This past issue of TWST featured a very special interview with Chris Evenden, the CEO of NVIDIA (NVDA). A semiconductor company, NVIDIA’s product is primarily graphics cards for the PC. We talked with Mr. Evenden a little bit about how that kind of product will do in the markets we’re facing currently:

Mr. Evenden: The nice thing about working in graphics is that software developers and consumers can always find a use for more graphics power. So we can always continue to differentiate ourselves from the competition. If the competition comes out with something, we can add extra functionality and come out with a better product. There’s always a way to advance and there are few markets in semiconductors that are actually like that…People want more resolution, people want stereo 3D, people want physics simulation, and there’s always an extra use for them.

 Given his rosy opinion of the current state of his particular market in the semiconductor space, we ask Mr. Evenden what he thought were some specific reasons long-term investors should take a look at NVIDIA:

Mr. Evenden: The best reason is that the computer market is leaning toward our area of expertise. Consumers care more about graphics and multimedia, and graphics and multimedia have become a more important part of the PC, the cell phone and even supercomputers. More and more applications are making use of them for things beyond graphics. In the short to medium term, you also have to look at the quality of the company, the fact that our balance sheet is very strong, and how tightly our competition is constrained by their own issues. We are maintaining our investments in R&D. We are being very careful about balancing the need to conserve cash with maintaining investment in areas that will allow us to grow after the recession ends. We’ve seen how the computing market is changing and are very focused on coming out of this recession strongly and using the recession to make NVIDIA a better company.

For the complete interview with Mr. Evenden, taking a closer look at NVIDIA, their focus and his personal expertise, click here.For the Wall Street Transcripts most recent Semiconductor report,click here.  

In a recent interview with Claude Camire of Paradigm Capital Inc. he discussed Canadian Healthcare and how the lack of new funding may influence the sector;

Mr. Camire: We have a lot of promising technologies and drugs, but unfortunately, if those companies were not able to finance themselves early, before August 2007, those companies are and will be suffering. This new situation is likely to create opportunities for mergers, especially among the small companies.

For the complete interview click here.

Yesterday’s announcement that AOL is replacing its CEO, Randy Falco and COO, Ron Grant, after a transition period is no real surprise.  Speculation about this change has been rampant for some time.  The real issue revolves around the announcement that AOL snagged Tim Armstrong, Google’s head of ad sales to become chairman and CEO of AOL.  Armstrong has been with Google virtually from the beginning.  AOL obviously hopes he will be a game changer for the firm.   It is hard to see besides the possibility that he relishes a sisyphean challenge what Armstrong sees in his new position.  AOL is in need of so much change even a player with the talents of Armstrong faces a real uphill struggle to make AOL a going concern again.

Time Warner intends to spin off AOL at some point, they have already made that known.  While I am very impressed with the fact that AOL snagged such a powerhouse as Armstrong, I remain skeptical about what even he can do.  For the moment the selection is a positive for AOL and Time Warner but long term it will be tough slogging ahead.

Stay tuned this is going to be very interesting.

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Who is to blame for the banking crisis. When we spoke with Bob Patten of Morgan Keegan & Co., Inc he contends there is enough blame for all to share. Some of it pointing right back at congress.

Mr. Patten:  So the banks are to blame, Wall Street’s to blame, the government’s to blame, the borrowers are to blame and that absolutely needs to be shared among all parties. President Obama pointed that out in his speech a week ago. Right now Congress is pointing the fingers, I believe unduly so, at Wall Street saying, “Wall Street and the banks, it’s all your fault,” and holding no responsibility for the fact that their programs and policies since the mid-1980s, starting with CRA, have forced banks to make loans to less than worthy borrowers, have forced the banks to create housing policies and home ownership policies, and then they put exotic products that they didn’t regulate but supported through Fannie and Freddie in terms of option arms, interest only and lowered credit underwriting policies. So hopefully we can go back to the old days when banking was boring and right now, boring would be beautiful.

For the complete Banking report, including a full overview of this sector with stock picks and an outlook for 2009 and beyond, click here.

In our special focus on Airlines this week, we spoke to analyst Helen Becker, who talked us a little bit about her outlook for the airline space:

Ms. Becker: We are expecting the first quarter to be horrible. We are expecting major losses in the first quarter for the industry. We are not expecting it to be quite as bad as what IATA is looking for, which is a $5 billion loss for the industry for 2009. But certainly we are expecting a first quarter loss to be in the $700 million range, under $1 billion, from operations.

Though this prediction may sound sanguine, Ms. Becker is in fact being optimistic, in her own way. As she mentions, the International Air Transporation Association (IATA) predicted late last year a $5 billion loss for airlines in 2008, followed by a $1 billion loss in 2009. Becker’s prediction of only a $700 million loss is optimistic, given the dark picture for airlines in general.

For the complete Transportation report, including a complete interview with Ms. Becker giving her full outlook for 2009 and stock picks, click here. 

We recently spoke to Dorson White of EVP & COO of ECB Bancorp, Inc. he had some interesting things to say about why the company has fared well in this economy;

Mr. White: ECB maintains a very strong credit culture. Its loan officers are  required to extensively underwrite each credit request, complete an in-depth cash flow analysis and risk grade each loan. That discipline has minimized the bank’s credit risk exposure. The bank continues to have excellent balance sheet  growth, but credit quality has not been sacrificed for that growth.

For the complete Banking report, including a full overview of this sector with stock picks and an outlook for 2009 and beyond, click here.

Klaus Kneale wrote a fascinating piece in Forbes yesterday entitled, Hiring a New CEO? Go Outside the Company.  Kneale’s piece refers to a study conducted by Vell Executive Search.  The firm located in New England performed a study that,

looked at 51 CEOs and their companies’ revenue growth, focusing on publicly owned technology outfits based in New England with $100 million or more in annual revenues.

Externally hired CEOs at companies with over $1 billion in revenue brought in a median three-year revenue growth of 99%; their internally promoted counterparts achieved only 35% growth. Founders, which were concentrated in smaller companies, outperformed both of these groups.

The study raised a number of very important points about CEO succession but its overall conclusion, while worth serious consideration, does not adequately answer the real questions typically surrounding the efforts and goals behind finding a CEO replacement for a company.  Each business circumstance is different, whether it is for a technology related company, a food company or other type of company and the CEO search must be dealt with in a manner capable of meeting a specific company’s goals and immediate needs.  The study sample of 51 companies appears to have been far too small to make any sweeping conclusions.

Determine for yourself the applicability of the Vell study, read Klaus Kneale’s Forbes piece.

With the new administration in place stricter regulations for transportation are around the corner, according to this week’s roundtable – and especially Jon Langenfeld of Robert W. Baird:

Mr. Langenfeld: I believe the biggest issue from a regulatory perspective involves the Employee Free Choice Act (EFCA). In the current form, the proposed legislation would represent a significant shift in power, making unionization of labor easier by authorizing unions to organize employees via “card checks” as opposed to secret ballot elections. The risk of increased unionization is a primary concern within the trucking industry. This piece of legislation is among the most frequently discussed topics of conversation, particularly as it relates to the less-than-truckload area. But it also creates risk for the broader trucking industry, the parcel players included. In 2007, then-Senator Obama co-sponsored EFCA while in the Senate, and his proposed Labor Secretary Solis supported it. Whether a piece of “card check” legislation gets through Congress and what form it ultimately takes remains unknown. Given the implications for the industry, it is something that we are watching closely.  

For the complete transportation report, including a full overview of this sector with stock picks and an outlook for 2009 and beyond, click here.

Even CEO’s are no longer immune to the economy’s troubles.  According to a story by Martha Graybow for Reuters, Equilar the compensation consulting firm recently found,

… annual bonuses for U.S. chief executives shrinking…

The article is worth a quick read. 

Early today Susan Arnold, the president of Proctor & Gamble Corporation’s (P&G) global business units announced she would retire effective September 1.  Arnold actually stepped down from her position today and until her retirement will be working on special assignement to P&G’s CEO. A.G. Lafley.

Arnold, who as been considered one of the most powerful business women in the world, has since 2007 been considered a potential contender for P&G’s CEO job should its highly regarded CEO, A.G. Lafley decide to retire.  Lafley has continued to consistently state he has no intention of resigning in the forseeable future (check earlier blog).    Lafley is currently 61 years of age and manadatory retirement at P&G is 65.  Arnold along with P&G’s chief operating officer Robert A. McDonald who are both 55 years of age have been touted by analysts as the two top contenders for Lafley’s position.

Arnold’s announced resignation has put McDonald at the front of the pack as Lafley’s ultimate successor.  According to the Cincinatti Inquirer,

Her imminent departure appears to clear up the succession picture, leaving Chief Operating Officer Robert McDonald as the leading candidate to take over for Lafley. P&G historically picks a CEO from its executive ranks.

Despite all the denials by the firm, the question remains was Arnold pushed, and if so, does she expect at some point to take another position somewhere else?  According to a story by Lisa Blank Fasig in the St. Louis Business Journal P&G’s spokesman Paul Fox said,

… it was Arnold’s longtime intention to retire when she turned 55, which she did on March 8.

Fox also said that Arnold ” has no plans to join another company at this time.” But she will continue to serve on the boards of the Walt Disney Co., McDonald’s, Catalyst and Save the Children.

The article went on to state,

In recent months, analysts have wondered if Arnold has fallen from favor with P&G because of struggles within the beauty care business, and particularly with the Pantene brand. Fox said such events played no role in her retirement.

I would recommend followers of Arnold’s career or people interested in qualified CEO possiblilities for top firms keep a close eye on Arnold for the next two years.  We may see her unexpectedly pop up for a top position at some other top firm in the future.

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