John Thain Gets Second Chance

John Thain, the former CEO of Merrill Lynch, who found his reputation in tatters after Bank of America acquired Merrill in the midst of the financial crisis, has been given a second chance to revive his reputation. Yesterday, CIT Group CIT (NYSE) announced that Thain would immediately become the new CEO and chairman of the small business lender. CIT had gone into bankruptcy under the leadership of Jeffrey Peek who ultimately had to give up his leadership role of the firm.CIT has been a very important lender to small and mid-sized businesses. It finds itself coming out of bankruptcy and hopes Thain can work wonders with the firm. An article in Forbes summed up Thain’s situation with regard to the Bank of America acquisition of Merrill and how it impacted his reputation and firm.

As chairman and CEO of Merrill Lynch, Thain’s deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he then came under fire for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.

CIT announced yesterday, as the firm moves out of bankruptcy, that Thain would serve as the firm’s new CEO and chairman. Thain replaces interim CEO Peter Tobin who will remain on the company’s board of directors. The decision to select Thain may actually be a good fit. Thain’s expertise could actually be very beneficial to CIT’s circumstances.

Best Buy's Rival Leaves the Scene While Company Changes CEO

Best Buy BBY (NYSE), the U.S.’ largest electronics retailer, announced today that the company’s long serving CEO, Bradbury Anderson, would be retiring his position in June.  The company also announced that Anderson would be seceded by president and chief operating officer Brian J. Dunn.  The succession announcement comes a week after the firm’s key rival, Circuit City announced it would liquidate its merchandise and close its stores and after Best Buy announced earlier in the month it would reduce its fiscal year 2009 earnings forecast.  In today’s announcement the company insisted Anderson’s retirement was not due to the difficulties the company has been facing due to the recession. According to a story by Sam Black for the Minneapolis/St. Paul Business Journal,

“I’ve always wanted to leave the organization at the right interlude: when I saw a new leader ready to take the organization to a new level, higher than I could take it myself,” Anderson said in a statement. “For many months, I’ve felt that Brian was fully prepared to be CEO. Based on his readiness and the journey we’re about to begin, I’ve concluded that this is the right time for my story as CEO naturally to end, and Brian’s story to begin.  

“Furthermore, this timing for my retirement is consistent with my personal goals and in accordance with our succession plan. The best part is anticipating the great joy ahead of seeing where his story arc goes, and 

how that transforms the company.” 

Anderson will complete his term as vice chairman even after he resigns his CEO position on June 24.  It is hard to accept Anderson or the company’s explanation for the announced change.  The difficulties Best Buy has faced this recent holiday shopping season and the fact that the company has so far been unable to take real advantage of its rival’s bankruptcy seem to be true reason behind the change in leadership.  Both Anderson and Dunn have labored at Best Buy from the beginning.  Each of them have worked their way up the corporate ladder.  Dunn knows the business and appears to be right for his new position.  According to a story by Mark Clothier for Bloomberg,

Dunn, who started with Best Buy in 1985 as a VCR salesman in the Minnetonka store, one of the retailer’s then 12, becomes CEO June 24. The 48-year-old has been president and COO since 2006.  

Best Buy remains an electronic retail behemoth that overall has been very well run.  The company is facing a new world as regards electronic retailing.  Dunn needs to find new ways to deal with a growing reticence on the part of  consumers to spend as they did in the past on electronics and more importantly the fact that consumers overall have reduced discretionary spending.  Keep a close eye on the Best Buy as its rival disappears from the scene and suppliers look to firm to help them succeed as well.    

For more:  

Reuters  

Associated Press  

Minnpost.com 

Thestreet.com  

Financial Times 

Twice  

CNBC (Reuters)

Businessweek  

CEO Watch - Philip Schoonover, Circuit City, Update 4

Circuit City appears to have made an about face today.  The company announced it has hired Goldman Sachs to help with a potential.  According to DealScape,

There is finally an agreement on the table between Circuit City and Wattles Capital Management LLC, and Circuit City has put itself on the block due to activist pressure, hiring Goldman, Sachs & Co. to manage the sale.

Blockbuster must be happy about the announcement.  One can only assume that Circuit city CEO, Philip Schoonover, recognized the need to try and play ball with Wattles, Blockbuster and Carl Ichan.  Time will tell how all this plays out.  According to the New York Times Deal Book, Ciruit City's change of heart might be due to,

Why the change? A letter from the billionaire investor Carl Icahn, who is Blockbuster’s largest shareholder, seemed to be a major factor. Circuit City said that Mr. Icahn had pledged, with certain conditions, to buy the company on his own if Blockbuster should be unable to finance the deal. “This written commitment answers some of [the company’s] questions with regard to Blockbuster’s and Mr. Icahn’s previous disclosures,” Circuit City said in a news release.

Keep your ears to ground and stay tuned.  There is more to come.

For more:

Financial Times

Bloomberg

Market Watch

Business Journals

Washington Post

Portfolio.com

Silicon Alley Insider

CEO Watch - Philip Schoonover, Circuit City, Update 3

As Circuit City CC (NYSE) continues to resist Blockbuster's BBI (NYSE) efforts to merge, the electronics retailer also continues to resist attempts by Wattles Capital Management to change a portion of the board.  To complicate the already difficult situation, a new fly has appeared in the ointment.  While Wattles Capital Management owns just over 6% of Circuit City stock and has continued to put increasing pressure on the firm's management, HPK Investments, who owns just over 9% of the stock has turned activist as well.  When HPK first invested in Circuit City the firm considered their investment as passive.  Just yesterday, the passive nature of HPK's investment changed.  The investment firm filed a new 13D.  In the filing HPK stated,

... On April 28, 2008, HBK Capital Management sent a letter to the Issuer encouraging the Issuer to allow Blockbuster to perform due diligence in connection with Blockbuster's proposal to acquire all of the outstanding shares of Common Stock of the Issuer and to commence good faith negotiations with Blockbuster regarding its proposal. In addition, HBK Capital Management urged the board of directors of the Issuer to create a competitive bidding process in

order to maximize shareholder value...

Circuit city's CEO, Philip Schoonover, now finds himself in an even more precarious position. Pressure is growing from all sides.  It is hard to imagine he can survive with the situation continuing as it is right now. 

Stay tuned.

For more:

The Deal.com

Silicon Alley Insider

24/7 Wall Street

What is Jim Keyes, Blockbuster's CEO up to?

The news that Blockbuster had previously approached Circuit City back in February about a potential acquisition and after being ignored, Blockbuster appears to be ready to go hostile has resulted in a predominance of criticism from the financial and business communities.

The most common response one reads or hears is twofold; why would two struggling retailers with different businesses wish to merge and how can Blockbuster whose stock has been pummeled manage to finance such an acquisition?

Check the satirical spin on the situation from Jack Flack of Portfolio.com. He seems to have brought some insight to the situation.

While I do not typically comment on potential acquisitions, I have a slightly different take on the situation specifically from a management change perspective.

Blockbuster's CEO, Jim Keyes, a former successful CEO at 7 Eleven, is anxious to find a way to rely on his talents as a successful merchandiser to turn Blockbuster around. Unlike his critics, who right now are many, he is thinking like the former CEO he was back at 7 Eleven. He believes he can find a way to turn the fortunes of both companies around as one firm. We will just have to see how this situation plays out.

For more:

Wall Street Journal (4/15 update)
Los Angels Times (4/15 update)

BloggingStocks
Seeking Alpha

Deal Journal

Newsvine

ABC (video)

All Things Digital

CFO.com

Intutitive.com

Fortune

CEO Watch - Philip Schoonover, Circuit City, Update 2

Circuit City, the embattled electronics retailer, (check my earlier blogs) continues to face pressures from numerous sides. Chris Wattles of Wattles Capital Management, a major shareholder in the firm (approximately 6.5% of shares) has remained a thorn in Schoonover's side for some time.  Today he made a new call for the CEO's head as well as a number of other changes.  In a letter to Circuit City's board of directors Wattles stated,

We are confident that, with the right senior management team, the right strategy and the right focus, Circuit City can overcome its operational problems and turnaround its struggling business. WCM's primary goal is to help restore investor faith in Circuit City and unlock the Company's significant unrealized value by pushing for the following immediate

changes:

    -- Replace the current Chairman and CEO with a seasoned executive capable

       of restoring credibility with employees, vendors and stockholders;

    -- Focus on the "customer experience" and strategies for making the

       current stores more productive;

    -- Begin addressing the actual issues facing the Company and drive revenue

       growth, rather than focusing on cost-cutting strategies and "spin"

       campaigns.

    -- Focus on the most immediate and least capital-intensive opportunities

       to improve the health of the business; and

    -- Develop and articulate a deliverable promise for the new "The City"

       brand that works within the realities of the current store footprints.

While Wattles' pressure is unlikely to result in getting Schoonover's head in the near-term, the current CEO's timeframe for success appears to be shrinking.  Continue to keep a close eye on how Circuit City responds to Wattles' pressure and the firm's shrinking profits and options for turning the company around. 

Best Buy Promotes Four Key Executives

Best Buy BBY (NYSE) continues to sharpen its focus to stay ahead of the competition. Yesterday the company announced a number of top management changes. Best Buy promoted four senior executives to new, expanded roles. All four appointments become effective March 2. The changes were as follows:

• Barry Judge is the company’s new chief marketing officer;
• Michael Vitelli will be the executive vice president of the company's customer operating groups;
• David Morrish will be the executive vice president of connected digital solutions, and;
• David Berg will be the executive vice president of international strategy and corporate development.

As Circuit City continues to flounder, Best Buy works hard to stay near the top and find ways to improve its sales and operations.

CEO Watch - Circuit City, Philip J. Schoonover

Circuit City's CC (NYSE) momentous decline over the last year and a half has come while its chief competitor, Best Buy has followed an opposite path. Each problematic announcement from the company over the last year should have been enough for the board to consider replacing Philip Schoonover as CEO. The most recent bad news has forced me to finally include Schoonover in my CEO Watch list. Schoonover became CEO at Circuit City back in June 2006 and has failed to do much positive for the firm since his appointment.

Stay tuned. The company needs a major shift in strategy and new blood if it ever is going to get itself going again and turn itself around.

For more:

24/7 Wall Street

Troubled Circuit City Loses Head Merchandiser

As Circuit City continues to follow an opposite path (declining) of its arch rival, Best Buy, it has found itself hit with another executive defection. Yesterday it was announced that David L. Mathews, executive vice president of merchandising, services and marketing was leaving his position to become president of Orchard Brands, a specialty retailer owned by private-equity firm Golden Gate Capital. The company has been reeling for some time now. In 2006 Philip Schoonover became the company's new CEO. Schoonover had previously served as Circuit City's chief merchandiser.

Schoonover has been attempting to right the ship, but so far has had little success. Over the last year the firm lost three top executive which now includes Mathews. Mathews' exit could not come at a worse time. The electronics retailer is gearing up for the Christmas selling season. Merchandising is key to success during the holiday season.

For more on the turnover see:

MSNBC
Wall Street Journal (sub. req.)