Cisco CEO Can He and Should He Survive?

Cisco Systems, Inc. CSCO (NASDAQ), the one-time darling of investors, finds itself in difficulty. The company designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. Back in early April, the company’s well known CEO, John Chambers, was forced to admit the company had problems. According to a story in BizJournals, Chambers wrote a memo in early April to his employees in which he stated,

“We have disappointed our investors and we have confused our employees. Bottom line, we have lost some of the credibility that is foundational to Cisco’s success – and we must earn it back.”

Chambers went on to state,

… he will “address with surgical precision what we need to fix in our portfolio.”

The growing problems facing Cisco were made more problematic yesterday, when Microsoft announced the purchase of Skype. While most analysts have focused on the problems Microsoft’s acquisition could mean for Google and Apple, Cisco is also at severe disadvantage from this latest acquisition and is in a weaker position than the others to respond. While Microsoft has not shown great success in the past when it came to telecom acquisitions and the ultimate execution or integration of the acquisitions, the purchase of Skype was a brilliant move. If Microsoft can make the acquisition work, it will be beneficial in many ways for the firm and may even make its arrangement with Nokia a real winner going forward. Cisco on the other hand, only has more competition and a greater need for righting its ship.

Investors can expect tremendous pressure on Chambers going forward. His reign at Cisco seems more and more tentative as we move forward. He needs to make changes in the company and fast. Stay tuned.

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 List- Steve Ballmer, Microsoft

I have resisted putting Steve Ballmer, Microsoft’s MSFT (NASDAQ) CEO, on the Liberum CEO Watch List for sometime now. Ballmer’s ongoing startling statements about Microsoft and the industry along with his lack of innovation over the last number of years has begun to be examined by a number of specialists in the field. Rumors even are heard about bringing Bill Gates back. While it is hard to believe Ballmer is really at risk, maybe he should be. Just today, Adam Lashinsky, the Senior Editor for Fortune wrote a piece in which he said,

He (Ballmer) is presiding over the umpteenth reorganization of the company he has run for years, having succeeded his pal, Bill Gates. His online business, whose Bing search engine is making modest gains against industry leader Google, lost more than $700 million last quarter.

Yet here was Ballmer traveling down a semantical rabbit hole over the future of the PCs. In Ballmerworld, it doesn’t matter that the PC is shrinking in relevance. Any device is a computer, and people will want to use Windows because they’re so familiar with it. By the way, Windows 7, Microsoft’s latest release, is crushing it, further proof that computer users love Microsoft.

CEOs certainly are paid to put on a happy face and represent as well as possible. But hearing Ballmer at the Wall Street Journal’s D conference left me with one question: What is the guy smoking? Windows 7 has been a “success” in part because Microsoft’s previous effort, Vista, was such a stinker. Businesses the world over held off so long on upgrading their PCs that once Microsoft got it right they had no choice but to start replacing obsolete equipment.Semantics aside, Ballmer knows as well as anyone that the future of personal-computer industry is in mobile devices. Here, Microsoft’s hand is so weak that its most important global equipment partner, Hewlett-Packard (HPQ), is buying a beleaguered smartphone maker, Palm (PALM), for its superior mobile operating system.

Ballmer really needs to show he understands his marketplace and his competition and how he expects to deal with it. So far, in this regard he has been a dismal failure. Under his tutelage the stock has not really shown much shine either.Stay tuned.

More:

Silicon Alley - Meet The New CEO Of Microsoft

Yang Exits, What's Next for Yahoo?

The tumultuous year and a half tenure for Jerry Yang at Yahoo (Yhoo) NASDAQ is about to come to an end.  Yang,  a co-founder of the once formidable Internet and search company, returned to Yahoo in July 2007.  He returned in what many considered as the “white knight” to replace former CEO, Terry Semel.  Semel, who was not a technologist, had tried to expand Yahoo into a media company as a way to compete with its prime competitor Google.  Semel’s efforts had been failing and Yahoo continued to lag and fall further behind Google.  Expectations on Yang’s return and leadership also failed to turn out as hoped.  During Yang’s short-lived tenure the firm has only seen its fortunes continue to decline.  According to a piece in CNN,

Things only got worse for Yang, due to both his own and previous management missteps and also external forces, including a hostile takeover attempt by Microsoft (MSFT), which was followed by a proxy fight by activist shareholder Carl Icahn.     

Yahoo also saw its search business decline and its strong graphical ad business suffer in the midst of the current economic meltdown.

There has also been an exodus of major executives over the last year, along with recently announced layoffs of 10 percent of the company, which are set to take place December 10.

In addition, Yahoo’s controversial search ad with Google (GOOG) recently collapsed, and its talks to merge with Time Warner (TWX) online unit AOL have dragged on.  

Yahoo has initiated a CEO search with the help of executive search firm Heidrick and Struggles.  Many names are being bandied about as a possible successor to Yang.  A number of the names being suggested include a former Microsoft executive and current Microsoft executive who according to some analysts might help to increase the likelihood of a deal with Microsoft.  Two names being raised are Kevin Johnson and Brian McAndrews.  Johnson originally headed Microsoft’s first attempt to buy Yahoo.  He recently left Microsoft to become the CEO of Juniper Networks (see earlier blog).  It is difficult to imagine he would leave that position at this point to head up Yahoo.  McAndrews is with Microsoft and is currently SVP of the Advertising and Publishing Solutions Group.   Other individuals include Susan Decker, the current president of Yahoo and a close associate of Yang’s along with Peter Chernin of the News Corp., Jan Miller former AOL head, Meg Whitman former head of eBay and others. Whoever is chosen to replace Yang will be on the hot seat.    

My own guess is someone from the outside will be chosen and possibly a name not yet being floated.  It is nearly impossible to conceive of any successor who will be able to run Yahoo as an independent firm going forward.  Some kind of deal will need to be made.  For the moment, Microsoft will remain on the sidelines until a replacement for Yang is found.  Once this happens we will see whether Microsoft jumps back into the fray.  Stay tuned, this sure to be an interesting but bumpy ride.   

For more:  

MarketWatch

Wall Street Journal 

ZD Net  

Minyanville  

SeekingAlpha  

Silicon Valley/San Jose Business Journal 

Cnet (Yang Memo to staff)  

Silicon Alley Insider  

Deal.com  

Microsoft's Loses Another Top Executive

As Microsoft's MSFT (NASDAQ) Web plans continue to flounder (Yahoo, search, etc.,) more complications have  appeared.  The primary person behind Microsoft's efforts to acquire Yahoo, Kevin Johnson, The Platforms and Services Division President will be leaving after sixteen years to become Juniper Networks JNPR (NASDAQ) new CEO.  Was he pushed or did he jump?  According to Zachary Rodgers of ClickZ Network,

Johnson may have taken the fall for Microsoft's unsuccessful (to date) exertions to acquire Yahoo. The Wall Street Journal reported late yesterday that CEO Ballmer has grown increasingly frustrated with his own senior executive management's maneuverings throughout the negotiation process, and Kevin Johnson has been fingered as a major shaker in that process.

According to Kara Swisher of the Wall Street Journal's All Things Digital,

As the president of its Platforms and Services Division, the smooth Johnson has been trying, without much success, to beef up the software giant’s efforts in the Web space, especially in the online advertising arena.

He and Microsoft have had a little problem with that, largely due to an immovable object called Google. 

In an attempt to make an end run around the search behemoth, Johnson led Microsoft’s attempt to take over Yahoo, the #2 player in the search and search advertising space.

The six-month effort, according to many sources at Microsoft, has led to a great deal of unrest at the company, including ire aimed directly at Johnson because of his perceived influence on CEO Steve Ballmer.

With Johnson's departure, Steve Ballmer, Microsoft's CEO, announced a new reorganization of the Windows and Online Services Divisions (see press release for details).  The Online Services division will now stand on its own.  According to the release,

Effective immediately, senior vice presidents Steven Sinofsky, Jon DeVaan and Bill Veghte will report directly to Ballmer to lead Windows/Windows Live...

In the Online Services Business, Microsoft will create a new senior lead position and will conduct a search ... In the meantime, Senior Vice President Satya Nadella will continue to lead Microsoft’s search, MSN and ad platform engineering efforts...

In addition, Senior Vice President Brian McAndrews will continue to lead the Advertiser & Publisher Solutions Group (APS)...  McAndrews will continue to focus on the display advertising opportunity for Microsoft, driving execution and integration of advertising assets, including recent acquisitions such as Massive Inc., Navic Networks, ScreenTonic SA and YaData Ltd.

Microsoft has been looking rather anemic of late.  We will just have to see how this all plays out.  Speculation is already beginning to appear as to who will replace Johnson at Microsoft.  Kevin Liu of Reuters wrote piece in which Jon Miller, the former AOL executive and a possible Icahn candidate to replace Jerry Yang at Yahoo should he ultimately prevail, might be considered for Johnson's former job.  Whatever the choice for now, Google must be singing a happy tune. 

For more:

Silicon Alley Insider

PC Pro

Barron's Blog

CNN Money

Guardian

Seeking Alpha

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

CEO Watch - Jerry Yang, Yahoo

The rumors are beginning to fly now that Microsoft has walked away from Yahoo. Today Zachary Kouwe wrote a piece in the NY Post entitled, Investors May Yank Yang, Filo over Dough. According to the story,

Several hedge funds with large positions in Yahoo! have written letters to the board and to Yahoo! President Sue Decker explaining their displeasure at how Microsoft's hostile offer was mishandled, sources close to the funds said.

Shareholders are particularly irked that Yang and co-founder David Filo negotiated with Microsoft last weekend without any representative from the board or their advisers.

The dance is probably not over with Microsoft. For now, Yang will need to find ways to convince shareholders Yahoo can turn itself around, a tall order. According to an AP story on MSNBC Yang is still open to working out a deal with Microsoft.

If Microsoft returned with a “real offer and a real proposal,” Yang said, “we would be happy to listen.”

Yang figures to get an earful from irate shareholders at the annual meeting. Yahoo finally set the meeting for July 3 after indefinitely postponing it in early spring as part of its effort to foil a possible hostile takeover attempt by Microsoft.

Now it may be Yahoo’s shareholders who try to oust Yang and the rest of Yahoo’s board instead of Ballmer, who had threatened an attempt to dump the 10 directors if they didn’t accept Microsoft’s offer.

Reuters Deal Zone quotes The New York Times and Wall Street Journal,

“I am extremely angry at Jerry Yang and at the so-called independent board,” Crawford told the Times. ”I’m hoping that there is such an outpouring of outrage that the board is embarrassed into revisiting this thing … but I’m not optimistic about that.”

I don't think Yang is on the way out but we will just have to wait and see how this all plays out.

For more:

International Herald Tribune
Newsfactor

CEO Watch - Steve Ballmer, Microsoft, Update 1

Could last week's story on Ballmer's fate actually have legs?  Microsoft's withdrawal from the Yahoo takeover might put a bit more pressure on Ballmer.  Yesterday Valleywag put out a piece questioning his long-term status.  I remain skeptical but if interested check the story.

For more:

Bloomberg

Techconfidential

TechObserver Portfolio.com

Newsweek

The Globe and Mail

CEO Watch - Steve Ballmer, Microsoft?

Steve Ballmer, the larger than life CEO of Microsoft who is frequently seen ranting and yelling in his presentations, recently was the focus of a Wired story.  Wired has raised the question whether Ballmer might be at risk for his position.  While the supposition might seem far fetched at this moment, Wired talks about the troubles surrounding Microsoft's launch of Vista as well as the ongoing fight to acquire Yahoo.  There is some merit to the idea but it is very unlikely.  Just yesterday Mary Jo Foley on CNET's blog wrote a short piece in which she tried to examine who Microsoft could turn to should Ballmer go.

For more:

Fortune

What Happened To Stuart Scott ,The Fired CIO of Microsoft?

Earlier today I planned to write a short piece on the whereabouts of Stuart Scott, the former CIO of Microsoft, who was publicly terminated by Microsoft in early November. Rather than write a piece, I recommend you read the stories written by Meridith Levinson, the senior online editor of CIO magazine and a blogger herself. Here is the original press release from Microsoft announcing Scott's termination.

Meridith has continued to stay on top of the story.

Check Out Meridith's stories:

Some Recruiters Skeptical of Stuart Scott's New Job
Ousted Microsoft CIO Stuart Scott Scores COO Job at Mortgage Company
Microsoft Should Seek Internal Candidate to Replace Ousted CIO

Microsoft Looks To Outside Talent to Compete

Microsoft MSFT (NASDAQ) appears to be taking a new tack in its competition with Google and other competitors. According to a piece by Robert A. Guth in the Wall Street Journal, Microsoft has finally recognized the need to hire outside the firm to compete with it rivals. In the piece Guth stated,

Before Brian McAndrews agreed to take charge of a crucial piece of Microsoft Corp.'s online advertising business, he insisted on a key condition: that he be granted certain power over the engineering part of the operation.

For a quick look on the outside talent Microsoft has hired over the last number of months, contact Liberum Research and we will provide a overview for free.

For more see:

Bloggingstocks

Another Online Marketing Firm Brings in New Leadership

Less than two weeks after revealing it is being probed by the Federal Trade Commission (FTC), ValueClick VCLK (NASDAQ) announced Wednesday that its board of directors elected Tom A. Vadnais as the Company’s new chief executive officer. Vadnais has been a member of the Company’s board of directors since October 2001 and has also held a number of senior management roles within ValueClick during this time, including his most recent role as president of U.S. operations. Vadnais succeeds James R. Zarley, who has served as ValueClick’s chief executive officer since 1999. Zarley has been named ValueClick’s executive chairman of the board of directors, focusing primarily on the Company’s strategic direction and the gradual management transition of the Company’s operations.

In a conference call, Zarley said the FTC investigation had nothing to do with the executive changes. He also said the selection of Vadnais as CEO is in no way related to the intense merger and acquisition activity in the online marketing industry.

"This is not something that's been a short-term process for Tom and I," said Zarley. "We discussed this and worked on it for at least a good year now, ever since Tom had taken over as president of U.S. operations... I plan on staying as a full-time employee so my status as a worker-bee is going to continue for whatever period of time Tom will have me around here."

Vadnais joined ValueClick in October 2001 through the Company’s acquisition of Mediaplex, where he was president, chief executive officer and a member of the board of directors. Mr. Vadnais became a member of the ValueClick board of directors in October 2001 and also has held general manager roles for the Company’s Mediaplex technology and Commission Junction affiliate marketing businesses. In June 2006, Vadnais was promoted to president of ValueClick’s U.S. operations. Mr. Vadnais’ experience prior to ValueClick includes positions as: president, chief executive officer and a member of the board of directors of Data Processing Resources Corporation; president and chief executive officer of Tascor, Inc.; a member of Norrell's board of directors; and a member of the board of directors of Traffic.com. Vadnais also had experience in other management positions. He was a vice president of operations, during his 23-years with IBM.

Vadnais takes on his new position at the same time online advertising and marketing firms are being gobbled up by big players, e.g., Google, Yahoo, Microsoft. Keep an eye on the company. Not exactly sure what Vadnais is actually bringing to the table with his newest appointment to run ValueClick.

Related Articles:

Forbes
Financial Times
Streetinsider (subscription req.)
Trading Markets

Novell - A Contrarian View

June of last year had a large number of CEO related changes I recommended investors re-examine for investment possibilities. I recently reviewed two June 06' picks in the blog, International Flavor & Fragrances (IFF - NYSE) and L3 Communications (LLL - NYSE). Another large company selected last June was software laggard Novell (NOVL - NYSE). Novell seemed to have been past by its competition for awhile and was viewed by many as an industry tortoise who could no longer compete in the race.

Back in June, the company after continuing poor results, along with growing outside pressures replaced its CEO, Jack Messman with the company's number two man, Ron Hovsepian. At the time of his selection, Hovsepian was the President and Chief Operating Officer. Many analysts and people familiar with the industry were skeptical another CEO would solve the enormous problems facing Novell. I saw Hovsepian as an excellent choice, who had a reasonable chance to make a difference at Novell over the long-term. He had three years at Novell where he moved up the corporate ladder rapidly and over seventeen years at IBM.

Hovsepian had a good combination of skills to bring to bear for the position. He understood Novell's business model and product base and more importantly, he knew how to deal with customers and the market. Messman was more an "engineer personality" and just was not able to easily articulate what he planned to do or how to work with customers. He ultimately failed to get the company to address the serious issues it had been facing. Neither Messman nor the previous CEO before him, Eric Schmidt were able to put the company on a sustained growth path.

Hovsepian, who has been making great strides since his promotion to the top, has yet to get it exactly right but he is moving in the right direction. So far, what he has accomplished has not impressed too many on Wall Street but he seems to be making the right moves. He has continued to cut costs, he has focused his efforts to make Novell a player in Linux for the enterprise taking a somewhat different strategic approach to Linux than that by Red Hat, its major Linux competitor. He was in charge when Novell began a controversial Linux partnership with Microsoft. In essence, Hovsepian has focused his efforts on the customer and if time manages to remain on his side, his latest prediction that 2008 will be the firm's boon year may actually come to fruition.

Keep watching Hovsepian and how he is managing Novell.

More on Novell:

May 7 - CBS News - Dell Joins Microsoft, Novell Alliance
May 7 - Endgaget - More on Dell Joins Microsoft, Novell Alliance
May 7 - BloggingStocks Take - More on Dell Joins Microsoft, Novel Alliance