Friday, March 27, 2015

Messi Announces Retirement, Reporter Asks About Half-Time Score

 Tom Prescott announced his retirement last night.   You may not have heard of him, but as CEO of Align Technologies (the inventors of Invisalign “invisible braces”) Prescott helped turn a $70 million revenue company with 35% gross margins, negative operating margins and a $127 million market value into a near-$800 million revenue company with near-80% gross margins and 25% operating margins.
 Oh, yeah, and a $4.5 billion market value, last we checked.
 More than that, Tom Prescott helped Invisalign develop from a niche product not much liked by the orthodontists who were supposed to use it (it’s far more expensive to them than the old-fashioned wires and brackets, plus, in the early days, before Prescott, the Invisalign treatment was far more limited in what it could do, teeth-moving-around-wise) into a near-standard of care in orthodontics around the world.
 And he did it the old-fashioned way: by spending on R&D to improve the product (a quarter billion in the last six years alone), marketing like crazy, and proselytizing every chance he had.
 Along the way, Prescott had to contend with a near-fatal copycat product (fought and won in courts of law), short-selling attacks (fought and won the best way possible: just running the business well) and big-company patent suits (smartly settled).
 If there ever exists a CEO Hall of Fame, Tom Prescott should get in on the first ballot.
 Thus it was quite a surprise to see the headline come across the tape after last night’s close that he would retire in June, with an outside-the-company successor to take his place.  No mention of such plans had ever passed his lips to anyone outside Align, and being the ripe young age of 59, nobody had ever bothered to ask him.
 Nevertheless, as the ensuing conference call made clear, the decision was voluntary, had been in the works for a year and a half, and had produced a successor who looks eminently worthy of filling some big shoes.
 Now you would think the first question on the call would be about the decision itself, with perhaps a follow-up on the successor and whatever plans he might have for the company.   
 But you would be wrong.  
 The first question was about what it’s always about for some of Wall Street’s Finest...near-term earnings:
 “Thanks.   Good afternoon.  Tom or David [White, the CFO], could you just elaborate on sort of the preliminary 1Q outlook in terms of revenues and EPS…?”
 It was as if Leo Messi suddenly announced his retirement from Barcelona during half-time, and the first question out of the reporters’ mouths was about who’s going to win the match.
 You could almost hear Prescott and his team restraining their incredulity, but, class acts that they are, restrain they did.
 Still, if there ever exists a Hall of Fame of Silly Analyst Questions, that one will get in on the first ballot.

Jeff Matthews

Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2015)    Available now at

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Gil Roth said...

I remember on "The Soup," they ran a clip of the movie premiere of "The Break-Up," starring Jennifer Aniston. The interviewer asked her, "What was the worst breakup you went through?"

This was 18 months after her divorce from Brad Pitt, following the "Mr. & Mrs. Smith" story.

Clay Tompkins said...

If only Jeff Immelt would have such grace, perhaps there's a bigger job for Tom awaiting.