CEO, is not out of the woods yet.  While Lewis managed the other day to get the support of the bank’s board, today’s New York Post in an article by James Doran stated,

A group of angry Bank of America shareholders plans to demand that Chairman and Chief Executive Officer Ken Lewis get the boot at the bank’s upcoming annual meeting. 

Whether the shareholder suit referred to in the NY Post story or other related outside pressures will ultimately result in Lewis’ head only time will tell.  At a minimum, expect far more turmoil as to Lewis’ tenure and management approach.  

For more:  

Clusterstock  

CEO Watch - Ken Lewis, Bank of America

Ken Lewis, BofA's embattled CEO who was responsible for BofA's questionable acquisitions of Countrywide and Merrill Lynch is expected to survive today's BofA board of directors meeting.  According to the Wall Street Journal,

"Lewis's job is in no danger," a person close to the board said Friday.

Whether he survives or not Lewis will remain on the hot seat for some time.  While both major acquisitions were favored by the government, at a minimum Lewis has failed to manage them and deserves to be forced out.  Rob Cox and Anthony Currie of Breakingviews.com yesterday, which appeared in the New York Times, summed up Lewis' predicament and concluded,

Corporate executives must accept responsibility for failures if they’re to keep their shareholders’ trust. When they don’t, it is up to the board to make sure blame is apportioned appropriately. Lewis hasn’t come clean. BofA’s board must go.

I agree but suspect the prevailing view that Lewis will for now remain at his post are accurate. Stay tuned.  

For more:  

New York Times  

Bank Investment Consultant  

Bizjournals.com  

Bloomberg  

AP  

NY Post  

Charlotte Observer  

Clusterstock  

Forbes (update)  

Guardian UK (update 1/29)  

Charlotte Observer (update 1/29)  

CEO Watch - Sir Howard Stringer, Sony

For the last number of weeks Sony SONY (NYSE) and its CEO, Sir Howard Stringer, have been in the news.  Most of the commentary has been about the impending reorganization of Sony’s electronics business Sir Howard hopes to get implemented.  The controversy surrounding the reorganization has focused on Stringer’s attempt to make changes in Japan that would have a direct impact on Japanese employees who traditionally expect a job for life.  The Japanese have remained adamantly resistant to the proposed changes. The controversy has remained a major thorn in Stringer’s control.  Now comes news that Sony has forecast a whopping annual loss of nearly $3 billion.  According to Canada’s Gazette ”the loss would be Sony’s first annual loss  in 14 years”.  Could Stringer now find himself in the reorganization cross hairs? According to a story by Pavel Alpeyev and Junko Hayashi in Bloomberg,

Sony Corp. forecast a record 260 billion yen ($2.9 billion) full-year operating loss, almost four times analysts’ estimates, as the global recession cuts sales of televisions and cameras. 

… The outlook increases pressure on Chief Executive Officer Howard Stringer, 66, who is reorganizing the main electronics business after failing to meet his pledge to raise Sony’s operating profit margin to 5 percent. Recessions in Europe, Japan and the U.S. have cut consumer spending, while Sony lacks hit products that have powered profits at Apple Inc. and Nintendo Co.

While I expect Stringer to survive for now the dismal news, he needs to find a way for the company to come up with some product hits and to demonstrate to both employees and investors that he understands what’s needed for Sony to succeed going forward.  Keep a very close eye on what transpires at Sony for the next couple of months.  

For more:   

AP  

Barron’s Blog   

Bloggingstocks   

Sonyinsider   

Silicon Alley Insider  

Forbes    

CEO Watch - Vikram Pandit, Citigroup

The continuing financial saga at Citigroup continues to remain front page news.  The latest moves at the bank ( Smith Barney - Morgan Stanley JV, moves to further break up the bank) all seem to be counter to the strategy Pandit has been professing for some time.  As these changes move closer to reality and Pandit continues to lose supportive allies, e.g., former U.S. Treasury Secretary Robert Rubin (resigning as Citi board member), the pressure on Pandit will only get greater.    

Let it be said, Pandit inherited a nearly impossible situation when he came in as the new CEO but its getting far more difficult to see how he can remain in his position.  More and more the U.S. government seems to be a powerful force behind the bank’s latest moves.  We will just have keep watching as changes dribble out and pressure builds on Pandit.   Pandit’s greatest hope and possible salvation as CEO is to become a “true believer” in the current changes and push hard for more dramatic and quick changes.  He must acknowledge that the global financial supermarket that was Citi must now come to an end.  Sandy Weil’s vision for Citi can no longer be valid.  

To get a sense of what he might do, check out the Breakingviews.com section in today’s International Herald Tribune.  I hope he can find the way to make things happen for the bank.  

For more:  

Fierce Finance  

Reuters  

NY Times Dealbook 

Crains

Huffington Post