Daily Archives: January 1, 2008

2008 Corporate Resolutions: Firing Your Bad CEO’s (BSC, BSX, CFC, FINL, MMC, MNI)

2007 has been a volatile year in the stock market, but there are many key technology CEO’s who just aren’t making a passing grade. 247WallSt.com has issued a brief list of some recognized CEO’s in technology whose shareholders would likely be rewarded if the CEO was axed or stepped down.  We think these CEO’s have a great shot at getting the ax in 2008.

We decided to run a GUIDELINES FOR CEOs TO GO.  Most of these CEO’s have a recent history of disappointment, and calling a CEO out can’t be just over stock prices. The CEOs have proven their need to be called on to go. Out of 24/7 Wall St.’s CEO list for 2007, six of the eight that we called on to be fired were fired or finally forced out.  Here’s the full list, with a brief sentence and a link to the full explanations for each:

  • Alan Cohen of Finish Line (NASDAQ: FINL) has proven ineptitude if you have watched this last week.  We named him on the list and showed what may happen to that stock before last week’s debacle.  The founder needs to bring in new blood.  Here’s the full scoop.
  • Gary Pruitt of McClatchy (NYSE: MNI) is responsible for heading up the acquisition of Knight-Ridder, and the stock has never been the same since.  The balance sheet is now more leveraged and his old glory days are long gone.  Here’s the full scoop on that one.
  • James Tobin of Boston Scientific (NYSE: BSX) is a CEO in the middle of  giant quagmire.  Not all of the problems at the company are his issue alone, but they are the worst performer in their sector and this acquisition of Guidant was such a dud that the BSX-GDT combined company is now worth less than Boston Scientific was before it went after Guidant.  Here’s the rest.
  • Angelo Mozilo of Countrywide (NYSE: CFC) is a different call here.  We think Angelo will survive if he wants to, but what we think will happen in 2008 is that he will announce his retirement as CEO to bring in more of a day to day operator.  We think Mozilo will remain as non-executive Chairman and here’s why.

Michael Cherkasky of Marsh McLennan (NYSE: MMC) was one of our top candidates to leave his CEO role, and the company finally decided to act ahead of 2008.  But they didn’t heed the writing on the wall and HAD NO REPLACEMENT.  Here was the full scoop on that.

So we already had on of the CEO’s TO GO make the firing squad even before 2008 started.  We do actually have a replacement candidate, although we admit it is an obvious one that may be too easy:

  • James Cayne ("Jimmy") of Bear Stearns (NYSE: BSC) is probably not going to be sitting with this Chairman AND CEO role for very much longer.  We understand that he’s well liked, and frankly it’s hard to pick him out of all the other obvious financial companies that are lenders, brokers, traders, guarantors, and the like that had major CDO or mortgage related losses that hurt the company.  But he is already in his 70’s, has spent much time out of the office, recently had health issues, had a reporter ‘pot smoking’ accusation, and there are too many other reasons we think that Bear Stearns will want to replace him.  Unfortunately for him, he probably won’t be running Bear Stearns that much longer. 

We also ran a separate list of five different TECHNOLOGY CEO’S WHO NEED TO LEAVE that include CEO’s of AMD, BigBand Networks, Circuit City, Alcatel-Lucent, and Symantec.

We’ll see what happens in 2008.  Six of our eight that we called on to go in 2007 back in December 2006 were forced out in 2007.

You can subscribe to our free email distribution list to see more previews on other mergers, restructuring, turnarounds, spin-offs, IPO’s and more.  Happy new years to all, even to this lot of CEO’s that need to go.

Jon C. Ogg
January 1, 2008

Posted on: January 1, 2008 – 11:07 am in Management Change, , , , , ,

The Earnings Gravy Train Jumps The Tracks

Year-over-years earnings for US companies have been rising since Cro-magnon man emerged from the forests of Europe 40,000 years ago. It appears that the streak is coming to an end.

Based on data from Reuters "projections for S&P 500 companies’ fourth-quarter earnings swung to a 6.1 percent drop on Monday from an 11.5 percent rise on October 1, in the biggest quarterly move since Reuters Estimates started compiling analysts’ forecasts in 1999." Tech company earnings are still expected to rise 25%, but that is the extent of the good news.

The impact on the stock markets could be significant.

The S&P 500 is only up a modest 18% since the beginning of 1999. This is due, to some extent, to the huge drop the index suffered in 2002. It points to a stock market which has not performed as well as earnings have. It is, is essence, more fragile than the corporate results which have driven it.

The index sits just shy of 1,500 and has taken a big run-up since mid-2006. It is not hard to believe that a contraction of earnings growth would take it to 1,200 which is about where it was eighteen months ago.If the economy has entered a recession, investors should be happy if it does not go lower.

Douglas A. McIntyre

Posted on: January 1, 2008 – 10:08 am in Earnings

Google (GOOG) And Yahoo! (YHOO): Newspapers Are Not Dead

Yahoo! (YHOO) has made a big deal about its deal to sell online advertising for almost 200 US newspapers. It will also index their content to run on the big portal. According to The New York Times "for the newspapers, which have struggled in recent years as readers and advertisers have flocked to the Internet, the deal represents an effort to earn a greater share of the fast-growing amount spent online on all types of ads."

Google (GOOG) seems to have come up with a simpler system which it will launch in Europe. It will simply auction off ad space in newspapers using a ruthless supply and demand system. MarketWatch writes "bidders would offer the price they are willing to pay for the ads, and newspaper publishers would then decide whether to accept the offer. Google stands to take a piece of the advertising sales from every deal between advertisers and publishers."

The new announcement indicates that newspapers are still an attractive target for advertisers even in the eyes of search giant Google. It believes that there is money to be made in an industry which many analysts believe is dying. Perhaps they are right.

The danger for newspapers is that once media inventory become a commodity, the value of the content is also marked down. What a newspaper writes may no longer be more important than what its ads can fetch at auction.

Douglas A. McIntyre

Posted on: January 1, 2008 – 9:12 am in Old Media, ,

A Vonage (VG) Settlement Does Not Save The Company

Vonage (VG) settles a patent dispute with a larger company about once a month. The latest one was with Nortel (NT), a broken telecom equipment supplier which has plenty of problems of its own.

According to The Wall Street Journal "the contemplated settlement involves a limited cross license to three Nortel and three Vonage patents, and dismisses claims relating to past damages and the remaining patents." This can be added to deals with Verizon (VZ), AT&T (T), and Sprint (S). Each IP contest could have scuttled that small VoIP company.

The news caused a 15% spike in Vonage shares taking them to $2.30, but the move is premature.

VG’s cash position is now well under $275 million. With one-time items backed out, the firm is probably losing about $70 million a quarter. Its revenue is still growing, but at $210 million last quarter, it is still small.

The things that are likely to kill Vonage have nothing to do with patent lawsuits. Vonage had a "first mover" advantage in the VoIP business, but now that all major cable companies offer the same service bundled with broadband and TV, there is no reason to get voice service elsewhere.

The run at Vonage is over, almost before it began.

Douglas A. McIntyre

Posted on: January 1, 2008 – 8:58 am in Telecom, , , , ,

PHH (PHH): Another Private Equity Deal Falls Apart

The Blackstone (BX) and GE (GE) buy-out of mortgage and vehicle leasing company PHH fell apart. The reason given was lack of availability of financing. In truth, PHH (PHH) is in a business that is currently as far out of favor on Wall St as an industry can get.

According to Bloomberg "GE agreed on March 15 to buy PHH, sell the mortgage division to New York-based Blackstone and keep the vehicle- leasing unit. The acquisition price was $31.50 a share." PHH shares currently trade below $18.

The company’s third quarter results were reason enough to cause a buyer to walk. Revenue fell almost 10% to $484 million and the net loss increased over five-fold to $38 million.

No one should be surprised if the shares go below $15 and stay there for some time.

Douglas A. McIntyre

Posted on: January 1, 2008 – 8:43 am in Mergers and Buy Outs, , ,