As Ship Takes on More Water, Fannie Mae Jettisons CFO & CBO

Fannie Mae FNM (NYSE) struggling to stay above water announced a late in day management shakeup that left the top of the firm CEO, Dan Mudd, still in place.  The current CFO, Stephen Swad, was leaving the company.  According to the company press release,

The executives include Peter Niculescu, who has assumed the duties of Chief Business Officer, as well as the appointments of David C. Hisey as Chief Financial Officer and Michael Shaw as Chief Risk Officer.

“After setting forth our capital and credit plan August 8, we are now putting a senior management structure in place to drive this plan across the company,” Mudd said. “This team will be responsible for meeting the dual objectives of conserving capital and controlling credit losses while Fannie Mae continues to provide crucial liquidity to the U.S. housing and mortgage markets. As we move through the bottom of this cycle, maintaining capital, managing credit and driving revenues are the priorities — and we have to organize and staff accordingly.”…”The Board of Directors is firmly committed to Dan Mudd, the management restructuring, and the strategic objectives around capital and credit he set forth on August 8,” Stephen B. Ashley, Chairman of the Board, said. “The Board will continue to work closely with Dan and his management team to guide the company and support the housing finance system through a very challenging period.”

While Fannie Mae desperately needs management change it still appears to be too little and possibly too late.  Mudd may still ultimately be forced to leave.  Stay tuned.For more:New York TimesMarketWatch

CEO Watch – Sir Fred Goodwin, Royal Bank of Scotland

Back in April I alluded to the pressures Sir Fred Goodwin, the CEO of the Royal Bank of Scotland was facing.  Goodwin has for a long time been considered a terrific CEO.  Then the credit crisis evolved and he too became ensnared in the difficulties facing many other banks.  Goodwin has found himself under increasing pressure from shareholders as RBS began seeing cracks in its invincibility.  In fact, the bank recently announced its first loss in forty years as a public company.  As the pressures grew Goodwin and the bank’s current chairman, Sir Tom McKillop found themselves forced to make room for for some new blood on the board.  According to a story by Julia Kollewe in theGuardian,

Royal Bank of Scotland has strengthened its board with the appointment of three non-executive directors, including the deputy chairman of Northern Rock, in a move designed to pacify investors.

Stephen Hester, who is also the chief executive of property group British Land, will join the RBS board when he steps down from Northern Rock on October 1……. John McFarlane, a former Standard Chartered and Citibank executive, and Arthur Ryan, the former chairman and chief executive of US financial services firm Prudential Financial, will also join the RBS board as non-executive directors on October 1. Last year McFarlane retired after 10 years as the chief executive of Australia and New Zealand Banking Group. Ryan retired from Prudential Financial in May. He previously spent 22 years at the former Chase Manhattan Bank, where he served as the chief operating officer and vice-chairman and also ran the worldwide retail bank.

Speculation has been heightened with the selection of the above three new members that Hester may be in line to succeed Goodwin. Keep a close eye on RBS and the moves made over the next number of months.  Management remains on the hot seat and cannot afford to make more mistakes.For more:BloombergMarketWatchManagement TodayFT Alphaville

Unconfirmed Reports Indicate Alcatel-Lucent Will Name New CEO

Alcatel-Lucent ALU (NYSE), which forced its CEO, Patricia Russo and Chairman Serge Tchuruk to resign back in July, is rumored to be ready to announce the appointment of former president of science technology and strategy, Mike Quigley as its new CEO.  Quigley, who at one time was considered a prime candidate for the CEO position of Alcatel, left the company back in August of 2007 and moved back to Australia.  According to a story by Mary Lennighan for Total Telecom,

Former Alcatel-Lucent executive Mike Quigley will likely succeed CEO Patricia Russo, having secured the backing of the vendor’s nomination committee, it emerged Wednesday. Quigley, who held the position of technical chief at Alcatel-Lucent until he resigned last August, is the favourite to replace the outgoing chief executive, Reuters reported, citing a piece in French weekly Le Canard Enchaine.

The market has responded positively to the rumor. For more:BusinessWeekTelecom TigerCanadian PressBarron’s Tech Trader

Bio-Key International’s New Emergency Platform for Schools

This past weekend, Bio-Key International (BYKI) launched a new emergency platform, with a focus primarily on improving emergency management in schools- both at  a K-12 and a college level.

According to the company, the new platform can provide administrators with an efficient solution for distributing school wide emergency and non-emergency alerts to faculty, students, and staff.

Benefits include silent alerts, which can be sent directly to administrators or campus police officers and incident updates, giving administrators the ability to update faculty and staff on an evolving situation; and the ability to link school resource officers directly to local 911 call centers, providing immediate emergency dispatch.

TWST interviewed Bio-Key International CEO Mike De Pasquale this past week. To learn more about Bio-Key International, how the company operates, and its plan for the future, click here. 

Off the Record- Oil & Gas Services & Equipment

Our Off-the-Record this week focuses on management teams that are contributing most to shareholder value in the Oil and Gas Services and Equip sector. Here’s the picks the people we interviewed had:

Dawson Geophysical Co. (DWSN)- “I think the guys at Dawson Geophysical are great, and you’ve got Decker Dawson there, who has now been in the seismic business I think he told me 61 years, so he’s got a bit of experience on his side. In these types of environments I like any management that runs a business for the long-term; there are a lot of smaller companies out there where managements are running on a day-to-day basis or to put it another way, are trying to respond to what the market wants today. That’s not what I want to see in this environment.”

National Oilwell Varco (NOV)- “I would mention National Oilwell Varco. Pete Miller, Clay Williams and their team have done a remarkable job after the combination of National and Varco. A merger of that size coming off as smoothly as it has is a real achievement.”

Schlumberger Ltd. (SLB)– “Schlumberger you go to bed sleeping well at night knowing that they are going to be allocating their capital the proper way, knowing that they are going about their business the right way. While it may not always be the best performing stock, you have faith in that management because they are very smart.”

For the complete Off-the-Record report, including general comments on the industry as a whole, and more stock picks, click here.

More rumors, more pressure – Lehman’s CEO, Richard Fuld, remains at risk

Colin Barr of Fortune reported today on the continuing rumors surrounding Lehman and now specifically Richard Fuld, Lehman’s embattled CEO.  According to Barr,

The big Lehman Brothers (LEH) story Monday is that CEO Dick Fuld is on the ropes. The Observer (U.K.) newspaper, citing “well-placed sources within the bank,” reported over the weekend that Fuld faces a “planned coup” that will force him out by year-end. The paper said operating chief Bart McDade, installed in June as Fuld sought to restore faith in the firm after a big second-quarter loss took Wall Street by surprise, has taken over many of Fuld’s responsibilities.

There is nothing new here but so far, Fuld has not managed to find a way to defuse the crisis facing Lehman and it remains unlikely he can survive all that much longer.  The real question is, can Lehman?For more:Dealbreaker

Recommended Reading – Turnaround Kraft (KFT): New management ‘shakes things up’

Steve Halpern of Bloggingstocks wrote a piece today highlighting the ongoing management changes and what they have meant for Kraft KFT (NYSE).  Most of Halpern’s piece refers to a story written by George Putnam of the Turnaround Letter.  Back in 2006, Kraft brought back Irene Rosenfeld to Kraft to run the company.  From the time she came back she has been working hard to strengthen the company’s key management. Just as an aside, back in February of 2008 it was revealed that Warren Buffett’s Berkshire Hathaway accumulated a 8.6% stake in the company, another possible show of confidence in Rosenfeld’s plans (see CNBC).

Additional Follow-up on The Gap

Surprise, surprise, The Gap GPS (NYSE) the well-known struggling retailer announced its quarterly earnings yesterday and they were up 51% from the same period a year ago.  Yesterday, I wrote a post about recent changes at The Gap.  I specifically focused on The Gap’s new designer, Patrick Robinson and his potential to help the firm.   The Gap’s CEO Glenn Murphy who was met with a good deal of skepticism when initially appointed back in July 2007 (see post) may actually be succeeding in making a real dent in resolving some of the troubles the retailer has been facing.  There actually may be some light at the end of the tunnel for the firm.Stay tuned.  For more:Atlanta Business JournalReutersLA TimesMarketing WeekRetail Exec

Portfolio Managers- What’s your edge?

Every week here at TWST, we speak to a variety of Portfolio managers about how they invest. With so many managers out there, it can sometimes be hard to distinguish what makes a particular management firm distinct. That’s why we here at TWST make sure to ask them that questions directly. What gives you your edge?

1. Frederic Burke, Johnston Lemon Asset Management (invests in Undervalued Large Cap Stocks) – “We have deployed our investment discipline in a consistent manner for over 10 years. Clients understand our investment process and how different securities fit into the asset allocation puzzle. Our competitive advantage is in our performance and level of service. We are very proactive with our clients. We continually work to explain our process and skills and to understand client goals and objectives. The resulting relationship defines our value proposition. Finally, I think that the individuals who are employed by Johnston Lemon Asset Management are very talented, understand the markets and know how to communicate the position of the organization to our clientele.”




2. Eric Heyman- Olstein Capital Management (shareholder activist value investing)– “We approach every situation opportunistically. We look at every situation from the point of view that we own 100% of that company. As a 100% owner, what would we do? How would we achieve our value? I think a truly unique part of our process that makes us different is our analysis rooted in forensic accounting. Robert Olstein, who founded Olstein Capital Management, previously co-authored the Quality of Earnings Report, a research service that undertook an inferential analysis of financial statements and footnotes to alert institutional investors to deviations between reported earnings and a company’s economic reality. This same approach is the foundation of our analysis and allows us to assess the quality of earnings that a company is reporting. We want to differentiate between companies with aggressive and conservative accounting practices and believe that companies using aggressive accounting practices may be prone to future earnings and revenue shocks, whereas companies pursuing conservative accounting practices may not only have more of a cushion regarding such surprises but may be managed in a way that values its shareholders.”
3. Doug McPeek- Nottinghill Investment Advisers (value and growth blend)- “I think two things. First of all, we are highly disciplined. This is a highly disciplined way to manage money. Second and probably even more important is this combination of value and growth in the same portfolio — two diametrically opposed ways of viewing the investment world. We incorporate both in the portfolio, and the advantages to a client are the fact that we not only have the opportunity to beat the popular market averages, we can do it on a more
   consistent basis.”

For the full investment strategies report, including full interviews with each of these portfolio managers regarding their investment strategy, outlook for the future and stock picks, click here.

Recommended Reading – GE executive: Reorg will simplify conglomerate

Stephen Singer wrote a story that appeared in Business Week that examined the recent organizational changes at General Electric GE (NYSE).  GE announced recently it would reduce the company into four businesses from six as a way to ultimately increase efficiency and improve shareholder value. The gist of the article focused on the explanations given by John Rice, GE’s vice chairman and president of the newly created GE Technology Infrastructure unit about the purposes behind the latest reorganization.  Rice, a star at GE, is being touted by some as a possible successor at some point to current CEO, Jeffrey Immelt.  Immelt has found himself under increasing pressure from shareholders (see earlier blog).  Check out the Business Week story for a sense of Rice’s talent.