Revolving Door
In contrast to Apple’s stunning success, the first calendar quarter of 2011 was a revolving door for other Silicon Valley companies and executives. There were management shifts, shakeups and ousters at Advanced Micro Devices (AMD), Google, Hewlett-Packard (HP) and Microsoft. They were variously aimed at jumpstarting product momentum (AMD, Microsoft), polishing a tarnished image and placating stockholders (HP) and providing an orderly transition of power (Google).
You need a scorecard to keep up with all the comings and goings.
AMD’s board ousted chief executive Dirk Meyer in mid-January after only 18 months on the job. It then appointed Senior Vice President and CFO Thomas Seifert, as interim CEO while the search goes on for a permanent chief executive. Siefert continues as chief financial officer and says he does not want to be considered for the permanent CEO position. This is probably a smart move. AMD’s flamboyant co-founder Jerry Sanders spent 33 years as CEO (1969 to 2002), but everyone who’s followed has had a short tenure.
The challenge for any AMD chief executive is to jumpstart momentum and somehow find a way to gain ground on perennial logic chip front runner Intel and Nvidia which dominates the mobile (Tegra 2) and graphics chip market. AMD’s Opteron dual and quad-core processors and the mobile and graphic chips which it acquired in its 2006 purchase of ATI are all solid offerings. However, AMD’s former CEO Hector Ruiz and Meyer elected to focus on optimizing their chips for traditional notebooks instead of the lightweight mobile devices and tablets that are stars in today’s markets. According to statistics published by International Data Corp., Intel’s share of the PC and server chip market is approximately 81% compared with AMD’s 19%.
AMD continues to shuffle its executive ranks. In February, two senior executives, Bob Rivet, executive vice president and chief operations and administrative officer, and Marty Seyer, senior vice president of corporate strategy, also resigned. In late March the company named former HP executive Mike Wolfe as its new chief information officer. Prior to joining AMD, Wolfe served as vice president of information technology for product development and engineering at HP. Wolfe is now responsible for managing AMD’s global technology infrastructure. Ironically, AMD’s former CIO Ahmed Mahmoud, who departed in 2010, went to HP where he is currently the Senior Vice President of the global information technology group.
HP Still Hurting from Hurd Scandal
HP has also had its share of executive shakeups in 2011. All of them stem from the continuing fallout from former CEO Mark Hurd’s exit last summer. The reverberations have tainted the company’s once pristine image and they are as toxic to HP as the radiation leaking from Japan’s Fukushima nuclear power plant. Hurd left under a cloud of scandal amidst charges of sexual harassment and dodgy expense accounting related to an undefined but inappropriate relationship with a female contract employee. A scant week after Hurd’s departure which included a platinum severance package worth $44M — a group of HP shareholders filed suit. The suit alleges that HP board members are guilty of “gross mismanagement and waste of corporate assets.” They claimed the board put the shareholders’ finances at risk by failing to disclose the charges of sexual harassment against Hurd. It sounds reasonable. What’s particularly galling to shareholders and rank and file employees is that Hurd got rewarded for his bad behavior after he spent the last several years cutting tens of thousands of workers from HP’s payroll.
In January, HP replaced four of its board members and added an additional director to the board. The departing HP board members are Joel Hyatt, John Joyce, Robert Ryan and Lucille Salhany. They are replaced by Shumeet Banerji, chief executive officer of Booz & Company; Patricia Russo, former CEO of Alcatel-Lucent; Gary Reiner, former CIO at GE; Dominique Senequier, CEO of AXA Private Equity and Meg Whitman, former president and CEO of eBay Inc.
The new board members provide HP with diversity and wide ranging experience. By overhauling its board, HP seeks to mollify outraged shareholders and distance itself from the Mark Hurd debacle. This is no easy task. HP launched its own investigation of Hurd’s departure. It will be conducted by CEO Leo Apotheker, the new board members and outside legal counsel. Apotheker has wasted no time assembling his team. On April 18, HP announced that Thomas Hogan, who headed the company’s enterprise business sales and marketing, will leave on May 31 to “pursue other interests.” Hogan’s replacement is Jan Zadak (a former Compaq executive). Zadak is presently the managing director for HP’s Europe, Middle East and Africa (EMEA) operations. In mid-April, HP also appointed Marty Homlish as executive VP and chief marketing officer. Homlish will be responsible for overseeing and leading marketing across the company and will become a member of the company’s Executive Council, reporting directly to Leo Apotheker. Homlish and Apotheker worked together before at SAP AG, where the latter was CEO. Prior to joining HP, Homlish spent 10 years at SAP AG, where he served as the global chief marketing officer and corporate officer, as well as president and CEO of SAP Global Marketing, Inc.
There was also a seismic (though amicable) shift at search engine market leader Google. The company announced in January that Eric Schmidt would relinquish his CEO post in April in favor of company co-founder Larry Page. Page took over in early April and immediately reshuffled managers and the reporting structure.
The CEO change at Google is prompted by the desire to aggressively expand into new markets. Page is going to have to prove himself. Wall Street is nervous. In the wake of continuing skirmishes with leading vendors including Microsoft and Apple and latest and somewhat disappointing financials reported on April 14, many on Wall Street are concerned about Google’s prospects. They question the company’s aggressive spending spree. Months ago Google announced plans to hire 7,000 to 10,000 new workers; hand out 10% company-wide salary increases and aggressively pursue new business. That includes technology expansion into everything from smart phones to social networking to mobile and expensive marketing campaigns.
In its latest quarter, Google reported expenses of $2.84 billion; a 54% increase from the prior year. While revenues in the latest quarter ended March 31 rose by 29%, Google’s stock price has decline by nearly 9% since January when it announced that Schmidt was stepping down as CEO. The decrease has wiped out roughly $12.5 billion from Google’s market capitalization which now stands at $173.09 billion (still one of the best in the industry). Google remains the dominant player in the search engine arena with a commanding 65% market share. Its next closest competitor is Microsoft’s Bing which has about 14% and Bing is linked to Yahoo which has another 16% for a combined share of 30%. Google’s Android mobile operating system meanwhile remains the undisputed market leader with a solid 45% market share; twice that of its nearest rival Apple’s iOS.
“Dog Wars” Android App Bites Google’s Image
Meanwhile, Google faces growing and well deserved criticism by the Humane Society, the ASPCA and animal rights activists who are outraged over an Android application called “Dog Wars.” The video game built by Kage Games glorifies dog fighting and depicts a bloodied pit bull next to the game’s logo on Kage’s website. Humane Society President Wayne Pacelle said in a prepared statement that “Dog Wars” could be used as virtual training ground for would-be dogfighters. Even Philadelphia Eagles quarterback Michael Vick who spent 18 months in prison after being convicted of illegal dogfighting, condemned the Android application. “I’ve come to learn the hard way that dogfighting is a dead-end street,” Vick said in a statement posted on the Humane Society’s website. “Now, I am on the right side of this issue, and I think it’s important to send the smart message to kids, and not glorify this form of animal cruelty, even in an Android app.”
Google ducked the issue for two weeks before it was finally pulled from Android Marketplace. on April 28. This incident also shines the spotlight on a larger issue: as Google further expands into the gaming industry via the number one Android operating system, will profits win out over principles and ethics? To further extend the Android mobile OS and solidify its lead, Google launched the new “Games at Google” gaming unit and they are seeking a Product Manager to fill the post. Let’s hope it top management provides some much needed ethical oversight.
Changes are also afoot at Microsoft. In late January CEO Steve Ballmer announced the departure of 23 year veteran Bob Muglia who successfully ran the company’s very profitable Server and Tools business. Under Muglia’s direction, STB recorded a $1.63 billion operating profit on sales of $3.96 billion in the prior fiscal quarter. Muglia will leave sometime this summer. To date, Microsoft has been mum about his replacement and while the company isn’t saying anything publicly word inside the company is that Ballmer forced Muglia out to accelerate Microsoft’s cloud strategy.
Whether or not that’s the case, Ballmer should speed up the search for Muglia’s successor and plug the gaping holes left by other very visible departures. They include: Brad Brooks, a corporate vice president in the Windows consumer marketing group who left to work for Juniper Networks; Matt Miszewski, the general manager of Microsoft’s government business who is taking an executive post Salesforce.com and Johnny Chung Lee, the infamous Wii hacker who partnered with engineers in Microsoft’s Applied Sciences group to develop the Kinect for the Xbox 360. Lee is defecting to Google. Ouch! The Kinect motion camera has been an unqualified success for Microsoft. It sold eight million units in the first 60 day. Microsoft is also betting heavily on its Windows Phone 7, which has garnered generally positive reviews. Microsoft says it has sold over two million units to date but it isn’t clear how many of those units (which have been shipped to partners) have actually been sold. Microsoft will have to bring its “A” game to challenge Android-based smart phones, Apple’s iPhone 4 and RIM’s Blackberry.