Monday, August 16, 2010
My Dog Charles, “Executing His Yadda-Yadda”
One thing I found surprising this week was learning that to many H.P. observers Ms. Fiorina no longer seemed quite so bad. It was actually her strategic vision that Mr. Hurd had executed, I heard again and again [emphasis added]. Her problem was that while she talked a good game, she lacked the skill to get that big, hulking, aircraft carrier of a company moving in the direction she pointed. Mr. Hurd was a brilliant operational executive, but had the strategic sense of a gnat, and knew only how to cut costs.
—“Real Reason for Ousting H.P.’s Chief” by Joe Nocera, New York Times, August 13, 2010.
So wrote Joe Nocera, ace New York Times business columnist, in Saturday’s paper. And the funny thing is, we’ve been hearing the exact same thing about Mark Hurd and Carly Fiorina from longtime HP-ers for the last three years, as follows:
“Hurd (and this is always said in a huffy, exasperated tone) was simply executing on Carly’s strategic vision”…
...as if spending $19 billion in precious shares of HP stock to buy an aging commodity supplier of PCs—that would be Compaq—was some kind of “vision.”
Anybody using a Compaq these days?
Carly defenders also gloss over the fact that she tried to buy the computer services business of PricewaterhouseCoopers (yes, that’s the actual name) for a cool $18 billion at close to the all-time peak of the technology business cycle in September of 2000.
One of Wall Street’s Finest said of the PWC deal at the time, “Strategically, HP is focused on being a growth company. That is the critical issue here.”
Now, Gartner Group estimated that PWC’s 30,000 service employees were generating $5.6 billion a year in revenue in those heady days, which means that Carly’s “strategy” was to become a “growth company” by paying 3-times revenue at the peak of the market for, essentially, a body shop.
Fortunately for HP, cooler heads prevailed and the $18 billion deal fell apart before it could be consummated. (Not only that, but one year later, HP and PWC announced an “alliance” to do what the $18 billion was intended to do—only the “alliance” cost HP zero.)
How, one may well wonder, is it possible for spin-doctors to insist that Mark Hurd merely “executed the strategy” formulated by his predecessor? Perhaps Hurd’s $13 billion acquisition of EDS eight years after the PWC near-miss was seen as an attempt to provide what the $18 billion PWC deal promised: an army of consultants grafting HP hardware and software onto Fortune 500 companies.
And while that may be the case, there is one difference, and it is huge: Hurd paid a mere ½ of revenue and a slight 6-times cash flow for EDS, compared to the offered 3-times revenue and who-knows-what-times cash flow for PWC.
But there is a broader aspect to this issue of “executing the strategy” that was on our minds even before Nocera’s excellent piece hit our screen Saturday afternoon, and it has been on our minds ever since the latest round of earnings calls began early last month:
Just what is “executing the strategy,” anyhow? And is there a company in America that does not “execute the strategy”?
We hereby present a list—incomplete, at that—of companies that proudly announced they have been “executing the strategy” on recent investor calls in the last 30 days.
Let’s start with the company about which this virtual column began:
8/6 Cathie Lesjak, Interim CEO, Hewlett Packard
“Finally, I can assure you that as acting CEO, my sole focus will be to keep this great company focused on executing our strategy.”
Note she does not say “Carly’s strategy” or “Mark’s strategy,” but we can be assured there is a “strategy.” Let’s move on to the other companies on our list.
8/6 Thomas Mangas, CFO, Armstrong World Industries
“Certainly…we are…thinking through what is the role of the balance sheet in executing our strategy.”
8/5 Marita Zuraitis, President, Hanover Insurance
“This morning I’ll review our operating results and…the progress we’ve made in executing our strategy.”
8/5 Koppers Holdings, Walt Turner, President
“We remain firmly committed to enhancing shareholder value by executing our strategy…”
8/5 Viacom, Thomas Dooley, COO
“…we remained focused on executing our strategy.”
8/5 MF Global Holdings, Jon Corzine, CEO
“…we’re not taking enormous market risk in executing our strategy.”
Yes, that last “strategy” was “executed” by the same man who, as Governor of the State of New Jersey forgot to wear a seatbelt while his official car was being driven at high speeds over the roads his State had not been repairing thanks to the horrible state of governance by people like him. (Apparently Mr. Corzine forgot to “execute” the “seatbelt strategy” that most Americans manage to “execute” every day.)
Moving on, we find that so many “strategies” were being “executed” last quarter, we can’t quote them all. Here we go:
8/4 Terremark, ADC Telecommunications
7/30 Genworth, First Potomac Realty Trust
7/29 Federal Mogul, Avon Products, Dresser-Rand, Integra Bank
7/28 Nalco Holding, Jones Apparel
And there are even more, including Harley-Davidson, Weyerhaeuser, Green Mountain Coffee and Gartner Group, not to mention perennial earnings-disappointer Take-Two Interactive, which is one company that is not exactly “top of mind” when it comes to “executing strategies,” if you get our drift.
The conclusion to which we have arrived is that a) strategies are a dime a dozen; and b) all companies execute them.
Ergo, even my dog Charles could “execute the strategy” if the “strategy” was to 1) eat, or 2) sleep, or 3) jump in whatever nearby car has an open door, or 4) eat miscellaneous weeds until he throws up.
Why, just this morning Charles successfully “executed” many “aspects” of his “strategy” several times—but he did not bother holding conference calls to brag about it.
Therefore, in light of the fact that “executing the strategy” is fast becoming the most overworked cliché on Wall Street, we here at NotMakingThisUp suggest that any CEO or CFO who for whatever reason feels compelled to use the dreaded phrase to describe whatever random actions the company has been taking recently, they should simply say “we are executing our yadda-yadda,” and get on with it.
And now that we here at NotMakingThisUp have “executed our yadda-yadda,” we can get on with it.
My dog Charles would no doubt approve: he is at this moment outside our window “executing” his “strategy” to eat miscellaneous weeds until he throws up.
And he is executing that strategy very, very successfully, we might add.
I Am Not Making This Up
© 2010 NotMakingThisUp, LLC
The content contained in this blog represents only the opinions of Mr. Matthews, who also acts as an advisor: clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 10:53 AM