Eddie Bauer Takes Next Step in Turnaround?

Eddie Bauer EBHI (NASDAQ) was first mentioned in the blog back in April when the company appointed Howard Gross, a member of the board, to serve as interim CEO. Gross was appointed interim CEO after the company essentially forced Fabian Mansson to resign after he failed to sell the company to private equity firms. On June 15, Eddie Bauer announced the hiring of Neil S. Fiske as the new CEO. Fiske, a highly successful retailer, was in charge of the Limited's Bath and Body Works, a company that had been languishing before his appointment as its CEO. Fiske helped turn the company around. Fiske's appointment is a good sign that Eddie Bauer is looking to turn itself around or get a good price for sale of the firm. Fiske is an exceptional retailer who brings necessary talent to the firm.

He did not come cheap. His compensation package was quite high. According to Craig Harris a reporter for the Seattle Post-Intelligencer,

"Fiske will receive a compensation package worth at least $3 million in his first year to take over struggling clothing retailer Eddie Bauer Holdings Inc., according to a securities filing.

And the turnaround expert persuaded Eddie Bauer to pay for his legal costs in negotiating the deal."

Despite the high salary, Fiske seems to be a good choice to head the company. Keep a close eye on how Fiske manages the firm over the next 3 - 6 months. There may be some real upside potential if he makes the right steps.

For more:

Marketing Daily

Telecom CEO Pushed Out in Europe

Swedish-Finnish telecom operator TeliaSonera AB TLSN (SWEDEN), the biggest in northern Europe, forced its chief executive Anders Igel to resign, effective July 31. Igel had been CEO of the firm since 2002 when Swedish Telia and Finnish Sonera merged in 2002. For some time now, Igel has been under pressure from shareholders, employees and members of the board. A key criticism has been speed with which he has moved to set new priorities and the pace he has followed in carrying out existing goals. One area that continues to rankle the board and shareholders has been Igel's failure to resolve ownership disputes with two of the company's key markets, Turkey and Russia.

TeliaSonera announced it might take 12 months before a suitable CEO is appointed. In the interim, CFO Kim Ignatius will hold the chief executive role. In announcing the change in management, the chairman, Tom von Weymarn and the board said,

"TeliaSonera needs a CEO who can improve the spirit and commercial drive..... make acquisitions and speed up efforts to cut costs and jobs ... We are looking for strong and motivating leadership focused on growth.... We're looking for someone who can speed up execution of strategy and can drive growth in addition to cost efficiency."

He went on to say, "we are still focused on our home market, our investment in Spain, and our Eastern positions..." referring to Russia, Turkey and the Baltic States." "We urgently need solutions to our Eastern positions."

Analysts Sally Banks and Mark Giles at Ovum, a European telecom consulting company, offered a few possible choices to take Igel's place.

There are a couple of obvious external candidates, who as far as we are aware are currently unemployed and could potentially fill the gap. From Deutsche Telekom Group's recent clearouts - Elek Straub, ex-CEO of Magyar Telekom and Kai Uwe-Ricke, ex-CEO of Deutsche Telekom might possibly be interested in a new challenge. Whoever succeeds as the new CEO will face some seriously tough challenges ahead as the soon to be ex-CEO has suggested that the company needs heavy re-engineering to get it on track.

Initial market response to the change has been positive but the company has a great deal of work to fix its current difficulties and get the right management in place.

For more on the change see:

The Local Sweden's News In English
Financial Times (registration req.)
Forbes
Daily News & Analysis

Qwest Board Has Tough Job Ahead

Yesterday the chairman and CEO of Qwest Q (NYSE), Richard Notebaert, unexpectedly announced he planned to resign his positions as soon as the board finds a replacement. Notebaert's surprise announcement comes in the wake of two other major management changes that occurred recently. Oren G. Shaffer, vice chairman and chief financial officer, resigned effective April 1. And Barry K. Allen, executive vice president of operations will retire, effective June 29.

Notebaert made a real name for himself taking over Qwest in 2002. At the time the company was mired in an accounting scandal and an investigation by the SEC. He joined Qwest as chairman and CEO in June 2002 soon after Joseph Nacchio resigned. Nacchio was recently convicted of insider trading and is scheduled to be sentenced this summer. The SEC later charged the company and key one-time Qwest executives, including Nacchio, with orchestrating a financial fraud at the company between April 1999 and March 2002.

At the time of Notebaert's appointment many people thought his task to turn the company around was nearly impossible. Notebaert managed to get costs under control. During his tenure at the helm, he launched some bold efforts. He succeeded in acquiring a strong position in the federal government's large Networxcontract. On the other hand, he was unsuccessful in his very public attempt to acquire MCI. In a bidding war for MCI, Qwest lost out to Verizon Communications.

The recent triple management losses at Qwest will put severe pressures on the firm. Qwest remains a small-fry in the telecommunications space when compared to its rivals. The board has a truly difficult task ahead to find the right person to run the company and more importantly, one that would be willing to do it. Qwest remains, however, a potential takeover target and could even be right for a potential acquisition by a private equity firm.

Keep a close eye on the company's board for the next few months.

For more see:

TheStreet.com (second article)
Financial Times
TheStreet.com
Bloggingstocks
Forbes

Another Major Auto Parts Retailers Makes Major Management Change

CSK Auto Parts CAO (NYSE) one of the largest automotive parts and accessories retailers in the United States, selected Lawrence N. Mondry its new President and Chief Executive Officer. Mondry will succeed Maynard Jenkins, who had previously announced his intent to retire upon the Board’s selection of his successor. Mondry will begin work immediately and is expected to assume the President and CEO positions in early July, upon Mr. Jenkins’ retirement. He will also join the Company’s Board of Directors at that time. The Company also announced that James B. Riley, Senior Vice President and Chief Financial Officer, resigned to accept a position as CFO with Ormet, an aluminum production company. The Company expects to appoint an interim Chief Financial Officer in the near future and to commence a search for a qualified replacement for Mr. Riley.

The company has been facing some problems related to their regulatory filings.

The announced change in top management at CSK Auto comes in the midst of intense pressure from Karsch Capital, an activist shareholder, who currently holds over 9% of the company's common stock. The head of Karsch Capital, David Karsch, just yesterday in a letter to the board urged CSK's Board to take action to enhance shareholder value. In the letter to CSK Auto's board Karsch stated,

"we believe the Board should conduct a review of strategic alternatives in which it weighs the relative merits of selling the Company versus giving a new management team time to turn around the business. It is increasingly evident that, under the right management team, such a turnaround should be relatively easy to achieve because of the tremendous opportunity to improve CSK Auto's operating margins".

In the letter Karsch goes on to state,

"having reviewed the recently released financial statements in which historical operating results were revised upwardly, we recognize the merit in considering the alternative of turning around the Company under a new management team and potentially receiving a much greater premium. With the leadership and vision of an above-average CEO, we believe CSK Auto could execute a very achievable operating margin of 9% in 2009 and retain its current8x forward multiple on our EBITDA projections, which would result in a stock price well above $30 per share over the next 18 months. Depressed operating margins should swiftly return to 2004 operating margin levels of 8.3% given that the unsuccessful integration of Murray's has temporarily reduced EBITDA from that unit and prevented the full realization of synergies, the 2006 EBITDA includes one-time integration costs, associates have been distracted by significant senior management turnover and a commensurate lack of direction,and difficult trends in the auto parts industry in 2006 resulted in de-leverag eof fixed costs.

Under the direction of a high quality CEO, the company should be able to surpass the 8.3% operating margin levels it generated in 2004 under a subpar management team given that its category management efforts are inferior to competitors, direct sourcing and private label penetration stand below peers,buying from vendors can be improved, sales mix can be shifted more toward higher-margin hard parts versus lower-margin discretionary and front-end product, and below-peer sales per store can be enhanced through better merchandising, marketing, adjacencies, attachment rates and store-level compensation programs. Lastly, we believe an 8x forward EBITDA multiple is very reasonable given the quality of the auto parts business and the valuation of relevant competitors. Auto parts is a large, fragmented, predictable industry with very little influence from Wal-Mart and rational, margin-focused companies that do not use price as a weapon to gain market share, all of which beget high margins, returns on capital and free cash flow. This unique type of industry backdrop provides turnarounds with a greater probability of success and less risk whereas industries with heavy promotional activity such as home furnishings have witnessed a number of failed turnarounds."

Karsch continues on to say,

"A sale of CSK Auto may still be the best option for shareholders, depending on where the bids fall, given the time value benefit of receiving a solid premium today versus an even better premium in 18 months, the execution risk that a new CEO could fail to improve operating margins, and the additional returns for CSK Auto shareholders if they were to possibly receive stock in one of the high-quality strategic buyers, whose stock should appreciate significantly in the years following the transaction given the notable earnings accretion and strategic value. Therefore, we believe a strategic review should be initiated so that both options can be properly considered and evaluated.

We believe the board has a very poor track record given two accounting probes,a near bankruptcy and a stock that has dramatically underperformed its key competitors, and therefore, we cannot presume for certain that the Board can execute hiring a high quality CEO. We expect to meet the new CEO immediately after that person is hired. If the Board hires a CEO that we do not believe is adequate for the turnaround, and does not conduct a strategic review, we will strongly consider all of our options including a proxy fight to replace some or all members of the Board."

The new CEO may end up being acceptable to Karsch but from a quick look does not appear to bring any extraordinary skills to bear for the firm's success. Mondry had previously been CEO of CompUSA from November 2003 to May 2006, a period of time when the retailer performed reasonably well. He began his retail career back in 1983 with Highland Superstores, a multi-regional consumer electronics retailer, where he held various merchandising positions including Vice President, National Merchandise Manager. He currently serves on the boards of directors of Micron Technology, Inc. and Golfsmith, Inc.

I would recommend investors examine Mondry's background carefully and keep on eye on Karsch Capital to get a sense on exactly how they intend to proceed with the firm with regard to their demands.

For more on CSK Auto

StreetInsider.com Rumor Pipeline (Feb. 26, 2007)
StreetInsider.com 13 D Tracker
Boston.com
Newratings.com
AZcentral.com

Iannuzzi Making His Mark at Monster

Back in April, Monster Inc. MNST (NASDAQ) brought in Sal Iannuzzi to head the company. Iannuzzi, the highly rated former CEO of Symbol Technologies until Motorola bought the firm, appeared a terrific pick for Monster (see earlier blog piece). Iannuzzi was also a former investment banker. At the time of Iannuzzi's selection in April, many analysts expected the appointment would lead to a potential sale of the firm. So far, it has not played out that way but it is still early.

On Wednesday, Monster announced what appeared to be the next step in Iannuzzi's ascendance to Monster's corporate throne. The company announced another management shakeup - Lanny Baker, the CFO, resigned to "pursue other interests" and in his place the company appointed Timothy T. Yates, the former CFO at Symbol Technologies, (Iannuzzi's former company). Yates was originally named CFO of Symbol Technologies back in February 2006. In addition to the Yates appointment, Monster announced a number of other changes within the top ranks. The market did not initially take kindly to yesterday's management shakeup. Give the company a little time to shake off the market's jitters. Iannuzzi's is trying to work his magic.

Time will tell.

For more on the management shakeup:

Blogging Stocks (new take)
CNET
Wall Street Journal (subscription required)
Seeking Alpha
BloggingStocks

Walmart Family's Support of CEO Lee Scott?

Is Wal-Mart WMT (NYSE) CEO, Lee Scott, feeling a little like Senator Thomas Eagleton in 1971? At the time, then Democratic Candidate for President, Senator George McGovern, announced he continued to support his decision 1,000% to have Eagelton as his Vice Presidential candidate. McGovern's backing came despite the news that Eagleton had previously been treated for severe depression and had undergone electric shock treatments. For those who do not remember or were not even around yet, one might think Scott is in a similar boat to Eagleton. As an aside, Eagleton left the ticket and was replaced with Sargent Shriver.

As Walmart's star continues to fade a bit and shareholders constantly moan about the company's performance, Scott seems to find new ways to get himself embroiled in problems he does not need.

At last week's annual meeting, Wal-Mart Chairman Rob Walton said, "The board and the Walton family have absolute confidence in your leadership, Lee. We appreciate you and we thank you."

Continuing corporate strategy failings, labor problems, environmental related problems, spying controversies and the Julie Roehm firing fiasco all point to a possible change at the top, despite protestations from the bigwigs.

Stay tuned.

For more on Scott's fate and problems check out:

Blogging Stocks
CNN Money/Forbes
Seeking Alpha

Arrow International Inc. Fires CEO and Bows to a Major Shareholder

Arrow International Inc. ARRO (NASDAQ) board of directors announced today the termination of its current CEO and chairman, Carl G. Anderson, Jr. The Board said that it had lost confidence in Mr. Anderson's ability to lead the company. In the interim, the board has brought back former president and chief operating officer of Arrow, Philip B. Fleck and made him interim President and CEO. The Company also announced that the Board elected R. James Macaleer non-executive Chairman of the Board of Directors.

The company stated,

"During this period the company has repeatedly failed to meet the sales and earnings targets provided to the investment community as well as projections Mr. Anderson has provided to the board,"

The company also stated that it currently expects fiscal year 2007 sales and earnings per share to be in near the low end of targets earlier provided in the Company's second quarter press release of March 27, 2007.

Both these announcements came on top of a notice from the McNeil Trust that was made public by Arrow International of the Trust's intent to nominate five persons for election as directors at the 2007 annual meeting in addition to the three persons it has already indicated it planned to nominate. In essence, The McNeil Trust seeks to elect 100% of the directors of the Company despite the fact that it only owns 10% of the outstanding shares. At this point, Arrow International has indicated it has no plans to block the Trust's attempt to take over the board and effectively the company.

What exactly is going on?

For more on the changes see the below story in the Philadelphia Enquirer on May 17 and articles published today, May 31:

Philadelphia Enquirer (May 17)*
Forbes
Wall Street Journal (subscription req.)
Street Insider (subscription req.)
Houston Chronicle
Trading Markets

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

Talisman Energy Nabs Top Energy Executive

Talisman Energy TLM (NYSE), Talisman Energy, Inc., an independent international oil and gas company, engaged in the exploration and production of crude oil, natural gas, and natural gas liquids in North America and internationally, announced that John M. Manzoni, a top level executive at BP would become the company's new CEO later in the year. Manzoni will succeed Jim Buckee, who is retiring from Talisman. Manzoni has quit his position as head of BP's refining business effective August 31.

Earlier in the year, Manzoni, a twenty four year veteran of BP, was one of only a few executives that had been considered as a potential successor to John Browne as the company's chief executive. He was not chosen. Browne quit unexpectedly on May 1, after it emerged during legal proceedings, he had lied about how he met a gay former lover. He originally lied to prevent a UK newspaper from publishing details of the affair but failed in his efforts. It is likely Manzoni was eager to find a new position after being passed over for BP's top job.

During Manzoni's recent tenure at BP, the company experienced a number of major refinery related accidents -- an Alaska pipeline spill and a 2005 explosion at a Texas refinery, that killed 15 workers. An internal investigation was initiated. The report into the blast criticized the company's global management culture and recommended four executives be fired. The report did not call for Manzoni's removal. Except for this major potential blemish on his reputation, Manzoni has shown himself to be highly successful energy executive with the skills necessary to lead a major energy company.

His appointment to Talisman is a coup for the company.

Additional Articles:

Financial Times (subscription req.)

Rural Health Provider Transitions Management

Health Management Associates HMA (NYSE), a leading provider of acute care services in rural communities, announced the promotion of Mr. Burke W. Whitman to Chief Executive Officer, effective June 1, 2007. The current CEO and Vice Chairman, Joseph V. Vumbacco has served as CEO for over six years. Vumbacco will continue as Vice Chairman and will assume new responsibilities including consulting on construction projects, legal issues and Federal and state governmental relations.

Whitman's promotion appears to be a positive move for the company. He has had extensive experience in the health management related field successfully handling a variety of executive positions at different companies (e.g., Columbia/HCA Healthcare Corp., Triad Hospitals, Investment Banker with Morgan Stanley). He initially came to HMA back in January, the same time a major recapitalization program had been announced. Whitman was hired to be the company's President and Chief Operating Officer. In January, the company announced a sizable recapitalization of its balance sheet. The recapitalization was designed to reduce HMA’s overall cost of capital, enabling it to achieve a more optimal capital structure. As part of the recapitalization, HMA returned over $2 billion to shareholders through a $10.00 per share one-time special cash dividend that was payable on March 1, 2007 to shareholders. HMA’s common stock started trading on the ex-dividend basis March 2, 2007, the date after the payment date. The stock has followed a stable path since the dividend payment.

Whitman's promotion can be expected to be a smooth transition. Keep a close eye on Whitman and how Health Management Associates performs over the next six to twelve months.