Recommended Reading - Too Many No Voted to Be Ignored, The New York Times

Gretchen Morgenson, the New York Times business reporter, wrote another spot-on story in Sunday’s Business section on the need for ending what she calls the often “cozy relationships” between corporate board members and management. Morgenson’s story, Too Many ‘No’ Votes to be Ignored stated,

For years, shareholders have done little to voice complaints about such cozy relationships, but it seems that the financial fiasco of the last few years, and the lackadaisical performance by directors at major banks that contributed to the meltdown, is encouraging investors to become more vocal.

Signs of such a welcome development can be seen in the results of this year’s director elections at annual corporate meetings.

… Even with such thumbs-downs nearly doubling year-over-year, negative votes on directors still remain relatively small and suggest that investors have plenty of room for improvement if they want to make themselves heard.

… Investors are clearly angry with their companies, and they have their reasons. Director accountability to the shareholders they are supposed to serve has been sorely lacking for decades. Even as they rubber stamp risky corporate practices and excessive executive pay, directors continue to win re-election to their increasingly lucrative board seats.

Liberum has also been examining this issue over the last two years. Investors often need to be vocal about how they view management and the responsibilities of board members. Investors must also stay on top of specific board changes for they could mean a potential change in management or strategy. To get more information on the specific statistics Morgenson referred to in her story check out the study performed by Proxy Governance, Inc. entitled SHAREHOLDER VOTES OPPOSING DIRECTOR NOMINEES SHOW SHARP INCREASE IN 2009 PROXY SEASON.

Smart Grid Related Firm, Itron Inc, Promotes New CEO

Itron, Inc. ITRI (NASDAQ), a global supplier of wireless data acquisition and communication products for electric, gas and water utilities yesterday announced reduced guidance for the first quarter and all of 2009.  The company also named a new CEO, Malcolm Unsworth the firm’s current president and chief operating officer.  Unsworth will replace LeRoy Nosbaum as CEO on March 31, 2009.  Nosbaum will remain executive chairman of the firm until the end of 2009.  The executive change at Itron comes at key time for the firm.  Itron is at the forefront of smart metering, a key issue the new Obama administration is expected to push for as it focuses on the improving the nation’s electric grid.  While Itron has an opportunity to take advantage of these potential changes, the firm along with some of its key competitors have found themselves facing a new competitor that could shake their foundation - Google.  Google recently announced it was looking to involve itself in the smart metering business.    According to a story by Katie Fehrenbacher in an earth2tech story referring to Google’s entry into the smart metering business,

… Google’s entrance into the space does raise a lot of questions for these firms. First off, will Google be a competitor or a partner?  

 … Perhaps a bigger question than whether Google is friend or foe is, who owns the relationship with the customer?  

… Beyond the issue of customer loyalty, Google’s entrance into smart meter software brings in a heavy-hitter for companies that are looking for Internet Protocol to be the basis of the next-generation smart grid. While some companies are hoping IP will be the dominant standard, many older companies have built networks and technologies on different standards, and even proprietary standards. Incumbent smart meter companies like Itron, Landis+Gyr, Elster and Aclara (part of ESCO Technologies) have already expressed concern over language in the stimulus bill that emphasizes Internet protocol for the smart grid.

Itron’s selection of Unsworth as the new CEO, an insider knowledgeable about the company, the industry and the vicissitudes of the industry was a well thought out decision.  The company’s board seems to be doing its job.  While Itron appears to be facing stiff competition from traditional competitors and now possibly Google, the company continues to have great potential.  Unsworth has shown himself to be a very capable executive who has the ability to stand up for the firm and make the right decisions in a difficult market.  Keep a close eye on the business decisions and possible changes Unsworth makes as he takes over management of the firm at the end of March.   For more:  Itron Press Release  RTT News  Briefing.com   

Is JDS Uniphase Losing CEO for Brighter Horizons or His Management Failings?

JDS Uniphase JDSU (NASDAQ), the laser and optical fiber component maker, announced during a conference call on October 29th its CEO, Kevin Kennedy, will be resigning his position.  Kennedy is leaving JDS Uniphase after five years at the helm of the firm to become the new CEO of Avaya, Inc. in January 2009.  Kennedy’s announced resignation comes as JDS continues to face slowing profits and a prediction by the firm that its sales for the second quarter that end in December are expected to be well below analysts forecasts.  Kennedy leaves the firm according to a story in Fierce Telecom,

… as JDSU is planning to cut 400 employee and contractor positions, as well as reduce its number of manufacturing locations from 19 to 12.

 Kennedy’s exit also comes as the company stock according to a story by Bert Hill of the Ottawa Citizen,

... plunged 61 per cent in the last year.

 It is difficult to determine what Kennedy succeeded in doing for JDS over the last year.  Kennedy himself was quoted saying (read Lightwave article),

“My decision to leave JDSU reflects the convergence of a unique opportunity presenting itself as well as my confidence in the JDSU leadership team that is in place to execute the initiatives now underway which should result in best in class operating metrics,” Kennedy was quoted as saying in an announcement. “I look forward to continuing to work with the team as a member of the board of directors.”  

 JDS finds itself in a difficult situation. Keep a very close eye on who the board puts in charge and who it ultimately finds to replace Kennedy.  It is hard to determine whether he is leaving a sinking ship or just jumping ship for a far better opportunity.Time will tell.

For more:

Barron’s Tech Trader (2007)

Marketwatch 

GigaOm

VMware CEO Out, Former Microsoft Exec In

In a surprise announcement VMware VMW (NYSE), the company that creates and develops software designed to manage virtual machines, made public the immediate resignation of its co-founder and CEO, Diane Greene. The resignation comes in the wake of the company's latest announcement that its 2008 sales will be lower than earlier projections. In Greene's place, the company has selected Paul Moritz, a former Microsoft executive who retired from the firm in 2000 after fourteen high-profile years with the company. According to the Silicon Valley/San Jose Business Journal during his time with Microsoft,

Moritz managed the development and marketing of many of the company's major products, including Windows 95, Windows NT, Database, Tools and Applications.

In 2003 he founded Pi Corp., a startup software company focused on building Cloud-based solutions. Pi was acquired by EMC Corp. in February 2008.

In the company press release, VMware did not give a reason for the departure of Greene. VMware had been a high flying stock at the time of its initial IPO back in the summer of 2007. Even before the IPO, VMware was considered a star in the computer virtualization space. The company remains the leader in the field but has found itself lately in competition with a number of the biggest players including Microsoft, Oracle, Dell, Red Hat and many others. To make matters worse many companies have turned to open source software as a way to manage virtualization an approach that VWware has refused to take and has helped to place the firm at an even further potential disadvantage going forward.

Greene's departure may be due to lower sales, growing competition or the fact that the firm needs new executive blood for it to find a way to successfully compete and remain on top. VMware remains majority owned by EMC which very likely had a hand in today's management change.

This is definitely a company that should be watched closely as new management takes over.

For more:

ValleyWag (7/9)
Market Watch (later in day)

Giga Om

CNET
Bloomberg
Reuters
Market Watch
Barron's Blog
MSN Money

Quality Systems Inc. CEO Unexpectedly Resigns

Quality Systems, Inc. QSII (NASDAQ), the software firm designed to automate medical and dental practices, announced the unexpected resignation of its long-time CEO and president, Louis Siverman. Silverman was orginally appointed to his position at the firm back on July 31, 2000. Silverman joined Quality Systems from the outside. Prior to his appointment, he was the Chief Operations Officer of CorVel Corporation, a publicly traded national managed care services and technology firm. Under Silverman, Quality Systems has thrived. When he first came aboard the company stock was trading below $5 per share. Today the stock trades at approximately $30 per share. The company's last quarter was quite successful and demonstrated conmtinue revenue growth.


Quality Systems in making the resignation announcement, indicated the firm planned to begin its search for Silverman's replacement immediately. Silverman is only 49 years of age. Why is he leaving the firm now, especially when all indicators are pointing in a positive direction? There is really very little explanation behind the announcement. It may be simple or may not.

Make sure you keep a close eye on the firm as we move throught the summer months. Silverman's resignation takes place officially on August 16, 2008. The company hopes to have a candidate to replace Silverman by the time his resignation goes into effect.

Universal Stainless Appoints New President and CEO

Universal Stainless and Alloy Products, Inc. USAP (NASDAQ), the specialty steel manufacturer whose products are sold to rerollers, forgers, service centers, OEMs and wire redrawers, tapped Dennis A. Oates as the president and CEO of the company. Oates will replace founder and long-time CEO (1994) and chairman Clarence McAnich. McAnich will remain chairman. The appointment is a definite positive for the firm. Oates will officially take his positions on January 2.

Earlier in the year, Universal brought in Kenneth Matz as president. At the time, he was considered heir apparent to McAnich's CEO position once the head of the company decided to hand over the reins of the CEO position. Matz left the company recently to pursue other opportunities. According to the Pittsburgh Business Times,

Oates ... most recently served as vice president of the specialty alloys operation of Carpenter Technology, based in Wyomissing, Pa. He also served as president and CEO of TW Metals in Birmingham, Ala., and president and COO of Connell Limited Partnership, a privately held metals recycling and fabrication firm based in Boston.

In statement McAnich said,

Oates is "the right person to lead our company going forward."

"I have known Dennis for many years," McAninch said. "He is sharp, tough and highly knowledgeable about the global specialty steel business from both the manufacturing and distribution sides of our industry."

Oates appointment is a relief, it seemed to appear that McAnich might not have been willing to give up some of the reins which could have turned into a problem for the firm going forward.

Keep a close eye on Oates and what he does for Universal and whether or not McAnich really begins to give up the reins of running the company.

For more:

Forbes

Shopping Channel ValueVision Ousts CEO

Value Vision Media VVTV (NASDAQ) which operates the 24 hour shopping channel ShopNBC last Friday ousted CEO and board member William J. Lansing. At the same time the company lowered the company's fiscal 2007 outlook. Lansing had been CEO of the firm since December 2003. The company named Chairman John Buck as interim CEO, effective immediately.

Value Vision has been struggling from inception. According to a story by Leslie Brooks Suzukamo for Pioneer Press,

Under Lansing, sales grew from $591 million in fiscal 2004 to $767 million in 2006 but lost money every year. Nearly all the company's revenue comes from its television and associated Web site shopping business, with jewelry the biggest category.

Back in May of this year, the company reduced its workforce about 14 percent after posting an operating loss of $7.4 million in its first quarter. The company also closed two outlet stores and consolidated its distribution operations into a single warehouse facility. The cuts failed to stop the decline. In August, the company reported its second quarter loss increased to $5.5 million. Shortly thereafter,

Lansing promised Wall Street he could drive up yearly sales to 6 to 8 percent.

It was not to be. Two months later the company's board felt compelled to act forcing Lansing to leave. Lansing, outside of institutional holders such as GE Asset Management (17.34%) and others is one of the largest individual holders of the company's shares (377,000 according to Reuters). Before Lansing was ousted, the company hired turnaround consultants Alvarez & Marsal to help the board develop ways to improve corporate performance. At the time, the board specifically went out of its way to emphasize the hiring of Alvarez and Marsal was not a turnaround situation. The company supposedly had a healthy balance sheet with $100 million in cash and no debt.

Keep a close eye on the moves the company makes over the next few months. If they manage to hire a very strong candidate with turnaround abilities and a thorough understanding of their specific business model there may be some real potential upside. As things stand, that might be a tall order.

Stay tuned.

For more:

Reuters

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
Forbes
NY Post

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.