24/7 Wall St. » Compensation

Bracing For The Euro Without Greece… Other PIIGS Too (EWG, EWQ, FXE, EWI, IRE, IRL, NBG, GREK, EWP, STD, BBVA, VGK, FEZ)

Administrator — Wed, 23 May 2012 16:20:17 +0000

So much for any great help from the ECB, France, Germany, and any other entity being able to help the Euro stay together. Rumors have been out that nations have been instructed to make contingency plans for what they will do if Greece does in fact leave the Euro. Make no mistake here. Greece IS leaving the Euro as it stands today. It is a question of when and how. It would take a miracle to make the Greek issue go away even if a solution comes up again. After all, didn’t they just make an agreement to stay in good graces with debt swaps and austerity earlier this year? Greece could get booted out now, or they could leave via electoral action. The return of the Drachma is coming and Europe has to deal with the fallout.

The financial damage is massive and the question boils down to how far the contagion can spread throughout Europe (and elsewhere). Austerity measures throughout Europe are now backfiring. France put in Hollande as a move back to the left as Sarkozy’s austerity measures were just going to be too great for the population to want. Inflation before cutbacks! Live well today, let the kids figure it out when hey get older! Hell, even The Netherlands could not agree on a budget and they have their act together financially just about as well as any of the top nations. Angela Merkel’s party suffered a regional election loss in recent weeks as well.

Greece will not likely be the only casualty here. Portugal, Spain, and Ireland are all at risk. Sinn Fein has been making policy statements about austerity and the Euro inclusion and went as far as issuing a video to call for a NO vote in the Austerity Treaty referendum. Spain has a serious capital shortfall in its banks if the reports over the size of the property value losses versus face value of loans is even only one-third true. Portugal is just totally irrelevant to Europe, but it is upside down and at risk. And Italy is just simply “too big to bail” with its debt and spending issues that lie ahead.

The fallout is running top to bottom… safe havens to PIIGS… We are seeing all the new 52-week lows come into play in some positions while many others are still above those recent lows.

iShares MSCI Germany Index (AMEX: EWG) is down 2.2% at $19.87 against a 52-week low $16.96; iShares MSCI France Index (AMEX: EWQ) is down 2.4% at $18.61 against a 52-week low of $17.88. The there is “the Euro currency ETF” via the CurrencyShares Euro Trust (AMEX: FXE) with a drop of 0.9% at $125.03 (new 52-week low) as the Euro is at the lowest point since July 2010. iShares MSCI Italy Index (AMEX: EWI) is down 3.8% at $10.26 and only one-penny above the $10.25 52-week low.

Ireland… The Bank of Ireland (NYSE: IRE) is down 2% at $4.90 against a 52-week low of $3.99. The New Ireland Fund, Inc. (NYSE: IRL) is down 1.1% at $7.79 against a 52-week low of $6.49.

Greece… National Bank of Greece SA (NYSE: NBG) is flat at $1.52 against a 52-week low of $1.45; Global X FTSE Greece 20 ETF (AMEX: GREK) is down 3.5% at $9.99 at a new 52-week low (prior $10.25 low). The election in mid-June will likely be the key determining factor here. If not, the situation is still not over and Greece is going to be an ongoing flight risk.

Spain… iShares MSCI Spain Index (AMEX: EWP) is down 3.3% at $22.81 and under the prior 52-week low of $22.87. Banco Santander, S.A. (NYSE: STD) is down 3.5% at $5.58 against a 52-week low of $5.52 and Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 4% at $6.02 against a 52-week low of $5.96.

Vanguard MSCI Europe ETF (AMEX: VGK) tracks the MSCI Europe Index, which is made up of approximately 460 common stocks of companies located in 16 European countries-mostly companies in the United Kingdom, France, Switzerland, and Germany. It is down 2.6% at $39.85 against a 52-week low of $38.40. The SPDR EURO STOXX 50 (AMEX: FEZ) tracks the STOXX Europe 50 Index and it is down 2.9% at $26.93 against a 52-week low of $26.10.

This is sort of funny on the surface if you don’t think about the financial and human tragedy that is unfolding. It is not exactly as though the global economy rose this much when they launched the Euro. Little reward, massive pain!

Sadly, Europe is starting to feel like Latin America of the 1980s and early 1990s all over again.

JON C. OGG

Filed under: ADR, Banking, Bankruptcy, Compensation, Corporate Governance, Currency, ETF, International Markets, Mutual Funds, Personal Finance Tagged: BBVA, EWG, EWI, EWP, EWQ, FEZ, FXE, GREK, IRE, IRL, NBG, STD, VGK

World’s Top Brands Led By Apple, IBM, Google

Administrator — Tue, 22 May 2012 12:04:20 +0000

You may or may not have heard of Millward Brown, but you might not be surprised who they ranked as the world’s top brand: Apple Inc. (NASDAQ: AAPL) took the pole position in 2012. Millward Brown’s 2012 BrandZ Top 100. The study took into consideration the following: Value, Renewal, Relevance, Reputation, Reimagine, Brand Contribution, Personality, Harder BRICs, Disruption, Technology, Digital, Health & Wellness, and Entitlement

Of the top brands, the following came in after Apple:

2. International Business Machines Corporation (NYSE: IBM)

3. Google Inc. (NASDAQ: GOOG)

4. McDonald’s Corporation (NYSE: MCD)

5. Microsoft Corporation (NASDAQ: MSFT)

6. Coca-Cola Corporation (NYSE: KO)

7. Marlboro of Altria Group Inc. (NYSE: MO)

8. AT&T, Inc. (NYSE: T)

9. Verizon Communications, Inc. (NYSE: VZ)

10. China Mobile Limited (NYSE: CHL)

11. General Electric Co. (NYSE: GE)

The ‘Top Riser” from 2011 to 2012 was Facebook, Inc. (NASDAQ: FB) with a 74% rise

The full Millward Brown study on these brands gets broken down into segments such as industry, brand growth, geographic, and sectors.

JON C. OGG

Filed under: Accounting, Compensation, Consumer Electronics, Consumer Goods, Economy, Editor's Picks, Product Review, Research, Retail, Shareholder Issues Tagged: AAPL, CHL, FB, GE, GOOG, IBM, KO, MCD, MO, MSFT, T, VZ

Hedge Fund Stock Picks: Whale Hunting of the Kingmakers

Administrator — Wed, 16 May 2012 21:43:08 +0000

24/7 Wall St. published the full list of positions already for Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A). While there were some surprises out there and 24/7 Wall St. tracked some of the key additions by “whales” like Farallon, Highbridge, Paulson & Co., SAC Capital, Greenlight Capital and others. These positions were the changes seen in the first quarter and has been consolidated from our prior reports.

Apple Inc. (NASDAQ: AAPL) was a large gain by Appaloosa Management, with a gain of more than 500,000 shares up to 685,000 shares worth some $303 million. This of course was worth more in April. Farallon put up a new position of just over 192,000 worth some $116 million. Janus only lowered its stake by 0.5% and Apple is still its largest holding at over $3.8 billion, while Vanguard lifted its stake by about 5% worth over $23 billion.

Caesars Entertainment Corporation (NASDAQ: CZR) was a strange position on the surface, but easy to explain later. Paulson & Co. was shown to have lifted its stake to 12.37 million shares from NO SHARES at the end of 2011. The problem is that Paulson owned Caesars shares already before the IPO but it was not public before the end of 2011.

Computer Sciences Corporation (NYSE: CSC) was a 2.4 million share stake by Greenlight Capital (under David Einhorn) worth $72 million, and that was a new position. With an activism flare, maybe this can light some fire under what has been a dead tech-value stock. Another firm, Highbridge Capital Management LLC, added more than 1 million shares as a new position in the first quarter.

DaVita Inc. (NYSE: DVA) was a key addition of Warren Buffett’s Ted Weschler who grew his stake to 6,000,000 from almost 2.7 million shares. This was a doubling of the stake, but we would note that this stock has slid 10% since the end of the quarter. The overall position may be closer to break-even here, but this has a huge portion of the kidney dialysis market as of today.

Dollar General Corporation (NYSE: DG) was a surprise for us considering that we thought Warren Buffett’s new manager Todd Coombs would have added to this position rather than cutting it. Maybe the valuation premium just became too much. The March 31 stake was 3.63 million shares versus the 4.497 million shares at the end of 2011.

El Paso Corporation (NYSE: EP) saw more than one move higher. Farallon Capital added another 50% or so to end with 22.49 million shares worth $235 million in the first quarter; Paulson & Co. doubled its stake in the first quarter to 8 million shares worth over $118 million.

Encana Corporation (NYSE: ECA) is a standout because it looks small, but it is a good whale watching stock. BP Capital’s T. Boone Pickens initiated a new position of more than 1.13 million shares worth some $22.3 million.

Express Scripts Holding Co. (NASDAQ: ESRX) was a very large gain by Farallon Capital, where the position rose to over 5.65 million shares as of March 31 from only 1.17 million shares at the end of 2011. Paulson & Co. also doubled its stake in the first quarter to 3.24 million shares worth over $87 million shares. With the merger now closed, others have been looking at this despite Walgreen’s issues.

General Motors Co. (NYSE: GM) was another new position of 10 million shares worth more than $250 million. Frankly, we might have guess that Ford would have been chosen. Is it possible that this was a “politically motivated or influenced” as Buffett is such a supporter of Obama? That admittedly seems like a stretch, but if we were looking for auto exposure it would have probably been with Ford.

SIRIUS XM Radio Inc. (NASDAQ: SIRI) saw SAC Capital grow from only over 3 million shares at the end of 2011 to 98.2 million shares worth almost $217 million in the first quarter, SAC wheels and deals in shares all the time, so they could have been in and out of a lot more or less shares before, during, and after that point.

Skyworks Solutions Inc. (NASDAQ: SWKS) scored a new large stake in the first quarter by Maverick Capital. The new holdings came to over 5.8 million shares worth some $161 million at the end of the quarter, likely as an “Apple play.”

United Continental Holdings (NYSE: UAL) was hard not to miss in the whale hunting as well as Appaloosa grew its position by 500% or so up to over 7.9 million shares worth over $146 million.

JON C. OGG

Filed under: Accounting, Activist Investor, Analyst Calls, Buffett, Compensation, Corporate Governance, Insider Activity, Large Cap Stocks, Management Change, Mutual Funds, Personal Finance Tagged: AAPL, BRK-A, CSC, CZR, DG, DVA, ECA, EP, ESRX, SIRI, SWKS, UAL

J.P. Morgan Firing The London Whale

Administrator — Wed, 16 May 2012 17:35:48 +0000

J.P. Morgan Chase & Co. (NYSE: JPM) has already sent its long-time Chief Investment Officer named Ina Drew packing after the $2 billion loss that surfaced last week. The damage to J.P. Morgan’s reputation has been extensive, but the bank is still expected to make something to the tune of $20 billion this year. Now it is the trader, the notorious London Whale named Bruno Iksil, who is “leaving” the bank.

DealBook of the New York Times has reported the news and it cited current and former colleagues as saying the timing of this departure is not known.

UPDATE 1:52 PM EST: CNBC reported that J.P. Morgan’s comment is that Iksil is still employed at the firm.

Today’s news should really not be a shock. Jamie Dimon survived efforts to split his office of the Chairman and CEO, but the damage to Jamie Dimon is that now politicians and the critics sitting back afar on Main Street think much less of him.

Other departures are cited in the Times around this issue and chances are high that either more firings are coming or are already in the works.

If J.P. Morgan can have stupid oversight procedures and poor risk management, then what does it say for the other participants?

J.P. Morgan shares are down 0.3% at $36.10 against a 52-week range of $27.85 to $46.49.

JON C. OGG

Filed under: Accounting, Banking, Brokerage Firms, Compensation, Corporate Governance, Management Change, Trading Alert Tagged: JPM

GE Finally Starts Getting GE Capital Dividends Again, Plus $4.5 Billion Special Dividend

Administrator — Wed, 16 May 2012 13:25:16 +0000

General Electric Company (NYSE: GE) is now going to be much further to being back on track in its GE Capital unit. After having promised a return to dividend after proper approvals had been granted, General Electric Capital Corporation has declared a quarterly dividend of $475 million that it will pay directly to the parent company of General Electric in the second quarter 2012. This is sooner than expected and it supports yet more dividend hikes from the parent company. GE said that the GECC 2012 dividend payments are being set at roughly 30% of the finance unit’s total 2012 earnings.

Here is where the news really gets interesting for GE… In addition to the second quarter dividend from GECC, the unit is now planning to pay a special dividend of $4.5 billion to GE in 2012.

GECC had to suspend the historical dividend in 2009 during the financial crisis. As a result of the dividend and the special dividend, General Electric said that it plans to accelerate its common stock buyback starting in the second quarter if market conditions permit.

GE shares are up 1.8% at $18.73 against a 52-week trading range of $14.02 to $21.00 and its dividend on the common stock is currently almost 3.6% paid to public shareholders.

JON C. OGG

Filed under: Accounting, Banking, Compensation, Conglomerates, Dividend, Financial Stocks, Shareholder Issues Tagged: GE

Big Changes to Buffett and Berkshire Hathaway Stock Holdings, A to Z

Administrator — Tue, 15 May 2012 21:05:01 +0000

Berkshire Hathaway Inc. (NYSE: BRK-B, BRK-A) and Warren Buffett have just released their most recent U.S.-listed equity holdings for the Berkshire Hathaway empire. This cut off date is as of March 31, 2012 and Mr. Buffett has already said that he was buying some shares since the end of the quarter on weakness.

Also, keep in mind that portfolio managers Todd Combs and Ted Weschler are still new and those new positions of under $200 million $300 million are likely tied to them.

24/7 Wall St. has gone through line by line of each position to see which stocks have been bought and sold as new positions, as well as having added in whether or not the number of shares grew or shrank on each since the prior quarter. We had added some color in on some of the positions if applicable.

Be advised that the number of subsidiaries that this filing covers is 14 entities rather than 18 entities in the prior quarter. There is also a note in the 13F filing showing that the SEC has granted “Confidential Treatment” on some Berkshire stock holdings and that likely suggests that Buffett is still acquiring a position he does not want the public to know about yet. This filing does not signal the half-dozen or more European shares that Buffett said he bought so that remains an outstanding issue as well.

The value of the stock portfolio was $66,151,587,000 at the end of 2011 and this was listed as $75,300,250,000 at the end of March 2012.

American Express Co. (NYSE: AXP) was over 151.6 million shares, SAME AS last quarter.

Bank of New York Mellon Corp. (NYSE: BK) is now 5.6 million shares, HIGHER THAN the 1,793,915 shares last quarter.

CVS Caremark Corporation (NYSE: CVS) is the SAME SIZE at 7.106 million shares after having been a new holding in a recent quarter and having been raised one quarter ago.

Coca Cola Co. (NYSE: KO) was right at 200 million shares, SAME AS BEFORE.

ConocoPhillips (NYSE: COP) is roughly 29.1 million shares, roughly the SAME AS BEFORE but it is still lower than previous quarters in past reports.

Costco Wholesale (NASDAQ: COST) 4,333,363 Shares, SAME AS last quarter after having lowered it before.

Da Vita Inc. (NYSE: DVA) is now 6 million shares worth $541 million and that LARGER THAN BEFORE after having been a new position of 2.684 million shares.

DirecTV (NASDAQ: DTV) is a LARGER POSITION listed at 22.999 million worth over $1.13 billion. This one had been 20.348 million shares worth $870 million one quarter earlier and it had been a new position just two quarters ago at 4.249 million shares.

Filed under: Activist Investor, Buffett, Buffett Holdings, Compensation, Conglomerates, Insider Activity, Mutual Funds Tagged: AXP, BK, BRK-A, BRK-B, CDCO, COP, COST, CVS, DG, DVA, featured, GCI, GE, GM, GSK, IBM, INTC, IR, JNJ, KFT, KO, LMCA, MA, MCO, MTB, PG, SNY, TMK, UPS, USB, USG, V, VIA, VRSK, WFC, WMT, WPO

The 18 Big Risks To Consider In The Facebook IPO

Administrator — Tue, 15 May 2012 11:14:40 +0000

It seems as though almost everyone wants a piece of the Facebook IPO. The social networking giant is set to come public this Friday in what will be one of the most highly watched initial public offerings of a lifetime. The price range was lifted to $34 to $38 per share with a value of roughly $100 billion. With potentially even more shares being sold by holders now, it is time to ask about what some of the risks are in this huge IPO. The deal was already oversubscribed with more than a week to go, and the order books are already said to be full.

Most investors and watchers are focused on how large Facebook is and how big its opportunities are in the future. There may be a side of caution with a super-premium valuation at the IPO here. 24/7 Wall St. wants to at least run up some of the less obvious flags of caution which investors should at least consider on the risk side before throwing their life savings into the social networking leader.

Leadership is a huge risk here… Facebook is effectively going to be controlled by 28-year old Mark Zuckerberg. He will hold or have the ability to control approximately 57% of the voting power of the outstanding capital stock following this offering. The fact that Zuckerberg’s ‘hoodie’ stood out in the IPO roadshow more than anything else may bring some caution. Zuckerberg also apparently gets to appoint a successor, making this somewhat like a kingdom rather than a public company.

NO real voting power for holders… Facebook has this dual-class of shares. This gives what is effectively zero power to common shareholders. Shares of the Class A common stock are entitled to one vote per share while shares of Class B common stock are entitled to ten votes per share. This is another example of a public company that might as well not even hold annual shareholder meetings.

Google hype versus Facebook hype… The last big frenzy of this sort that comes to mind is Google Inc. (NASDAQ: GOOG). Facebook will already be worth half of what Google is worth today, yet Google is expected to generate almost $35.5 billion in sales in 2012. If you just annualize the first quarter Facebook revenues with 10% growth sequentially in each quarter, the Facebook revenues would come to about $4.9 billion in 2012.

Sequential revenue growth has already faltered… We just noted the revenue path if Facebook grows revenues 10% sequentially each quarter, but the reality is that in the first quarter of 2012 the social media giant saw negative sequential revenue trends. Facebook generated revenues of $1.06 billion versus $731 million a year earlier and net income attributable to shareholders was listed as $137 million versus $153 million. Facebook saw its first sequential decline in revenues as the fourth quarter of 2011 had combined revenues of $1.131 billion. Despite seasonality, the growth opportunity here is so large that the company should still be growing sequentially at this point.

Filed under: Accounting, Compensation, Corporate Governance, Editor's Picks, Entertainment, Internet, IPOs, Media, Shareholder Issues Tagged: FB, featured, GOOG, MSFT, ZNGA

Groupon Manages Adult-Level Earnings

Administrator — Mon, 14 May 2012 20:23:27 +0000

Groupon, Inc. (NASDAQ: GRPN) is out with its quarterly earnings report and frankly it looks and feels like an earnings report from adults rather than from what has looked and felt like the adolescents that have been in charge of the company’s controls and procedures so far. The net loss was $0.02 EPS, but on a non-GAAP basis used by analysts the couponing website reported $0.02 EPS on a revenue gain of 89% with some $559.3 million in sales. Thomson Reuters had estimates of $0.01 EPS on $530.8 million in sales. The company’s cost of revenue rose to $119.5 million from $39.7 million a year ago. Marketing costs were said to be down almost 50% to $116.6 million, but SG&A costs effectively doubled to $283.5 million. Total operating expenses rose to $519.6 million from $412.6 million a year ago.

Revenue guidance for the second quarter 2012 is now projected to grow at 40% to 50% in a range of $550 million to $590 million. Income from operations is put at $25 million to $45 million, which includes approximately $35 million of stock-based compensation. Estimates next quarter are $0.03 EPS and $559.34 million in sales.

The site reported that first quarter gross billings actually increased 103% to $1.35 billion in the first quarter 2012. For the quarter, operating cash flow increased 367% to $83.7 million and free cash flow was $70.6 million for the first quarter 2012.

North American revenues grew 75%. Groupon surpassed the 35 million active customer mark with a 140% gain to 36.9 million active customers. More than 100,000 unique merchants were served in a single quarter.

Groupon ended this last quarter with $1.2 billion in cash and cash equivalents and no long-term debt. Groupon’s lock-up period has been extended from May 2, 2012 to June 1, 2012.

Shares closed up 18.5% at $11.73 against a post-IPO range of $9.63 to $31.14 and the company had a market capitalization rate of $7.57 billion. The after-market reaction so far has shares up almost 12% at $12.95 in active trading.

JON C. OGG

Filed under: Compensation, Consumer Goods, Earnings, Internet Tagged: featured, GRPN

A Call For Jamie Dimon To Resign

Administrator — Fri, 11 May 2012 15:17:02 +0000

J.P. Morgan Chase & Co. (NYSE: JPM) has done some severe damage to its image as the best risk manager of the large banks, and this damage may easily carry over into all of the ‘too big to fail’ banks. It is becoming more and more evident that the new ‘Best Bank in America’ title belongs to Wells Fargo & Co. (NYSE: WFC) as Warren Buffett keeps adding to this position each and every quarter. Now we are already hearing at least one call that Jamie Dimon might need to resign.

The Thursday disclosure of a loss of about $2 billion due to egregious failures in risk management now puts J.P. Morgan Chase in the same league as Bank of America Corporation (NYSE: BAC) and Citigroup, Inc. (NYSE: C). Jamie Dimon has been the most vocal bank executive out there and this is not exactly going to help Dimon in any of his future arguments against more and more bank regulations.

Simon Johnson at MIT’s Sloan School of Management is shown here calling for the possibility of a resignation of Jamie Dimon. Johnson went on to note that if any other company lost this much then the person responsible would be forced to resign. He did note that it is not going to happen in banking where regulators move to oust Jamie Dimon. Johnson is one of the voices calling for the break-up of the big banks

Dimon noted that this trade did not violate the Volcker Rule but it did violate the Dimon Principle. What happens when your hedges are wrong hedges? The loss could cost another $1 billion over the next quarter or two as well as the trade was called flawed synthetic credit derivatives which are volatile.

So, back to this call for a Dimon resignation. Dimon remains one of the top executives out there in banking and in corporate America. He was recently cleared to lift the common stock dividend and to buy back stock. Dimon always said that he would buy stock back when its price made sense to do. A drop of almost 8% down to $37.60 takes this banking stock down to prices not seen since February 16, 2012. The dividend-adjusted closing price at the end of 2011 was $32.80.

There is another call for Dimon’s role of Chairman and CEO to be split as well. AFSCME sent out an email noting, “After JP Morgan’s Jamie Dimon lost $2 Billion in risky trading, today, AFSCME issued a renewed call for the shareholders of JPM to end Dimon’s reign as Chairman and CEO and adopt an independent board chair.” In short, the call is keep Dimon on as CEO but to bring in a new Chairman of the Board that is independent of the company.

Congressman Barney Frank (co-author of Dodd-Frank) has publicly said, “JP Morgan Chase, entirely without any help from the government has lost, in this one set of transactions, five times the amount they claim financial regulation is costing them. The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today.”

Jamie Dimon may have taken a body blow here, but the notion that this will cause his resignation seems very unlikely. The next risk is the pending downgrade of more than 100 of the top global banks from Moody’s.

FBR was one of the firms which downgraded J.P. Morgan shares this Friday and the target was taken down to $37 from $50 previously.

JON C. OGG

Filed under: Accounting, Analyst Calls, Banking, Compensation, Corporate Governance, Dividend, Earnings, Earnings Warning, Economy, Financial Stocks, Management Change, Shareholder Issues, Stock Buybacks Tagged: BAC, C, featured, JPM, WFC

Sprint CEO Takes Pay Cut To Exclude iPhone Gains… Is An Ouster Next? (S, AAPL, PCS)

Administrator — Fri, 04 May 2012 21:49:39 +0000

It is no secret that Sprint Nextel Corporation (NYSE: S) is in trouble. CEO Dan Hesse has been under pressure by holders on and off during his tenure. Many of the problems facing Sprint are not the fault of Hesse because the problems were there before he took control. Still, as CEO he often has to take the blame. Now Hesse is out with a SEC filing showing a voluntary deduction to his own compensation package. Part of the blame may be on the iPhone from Apple Inc. (NASDAQ: AAPL).

The company filed an 8-K after the close of trading Friday. Hesse noted that the company has received feedback from some shareholders relating to the discretionary adjustment the Compensation Committee made under the incentive plan payouts for the impact of the iPhone on its financial results.

Hesse noted in the filing, “I do not want, nor does our Compensation Committee want, to penalize Sprint employees for the company’s investment with Apple, so I will forego this adjustment to my compensation. I have also voluntarily decided to take some additional actions regarding my personal compensation, and the Compensation Committee has agreed. I’m hopeful that these actions will allow the company to remain focused on delivering the best overall customer experience in the wireless industry, which is what will serve the company best in the long run.”

There is a lot more to this story if you look past the raw terms of the cuts. Here are some of the actions being taken on Hesse’s compensation:

Salary cut on a pro-rata basis over his remaining paychecks in 2012 to repay the $239,760 associated with the discretionary adjustment he received in February under the 2011 Short-Term Incentive Plan.

Salary cut on a pro-rata basis over his remaining paychecks in 2012 to repay the $106,463 associated with the discretionary adjustment he received in February related to the performance units under the 2009 Long-Term Incentive Plan.

Forfeits any right to a payment of $250,500 associated with the discretionary adjustment earned with respect to the 2011 performance period for the performance units under the 2010 Long-Term Incentive Plan. Subject to the satisfaction of applicable vesting conditions, this payment would otherwise be payable to Hesse in 2013 under the terms of the plan.

Forfeit any right to payment of $294,107 associated with the discretionary adjustment earned with respect to the 2011 performance period for the performance units under the 2011 Long-Term Incentive Plan. Subject to the satisfaction of applicable vesting conditions, this payment would otherwise be payable to Hesse in 2014 under the terms of the plan.

Reduce, from 200% of Hesse’s annual base salary ($2.4 million) to 170% ($2.04 million), his target opportunity under the 2012 Short-Term Incentive Compensation Plan.

Forfeit two million performance units (valued at $2 million) granted to Hesse on February 22, 2012 under the 2012 Long-Term Incentive Compensation Plan.

Again, this feels like one of those situations where there is just a lot more to the story than meets the eye.

Hesse went on to say, “These voluntary actions regarding my personal compensation, which total $3,250,830, will eliminate any benefit for me to the discretionary adjustment the Compensation Committee made earlier this year, and will set my 2012 incentive compensation target opportunities at my 2010 levels.”

Hesse said this voluntary reduction of his future compensation does not constitute “Good Reason” under his amended and restated employment agreement dated December 31, 2008. Hesse also agreed that if his employment terminates prior to completion of the salary reductions described in the first two bullet points above to a reduction of any amounts otherwise payable to him or his estate in an amount necessary for Sprint Nextel to “fully recover the indicated amounts, and to the extent insufficient to do so, to repay the remainder as soon as reasonably practicable.”

Doesn’t that sound a bit like a clawback of pay similar to what you have heard about for Wall Streeters during the financial crisis?

What is interesting here is that this starts out using the ‘investment’ with Apple over the iPhone. It is not typical for a CEO to take a pay cut and to address dealings with an outside company as one of the first issues. That is particularly the case in a hot product like the iPhone.

Another take here, and perhaps the most important take, is that Hesse is losing serious support from inside the company. The way that the news reports went in February it looks like the board rejected Hesse’s efforts to acquire Dan Hesse, to purchase MetroPCS Communications, Inc. (NYSE: PCS) for the no-contract and ‘pay as you go’ cellphone service offering. It is worth noting that MetroPCS shares hit another 52-week low on Friday and this one has been battered since earnings just over a week ago.

The question we are asking ourselves here is really about the timing of this filing. By sneaking the news out on Friday after the close of trading, it sure seems like the company is hoping that other news will be more front and center besides a ‘voluntary’ pay cut. The news may not be a stock-moving event on its own merit but this certainly feels like the second move from Sprint that would lead us to question just how long Dan Hesse has left as CEO of Sprint Nextel.

Sprint is burdened with debt of more than $20 billion at the end of 2011 and its share price of $2.36 compares to a $2.10 to $6.45 range of the last 52-weeks. The $7.1 billion market capitalization of the common stock is only a small portion of the Sprint Nextel enterprise value.

Blocking a CEO-led acquisition and then sneaking in a filing late on a Friday showing a ‘voluntary’ pay cut for the CEO… Honestly, how much longer does Dan Hesse have as CEO?

JON C. OGG

Filed under: Activist Investor, Annual Report, Compensation, Consumer Electronics, Editor's Picks, Management Change, Telecom, Turnarounds, WiMAX, Wireless Tagged: AAPL, featured, PCS, S