Liberum Research’s executive turnover numbers do not yet show an increasing turnover trend. There are, however, more and more specific situations where CEOs and CFOs are resigning as corporate performance has lagged. Just yesterday, Silicon Image SIMG (NASDAQ) the connector chip maker’s CEO, Steve Tirado, resigned after the firm announced its third quarter revenues were expected to be much lower. We are beginning to see more and more top executives leave their positions as their respective firms have failed to perform.
The board of directors of Sequenom SQMN (NASDAQ) terminated the employment of the president and CEO, Harry Stylli and Elizabeth Dragon, the SVP of R&D after an investigation into the mishandling of test data. Sequenom a biotechnology firm involved in the development of a test for Down’s Syndrome acted quickly after the results of the investigation was completed. Other employees have been affected as well including the firm’s CFO. According to a story in GenomeWeb Daily News,
The clear out comes following the completion of an investigation into the mishandling of R&D test data and results on the firm’s SEQureDx Down syndrome test. Sequenom disclosed the problems last April and opened an investigation at that time.
“While each of these officers and employees has denied wrongdoing, the special committee’s investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company’s board of directors in the personnel involved,” the firm said in a statement.
“In making the transition from researching potential molecular diagnostic tests to developing and commercializing those tests, the company failed to put in place adequate protocols and controls for the conduct of studies in the T21 program … and some employees failed to provide adequate supervision,” Hixson said during a conference call following the announcement. “This resulted in inadequately substantiated claims, inconsistencies and errors in the test data, and results for our T21 program.”
In a recent interview conducted by The Wall Street Transcript of Zarak Kurshid, a vice president for Caris and Company published on September 14, 2009, he said,
“We’re recommending selling Sequenom.”
According to a story by David Olmos for Bloomberg,
(The company’s) planned launch of a prenatal test for Down syndrome may be delayed by more than a year after a finding that research data gathered to develop the screen was mishandled.
Following the terminations and resignations the firm’s board according to its SEC 8K filing,
… appointed Chairman Harry Hixson, a former president and chief operating officer of Amgen, and Director Ronald Lindsay to serve on an interim basis as CEO and SVP of R&D, respectively. The company’s board of directors also has designated controller Justin File to serve as principal financial and accounting officer.
There is likely more to come as the SEC is investigating the problems at the firm as well.
For more:
In our recent report on Medical Devices Edwards Life Sciences was a top pick of Kristen M. Stewart,Vice President and Senior Analyst , Credit Suisse and here is why ;
Ms. Stewart: One company that I like at the present time is Edwards Lifesciences. It’s more of a mid-cap cardiovascular company. They are developing a new product, it’s called the transcatheter heart valve. They are selling it in Europe and are in clinical trials in the United States. It’s really one of the largest areas of new innovation. I think transcatheter heart valves can certainly be the next big thing in medical devices. It could be a multibillion-dollar market opportunity for a company of that size; that is very significant. These valves can really drive accelerating top- and bottom-line growth.
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Our featured interview this week is with Zynex, Inc.(ZYXI)
The complete interview with Thomas Sandgaard, President & CEO, is now available.
Zynex, Inc. engineers, manufactures, markets and sells its own design of electrotherapy medical devices in two distinct markets: standard digital electrotherapy products for pain relief and pain management; and the NeuroMove(TM) for stroke and spinal cord injury (SCI) rehabilitation. Zynex’s product lines are fully developed, FDA-cleared, commercially sold, an have been developed to uphold the Company’s mission of improving the quality of life for patients suffering from impaired mobility due to stroke, spinal cord injury, or debilitating and chronic pain.
Ben Steverman wrote a terrific piece in Business Week that examined the issues surrounding CEO compensation and what it means with regard to the quality and proficiency of CEOs. If you are interested in compensation issues or more importantly in CEOs and their impact on companies, it’s a must read.
One of few bright spots in the retailing scene Aeropostale ARO (NYSE), the teen retailer, announced today that its longtime CEO going back to 1996, Julian Geiger, would be stepping down at the end of the fiscal year. For now, the firm will
replace Geiger with Mindy Meads, the president and chief merchandising officer, and Thomas Johnson, the chief operating officer, who will serve as co-CEOs (see press release). Both executives have performed terrifically at the firm. It is unlikely, however, the two will remain as co-CEOs for very long. Co-CEO
s is usually difficult arrangement under normal circumstances but it is even more problematic in a retailing situation.Keep a close eye on how this all shakes out over time. The company does not want to damage a good thing.For more:MarketWatchThe Street.com
This week we have put together a special 63 page report on Large Cap Value Investing. As part of the report we spoke with Marian L. Kessler and Robert N. Schaeffer of Becker Capital Management, Inc. They gave us their investment strategy and what opportunities might be available in this economy;:
Ms. Kessler: We are large cap investors. At least 60% of both our separate accounts and our mutual fund are invested in large cap stocks. However, we do have some flexibility to find stocks, particularly in the mid-cap range. In the past year we have had an opportunity to look at many companies that have fallen into this territory, but the average market capitalization of our portfolio is still clearly large cap at $38.8 billion. Philosophically, we buy stocks that meet four characteristics; 1) They must be out of favor, 2) They must be average or better quality, 3)Business trends must be stable to improving and4) They must be trading at a valuation discount to their historic norms, or the market. We don’t buy turnarounds. Instead we prefer healthy balance sheets. We prefer very low debt-to-capital and we’re really focused on cash flow and other attractive balance sheet characteristics. We spend our time researching diligently our companies to discern the direction and the magnitude of the change in business fundamentals, whether that is operating margins, market share, top line growth, bottom line growth. This approach, especially last year, kept us away from a lot of value traps that many large cap value managers fell into.
On finding opportunities in this economy
Mr. Schaeffer: It is becoming more difficult. The market’s second quarter performance was the result of very strong performance from companies that had been most negatively impacted by the credit crunch. We have maintained our emphasis on larger, higher-quality companies that are financially strong, have superior balance sheets and the wherewithal to operate in a variety of economic conditions. That’s one of the things that we do think will matter significantly going forward as this is a very challenging economy still. Our belief is that this economic rebound may well be substandard by historic comparisons. In a challenging environment, the economy will likely divide companies into winners and losers more than ever before. However, given our emphasis on research at the company level, we believe that superior stock selection will drive returns over the next several years. Becker Capital’s value add over the years has typically come from superior stock selection; approximately 70% to 75% of our performance as opposed to sector bets
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Ken Lewis’ CEO chair at Bank of America continues to get hotter and hotter. It is getting more and more difficult to see how Lewis can manage to keep his position much longer. Joe Bel wrote a piece for MarketWatch Tuesday in which he stated,
The multiple probes bearing down on Bank of America Corp. could make it difficult for Chief Executive Ken Lewis to keep his job.
Numerous analysts and management experts are now predicting the when rather than the whether. Stay tuned.
Reuters reported today that the International Teamsters Union urged Fedex shareholders to separate the positions of chairman and CEO. While this is not first time this issue has been raised with regard to Fedex it represents a growing trend. While the Teamsters view may not prevail at the company’s upcoming annual meeting, we are likely to see more of this type of pressure imposed on public companies.
As part of our Application Software Report we spoke with Aaron Schwartz, Senior Analyst, Ladenburg Thalmann & Co. thinks software stocks , have gotten a little ahead of fundamentals, and he expects the group to trade sideways into the fourth quarter . He does like Avocent (AVCT) on the long side:
Mr. Schwartz:”…It’s a company that’s a mix of hardware and software. To me, this is a company in sort of a turnaround story, it’s a non-consensus call. They’ve had a new CEO in there for about a year and he started to influence some change in the company, but they’re going to see their software mix increase as a percent of total. I think that they are a derivative play on the Windows 7 release – that’s the desktop operating system release that will be out in October. They should see some pretty strong margin and earnings leverage into next year, and the valuation is at about a little less than 10 times earnings. To us, it is very attractive for a company that’s continuing to see things improve.”
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