Former CEO Market Hurd built his reputation because he was a talented cost cutter. He fired more people than Whitman will with the upcoming cuts. In one move, after HP bought tech consultant EDS, he sacked 24,000 people he deemed redundant. Despite the human damage, he increased HP’s margins and its share price. If it were not for indiscretions, he would still be wielding his axe.

IBM’s (NYSE: IBM) multidecade turnaround and success was built on a weeding out of weak businesses and bolstering of good ones, along with a smattering of smart M&A. Starting with uber-CEO Louis Gerstner, IBM cuts its workforce by tens of thousands. Some observers believe IBM continues to silently let people go as it outsources their jobs to India and other parts of Asia. Not many months ago, IBM’s shares were at an all-time high.

One of the most proficient cost cutters in the tech world is Larry Ellison of Oracle (NASDAQ: ORCL), one of his generation’s great success stories. His serial acquisitions of smaller companies almost always result in elimination of redundant jobs.

Layoffs at weak tech firms may seem cruel and examples of how some people who have jobs today help a company atone for past sins. But they also are often the start of new focus by a CEO with reasonable plans to make his or her company much better, at least financially.

Douglas A. McIntyre

News on Wednesday night showed that Chief Financial Officer Mark Murphy is leaving the company to rejoin a position at Praxair.  The news is on the heels of previous report showing a major loss due to poor solar materials sales. Does the notion that MEMC named Brian Wuebbels as executive vice president and CFO help?  Not really, even if Murphy will act as a “consultant” during the transition period.

Losing a CFO is not as bad as losing a founder and not as bad as losing a CEO, but the problem with losing a CFO is that Wall Street assumes that the CFO has lost faith in the future of the company. In some cases, it could mean something far worse.  With MEMC shares having fallen from over $90 during teh solar boom down to under $2.00 it is easy to wonder if things are going from just awful to even worse.

So, here is where we cannot help but wonder about MEMC’s future.  Thomson Reuters expects a loss of -$0.10 EPS in 2012 on sales of $2.6 billion.  But almost magically in 2013 the consensus is back up to $0.45 EPS on $2.83 billion in sales.  The revenues in 2011 were $2.715 billion, in 2010 they were $2.239 billion, and 2009 revenues were $1.163 billion.  The problem is that sales in the solar sector are getting harder and harder to come by and the solar sector is in total disarray.  The company’s latest loss and decline in revenues also reflected weak demand in the semiconductor wafer markets.  Yep, MEMC is facing a war on two fronts and its non-GAAP margins are getting squeezed.

The sector leaders are looking like hell frozen over.  First Solar Inc. (NASDAQ: FSLR) is effectively at all-time lows if you discount a small 2% gain today.  SunPower Corporation (NASDAQ: SPWR) is down over 75% since Total SA (NYSE: TOT) bought the controlling interest.

If the company was on the verge of a great turnaround then the CFO would seemingly not have pulled the ripcord on the way down here.  The company has what looks to be ample cash reserves to fund operations, but it also has significant amounts of long-term debt. This situation just feels like it is one which is going from awful to far worse.

MEMC is in serious trouble.  Still, it is one of these outfits that has enough cash to fund operations for probably quite some time, but its core businesses are challenged and the company has so far been unable to get its operating costs in order.  It has also forecast a weaker demand for semiconductor materials in 2012 as well as a lower price per watt in solar.  Our big concern is that the projections may have been based entirely upon the CFO forecasts just a week or so ago, and his departure would bring even the lower guidance into question.

For whatever this is worth, Wunderlich Securities cut its target down to $1.00 after it maintained a SELL rating after the most recent earnings.

It is too soon to declare that MEMC will be a total implosion.  It is even possible that there could be a turnaround of major proportion coming here.  Unfortunately, that does not appear to be the case any time in the immediate future.

So you tell me in a poll, no “I don’t know” answers allowed…

JON C. OGG

The company is also calling this coming year a year it breaks away from the pack with a very different profile than the traditional game companies and capabilities. It also noted that none of the company’s new digital competitors can match EA. The video game giant further noted 20% non-GAAP EPS growth in fiscal 2012, and it now expects over 30% growth in 2013, based upon the midpoint of own guidance.

In this past quarter, EA generated net revenue of $977 million, and that was slightly ahead of its guidance of $925 to $975 million. Non-GAAP diluted earnings per share of $0.17 was in line with its guidance of $0.10 to $0.20 EPS. Thomson Reuters had estimates of $0.16 EPS and $958.5 million in revenues.

Guidance is being offered for a year out to its February 2013 year-end: $4.3 billion in sales and $1.05 to $1.20 EPS (both non-GAAP of course) against Thomson Reuters estimates of $1.12 EPS and $4.5 billion in sales.

Next quarter guidance is being put at -$0.45 to -$0.40 EPS and $500 million in revenue (both also non-GAAP) against Thomson Reuters estimates of -$0.33 EPS and $577.9 million in sales.

EA shares closed up $0.01 at $15.13 against a 52-week range of $14.48 to $26.13; shares are down about 7.3% at $13.90 in the after-hours session.

JON C. OGG

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

Over the last year we have witnessed shares falling from over $30.00 to almost $16.00 before the recent recovery.  The problem is that the bad news has not ended and the turnaround has yet to even really get started.  So why is there such highly unusual options trading activity in this stock?

If you look out to the July options trading, which is now only about two months out, there is some speculative call options activity.  Either someone is under the impression that something good is about to happen on the M&A front or they are expecting business to pick up this summer for Avon.

We have seen more than 37,000 contracts trade in the JULY $22 CALLS and the open interest before today was listed as only 5,999 contracts.  As a reminder, this is worth some 3.7 million shares if you count this options activity on a fully leveraged basis.  Avon trades an average of 7.7 million shares or so each day.

Joe Kunkle of OptionsHawk.com wrote in options trader lingo, “Avon Products (AVP) with 34,900 calls trading, initial buyers on $0.85 offer and IV jumping as blocks of 10K and 24,700 come in at $1.15, opening buyers.  Calls trading with a block of 1.357M shares of stock.”

The move today is with Avon down 3% at $20.36 and its 52-week range is $16.09 to $30.63.  Shares closed at $21.57 and the stock traded as low as almost $19.50 on two days this week.

If there are any rumors out there it is not evident at all in the stock.  Still, it is always interesting when you see very unusual options trading on Fridays when the options are not just hedging transactions.

JON C. OGG

Where the story gets cautious is in the April to June forecast, where Wipro now expects a 1% revenue decline, which was given a caveat that revenues might grow by 1% or so on an “at-best” guess. The company is reiterating what Infosys said in that its clients are cautious in a volatile environment. There is also the aspect that outsourcing of jobs is now less popular than it was as this is an election year in the United States. The woes in Europe are also a key issue. Today’s news is likely to be a blow to the turnaround efforts made by the company after restructuring its software outsourcing efforts over the past year.

Tata Consultancy Services Ltd. gave a stronger forecast earlier this week, but the love is not being shared. Infosys Ltd. (NASDAQ: INFY) already set the tone and Wipro is following Infosys rather than Tata.

The Bombay Stock Exchange’s IT Index fell over 8% after the Infosys report and gained almost 5% after the Tata report, but today’s news from Wipro took out another 2% on the index as IT shares fell in India. Wipro shares were down almost 8% in local trading on the Bombay Stock Exchange.

We have yet to see local trading in New York for Wipro’s ADRs but these closed at $10.33 on Tuesday and the 52-week trading range is $8.63 to $14.65.

Another name to watch in this sector is Cognizant Technology Solutions Corporation (NASDAQ: CTSH) with a $22 billion or so market cap. It offers IT consulting and outsourcing and is based in Teaneck, N.J., but it could be considered as the “American-Indian Indian outsourcing outfit.” Cognizant is set to report earnings on May 7, 2012, and at $72.39 as of Tuesday’s close it has traded in a range of $53.54 to $83.48 over the past 52-week period.

Maybe the woes in India are actually working in favor of International Business Machines Corporation (NYSE: IBM), although its services backlog was down slightly to $139 billion at the end of the first quarter.

JON C. OGG

The head of sales is also leaving the company.  Nokia’s loss in the first quarter amounted to 0.08 Euro per share.  The loss was a cent wider per share than the consensus targets in Europe.  Since Nokia had already issued an earnings warning for the first two quarters, Wall Street and Helsinki had already thrown in the towel on ay grand expectations here.  While Apple Inc. (NASDAQ: AAPL), Samsung, and even Google Inc. (NASDAQ: GOOG) makes sales after sales, Nokia is betting on the Windows O/S from Microsoft Corporation (NASDAQ: MSFT) to drive its future.

Nokia has also committed to announce the details of the coming cost cuts soon.  It is sad to say, but the company should already know many of these cuts. Sales of the new Lumia phones have been mixed but the company said that U.S. sales and some other markets have so far exceeded the company’s internal expectations.  The U.K. was called “challenging.”

Nokia is not in a potential value situation.  This is a troubled turnaround at this point.  Sadly, some will question the company’s future and it is not a mystery as too why.  This also comes to a blow for the nation of Finland.  Nokia shares are up about 1% at $4.01 in pre-market trading of the ADRs in New York.

This morning’s gain in the stock should be considered a down-payment on hope rather than a reward for any success.  Shares have recently hit not just a year low, but a low not seen in a decade.

JON C. OGG

It was Western Digital which was in the most trouble in Thailand, but it has recovered.  Now we are a full quarter past the Seagate acquisition of the Samsung drive unit.  Investors needed to be buying these stocks in mid-too-late 2011 when they were under pressure.  We now have effectively what is two guidance hikes out of Seagate and it has performed almost the same as Apple Inc. (NASDAQ: AAPL) so far in 2012 and has nearly tripled since the lows seen last year.

Over at Western Digital, we called it a value stock in November when shares were down closer to $27 with the call that when things normalize it will be back at $35.00.  These were not just value stocks at the time; they were turnaround stocks.  Apparently we are just too conservative because Western Digital is now up above $41.00 after a 5% gain today.

The other driver for the drive-makers is that there is virtual duopoly now that Western Digital has closed its Hitachi HDD purchase in March and since Seagate closed its acquisition of the Samsung HDD unit back in December.  Maybe the companies look less like value stocks in some of their respective stock screens now, but investors chasing these now things are finally good have really missed a large portion of this ship’s journey.

Can these continue running higher?  Yes, of course they can.  Seagate is currently just above $29.00 and the Thomson Reuters consensus analyst target without considering today’s news is $32.72; Western Digital is now above $$41.00 and the Thomson Reuters consensus price target is $47.20 without considering any changes from today’s news.  Those price targets have ratcheted higher and higher as the companies have continued to recover. The difference we have in not wanting cheer today’s gains on endlessly in the drive-makers is that we would point out that the easy-money here has been made.  Maybe the easy-money has been made and then some.

JON C. OGG

First Solar, Inc. (NASDAQ: FSLR) has announced a restructuring and it is really is a series of layoffs and closures.  First Solar will close its manufacturing operations in Frankfurt (Oder), Germany, in the fourth quarter of 2012.  The company will also “indefinitely idle four production lines” at its manufacturing center in Kulim, Malaysia, on May 1, 2012.  The company noted further personnel reductions in Europe and the U.S.  All in all, the layoffs globally will come to about 2,000 positions or about 30% of the workforce.  Doesn’t that sound like great growth???

The efforts are said to generate savings of $30 to $60 million this year and are projected to save $100 to $120 million annually going forward. First Solar is claiming that this will drive down the average manufacturing cost to a range of $0.70 to $0.72 per watt in 2012 as a result of the changes.  The prior projection was $0.74 per watt and the company is forecasting the average module cost in 2013 will be $0.60 to $0.64 per watt.

For total charges related to these ‘savings initiatives’ the company will record $245 to $370 million, with about $80 to $120 million being cash expenditures.  These charges will come primarily in the first quarter of 2012 and the rest charges will take place throughout the remainder of this year.  First Solar has also voluntarily paid down approximately $145 million of debt ahead of schedule in 2012 under its German loan agreement.

Bringing the cost per watt down this much may act to drive margins higher, but that assumes a flattening out of price trends in solar PV modules.  With Chinese dumping efforts and with the tariffs being so small against the dumping initiatives, this requires a large degree of trust that things will go as well as the company hopes.

Here is the company’s comment that goes to the core issues surrounding the new solar market trends: “The solar market has fundamentally changed, and we are quickly adapting our market approach and operations to maintain and build upon our competitive advantage.  After a period of robust growth, First Solar is scaled to operate at higher volumes than currently exist following the reduction of subsidies in key legacy markets. As a result, it is essential that we reduce production and decrease expenses to reflect the smaller volume of high-probability demand we forecast. These actions will enable us to focus our resources on developing the markets where we expect to generate significant growth in coming years.”

We’ll see.

First Solar shares were initially up as much as 4% or 5% in the early pre-market indications but after 15 minutes of trading the stock is only up 1.6% at $21.12.  As a reminder, anything under $20.00 is the demarkation line of what would have market a busted IPO level.

JON C. OGG

The company reported a loss of $424 million or $2.00 per share, but that is after asset impairment charges and layoff and restructuring costs.  Supervalu would have earned $0.38 EPS outside of items.  That is down from $0.44 EPS a year earlier but well above the consensus target from Thomson Reuters of $0.35 EPS.  Revenue was down by 5% to $8.23 billion, and that was slightly under the Thomson Reuters consensus target of $8.31 billion.

Guidance is where SuperValu’s story gets interesting.  The company forecast annual earnings to be in a range of $1.27 to $1.42 EPS outside of items against a backdrop of $1.19 per share expected from Thomson Reuters.  With a $5.32 closing price on Monday, the case for value is strong in an obvious turnaround.  The 52-week trading range is $5.07 to $11.77 and shares recently put in a multi-decade low after having been above $45 briefly almost ten years ago.

It is without surprise that today’s report has shares indicated up over 16% at $6.18.

JON C. OGG