by Will Ashworth | December 17, 2013 2:46 pm
Bloomberg’s Jeff Green and Carol Hymowitz reported in November that U.S. CEO turnover is at the highest level since 2008. Through the third quarter, a total of 43 companies in the S&P 500 were working under new CEOs. Recently, there have been some high-profile changes in the C-Suite, including Mary Barra taking the top spot at GM (GM) in the new year.
Some of the changes will be good ones while others will lead to more of the same. Here at InvestorPlace, we thought it would be fun to handicap the job some of these more high-profile CEOs will do in 2014. In each case we’ll tell you if they’ll be a hit or a miss — and why.
It’s not easy being the CEO of a large company. These five have their work cut out for them.
InvestorPlace contributor Jonathan Berr weighed in on the news that Walmart (WMT) was replacing CEO Mike Duke on Feb. 1 with Doug McMillon, currently the head of the retailer’s international division. Berr’s take: Mike Duke’s four years as CEO did little to move the company forward at a time when competitive pressures dictated original thinking. Instead, the executive let its customer service in the all-important U.S. market virtually disappear. Add to this a Mexican scandal and a stock that has severely underperformed both the S&P 500 and Target (TGT), a major competitor.
Personally, I believe CEOs have less to do with a business’s success than the front-line people working in the stores. If Doug McMillon can figure out how to rejuvenate a floundering U.S. business — and that’s a big if — I think the 47-year-old has a huge career ahead of him at Walmart. I like the fact that he’s coming over from an international division that is growing sales at a much brisker pace than here in America. He understands how to run a growing business. He’ll need that mindset if he wants to fix things at home.
Hit or Miss: At 47, McMillon is 16 years younger than the man he’s replacing. He’ll bring a much different dynamic to the C-suite for the simple reason that he’ll have more energy to bring to the job each day. He’ll need buckets of it, mind you; youthfulness is no guarantee of success. Nonetheless, I think Doug McMillion will be a hit in 2014.
America’s largest car company (by revenue) is getting a new CEO Jan. 15, 2014. Current General Motors (GM) CEO Dan Akerson, thought he’d retire later in 2014 but his wife’s illness moved things up. Incoming CEO Mary Barra is a 33-year veteran of GM; it’s the only company she has worked for in her business career, advancing through the ranks to become senior vice-president of global product development in 2011. At a Detroit automotive conference in September, Akerson said, “Someday, there will be a Detroit Three that’s run by a car gal. I actually believe that.” And now there is.
Barra’s got the right background, she’s worked in several different areas of the company, and she’s the right age at 51 to lead the company for the next 5-10 years. No woman has ever been the CEO of a major car company, and if she doesn’t do a good job it won’t be because she wasn’t qualified.
Hit or Miss: Dan Akerson calls Barra “… one of the most gifted executives I’ve ever met in my career. She was picked for her talent, not her gender, not for political correctness, anything of that order.” Akerson, for a non-car guy did a good job moving the company forward. I think Mary Barra can make it a great company once more. She’ll be a big hit in 2014.
By now most investors know about Lululemon’s (LULU) many problems in 2013. The see-through yoga pant debacle, the foot-in-mouth disease of founder and chairman Chip Wilson, and the surprise resignation of Christine Day in June after five years as CEO. Needless to say it hasn’t been an easy year for the Vancouver-based company — LULU stock is down 22% year-to-date through Dec. 13.
Investors can no longer trust the company to keep growing. Its fourth quarter outlook calls for flat same-store sales, after two years of strong growth. It’s quite a reversal that’s partly due to the fact that competitors like the Gap’s (GPS) Athleta brand are poaching its customers. Three days before LULU announced its Q3 earnings and fourth quarter outlook I explained to InvestorPlace readers Why Lululemon Stock Could Get Crushed On Earnings. What I didn’t realize at the time was how awful its same-store sales outlook would be. Regardless, I still didn’t think its stock wast worth owning. The 15% drop since earnings came out December 12 suggests investors agree.
Hit or Miss: Lululemon named Laurent Potdevin CEO a day before earnings. Although he’s a capable executive with stints at Toms Shoes and Burton Snowboards, Day was just as capable. The problem with Lululemon is its corporate culture is far more like Chip Wilson than anyone wants to admit. Christine Day was an outsider, and eventually that caught up with her. Potdevin is going to have his hands full reversing this culture at a time when there’s far more competition than when Day took over in 2008. Although he’s a solid executive, I see a miss in 2014.
It has been four months since Microsoft (MSFT) CEO Steve Ballmer announced he was stepping down from the top job. Thirteen years is a long time to run any company, but when it’s a company like Microsoft that has been wandering in the desert for several years it couldn’t have come soon enough. While Ballmer has had some success during his tenure — including building its Xbox business — he’s also made some colossally poor decisions like trying to buy Yahoo (YHOO) in 2008 for $45 billion, far higher than its market cap today.
Microsoft’s search by its board for a new CEO is led by two executives who’ve been at the helm of large technology companies. That would lead some to speculate that the eventual candidate will be someone already a tech executive who’s young enough to reinvigorate the company over the next 10-15 years. Personally, I believe the board goes for the best CEO candidate regardless of tech experience. CEOs of major corporations are usually pretty smart and if they don’t have tech experience they’ll figure things out. Just like drafting in professional sports, when it’s your time to pick, you go for the best available candidate regardless of position.
Hit or Miss: Speculation has Alan Mullaly moving from Ford (F) back to his old home of Seattle to take over Microsoft. If he’s truly available, I think MSFT would be crazy not to reel him in. He did a masterful job at Boeing (BA), although he was passed over for the top job. The same is true in the Motor City. If Microsoft hires Mullaly in 2014, I say he’ll big hit. Anyone else will be a miss.
Three days ago, current Qualcomm (QCOM) COO Steve Mollenkopf was named CEO and will take the job March 1, pushing current CEO Paul Jacobs into the executive chairman’s role. Mollenkopf was considered a top candidate for the top job at Microsoft before the QCOM board decided to move up its succession plan.
Analyst Stacy Rasgon of Bernstein Research sees this as a good move because Jacobs is a visionary while Mollenkopf is a great operator. Furthermore, Mollenkopf commented that, “this is very much a story about keeping the band together. I think that is exactly what successful companies do at the right time to make sure they remain successful.” This seems like a no-brainer for Qualcomm. QCOM shareholders can be thankful they’ve got a cohesive team running the company from the board on down.
Hit or Miss: I don’t see how Steve Mollenkopf, who’s been with QCOM for more than 20 years, will be anything but a hit in 2014. As a side bet, if Microsoft hires Mullaly as its CEO, look for MSFT to throw everything but the kitchen sink at Mollenkopf in 2-5 years when Mullaly’s ready to retire. Stay tuned.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.
Source URL: https://investorplace.com/2013/12/ranking-new-ceos-2014/
Short URL: http://invstplc.com/1banIQx
Copyright ©2017 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.