By Quentin Fottrell
Maybe there should be a daily deal on crystal balls.
Two weeks ago, Groupon Inc. (GRPN) CEO Andrew Mason was fired
after the daily-deals site reported a fourth-quarter loss. Last
week, Pandora Media Inc. (P) CEO Joe Kennedy resigned following its
dismal earnings report. Among tech companies, some experts are now
wondering: Who will be next?
As more new tech firms struggle, some suspect we're witnessing a
second, albeit smaller, dotcom bust. "Once you go public, you get
judged on how the stock performs," says Mike Vorhaus, president of
media consulting firm Magid Advisors. "That's the price you
pay."
And new start-ups are always snapping at their heels. In fact,
some 20 closely held U.S. companies backed by venture capital are
now valued at $1 billion or more, exceeding the heady days of the
1990s tech bubble, according to a recent Wall Street Journal
report.
Of course, some of the youngest tech companies are still riding
high. LinkedIn Corp. (LNKD) CEO Jeff Weiner and Facebook Inc. (FB)
CEO Mark Zuckerberg won't be going anywhere anytime soon, Vorhaus
says. "Weiner has done a spectacular job with LinkedIn," he says.
LinkedIn is worth around $19.2 billion, a far cry from its $4
billion valuation at its 2011 IPO. "Facebook shares have begun to
recover as Zuckerberg has begun to execute his plan," Mr. Vorhaus
says. That includes a revamped news feed and renewed focus on
mobile ad revenue.
Indeed, many veteran technology companies are wrestling with the
same issues as Facebook, experts say. "There has been a permanent
power shift in technology from personal computers to mobile
devices," says Brent Bracelin, a partner at Pacific Crest
Securities, "but not all companies have a clear path to manage this
transition." And while the CEOs of some major tech companies are
changing their strategies, they are late to the game. The global
smartphone market is effectively dominated by two players, he says:
Samsung Electronics Co. (SSNHY, 005930.SE) and Apple Inc.
(AAPL).
Other companies have navigated their way through a digital
revolution and at least one tech bubble, but not without bumps
along the way. Cisco Systems Inc. (CSCO) acquired the maker of Flip
video cameras in 2009 for $590 million--only to shut it down two
years later. A spokesman for the San Jose, Calif.,
network-equipment supplier says it has renewed its focus on
switches and routers--the machines that direct packets of data
across a network--as well as on other technologies like cloud and
data computing.
Here are five other tech heads in the hot seat:
Zynga CEO Mark Pincus
Zynga Inc. (ZNGA) CEO Mark Pincus has had a turbulent year at
the social gaming company he founded in 2007. Zynga's shares were
priced at $10 when he took the company public in December 2011, and
they reached a high of over $14.50 in March 2012, but as the
popularity of its blockbuster game FarmVille and pricey new
releases like Draw Something declined, so too did its stock. It now
trades around 60% below its IPO price.
"Zynga did well in its early days due to its close relationship
with Facebook," says digital marketing consultant Jeffrey
Eisenberg, "but it's not Facebook's primary focus." Defections of
key personnel like the chief creative officer may have damaged
morale, he says. In the fourth quarter, Zynga narrowed its net loss
to $48.6 million from a loss of $435 million a year earlier, but
revenue was broadly flat.
Zynga declined to comment for this article.
Yelp CEO Jeremy Stoppelman
Founded in 2004, Yelp Inc. (YELP) has never turned a profit. The
Internet search and review company floated in March 2012 at $15 has
risen around 67% since then, leading many analysts to conclude that
the stock was priced too low. But though its reported
fourth-quarter net loss of $5.3 million was better than the $9.1
million for the same period in 2011, some experts are growing
impatient with co-founder and CEO Jeremy Stoppelman.
Google Maps is a formidable rival in Internet search and,
although they don't have Yelp's small army of reviewers, Facebook
Graph Search and Apple Maps are also chipping away, Mr. Eisenberg
says. Unveiling the company's fourth-quarter results last month,
Mr. Stoppelman said 2013 will be a "tipping point" for the European
market and said the company's mobile strategy will remain a top
priority.
Yelp declined to comment for this article.
Microsoft CEO Steve Ballmer
Microsoft Inc.'s (MSFT) consumer business has experienced an
identity crisis with Surface, its recently released tablet-laptop
hybrid, analysts say. Steve Ballmer--CEO since 2000 when the stock
was trading near $60 at the peak of the tech bubble--reported a
3.7% decline in net income to $6.38 billion for its fiscal second
quarter, excluding deferred revenue.
Microsoft is expected to sell just 600,000 Surface tablets in
the quarter ending March 31, down from an initial estimate of 1.4
million tablets, according to Brendan Barnicle, an analyst with
Pacific Crest Securities. "The decline in the PC market in 2013
will create additional headwinds for Microsoft," he says. On the
upside, the Windows 8 operating system, released in October, is
designed for both tablets and PCs.
Microsoft declined to comment for this article.
Hewlett-Packard CEO Meg Whitman
Hewlett-Packard Co. (HPQ) has had three CEOs in three years. In
August 2010, CEO Mark Hurd resigned and, in September 2010, Leo
Apotheker became CEO. In September 2011, former eBay CEO Meg
Whitman took over for Mr. Apotheker, who presided over the $11
billion acquisition of British software maker Autonomy. That deal
resulted in an $8.8 billion write-off. Despite recent year-to-date
gains, the share price--halved since early 2011 before Ms. Whitman
took over--hasn't recovered since she took the helm.
H-P recently launched a Windows 8 tablet and will release an
Android-based tablet in April. The company remains a "diversified
technology player," a company spokesman says. It recently reported
a first quarter decline of 16% in net income to $1.2 billion. There
may be trouble ahead: Global shipments of PCS will be exceeded by
tablets for the first time this year, Mr. Barnicle says, "and H-P
is struggling with the transition to mobility."
Dell CEO Michael Dell
There are signs that other veteran tech companies are
struggling, even as they try to go private. Dell (DELL) CEO Michael
Dell recently struck a $24.4 billion deal to take the company he
founded private--at a 25% premium to the share price before the
talk of the buyout came to light. Dell launched a business tablet
in the U.S. in 2011 and consumer tablet that runs on Windows 8 last
year. But Mr. Eisenberg says Dell didn't get into the tablet market
early enough. "That was a mistake," he says.
Dell has been trying to move away from its dependency on PCs and
focus on other businesses like servers, security software and
storage systems, but Eisenberg says that strategy has yet to reap
solid rewards. In its most recent quarter, the company reported an
18% drop in net income to $764 million, its fifth straight quarter
of profit decline. "Michael Dell was a CEO in a different era of
computing," he says.
Dell didn't respond to requests for comment.
Write to Quentin Fottrell at AskNewswires@dowjones.com
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