Andreas -
I share entirely your disgust with the performance of CPQ stock price. But I have a different view of how Rosen was discharging his duties as chairman of the BOD and how he is now performing.
At the time of EP's departure, many commented on the fact that any strong new CEO would be nervous about being second-guessed by Rosen. I pointed out at that time that Rosen throughout CPQ's history has worked to balance a strong board (and the board's charter) with the need for a fast-moving and confident management team. Rosen has spoken extensively on this over the years, and has even testified before several congressional committees on the topic. His thoughts make interesting reading.
One of the points that he has made is that if the BOD becomes too intrusive in the day to day management of the company, the senior management becomes focused on short term performance at the expense of strategy, and also has a ready scapegoat if things go wrong - after all, it was the board calling the shots. This in effect makes the board the top layer of management and eliminates any "checks and balances" between near-term operational decisions and longer term strategy. There are examples of successful companies where the chairman is also CEO - Microsoft comes to mind - but there are more examples where the lack of separation of board and upper management has lead to poor performance.
Rosen has done a good job over the years in creating a strong, dynamic management team with sufficient independence to develop good long term strategies while remaining responsive to current business. There have only been two periods in the company's history where a combination of management errors and market conditions put the company in crisis, and both times Rosen responded. The idea that Rosen should have taken out one of the best management teams in the business because of a few bad quarters (especially when it was well understood that the changes CPQ was undertaking were sure to cause at least 6 months disruption, maybe more) is extremely short sighted. Rosen acted in a measured way, first pressing for adjustments to bring the company back on plan, and then, only when it became obvious that the current management was unable to take the necessary steps to complete the transition to a full-fledged enterprise computer company, replacing the management.
As investors we tend to focus on stock price, but it is important to remember that CPQ is an extremely healthy company, with the dominant share of most of the markets it sells into, and huge potential. They continue to be one of the best positioned to take advantage of the potential of coming shifts in customer buying patterns, and have assembled a technology portfolio second only to IBM.
I understand that investors who bought into CPQ in the 30s or 40s are unhappy with their investment, but even looking out 6 months, it is hard for me to see any reason for concern. I am not looking for a "quick fix" which would damage the long term value of my CPQ holdings. But then again, I do not plan to sell any of my current holdings any time in the next few years. |
