Kevin Kennedy Gets His Dream Job
So, Kevin Kennedy finally gets his wish. The former Cisco Systems Inc. (Nasdaq: CSCO) executive, who reportedly left in search of a CEO post, has landed one: the helm of components behemoth JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU).
Whether it's a plum assignment or a bitter fruit remains to be seen. Either way, some of the territory is familiar to Kennedy. As chief operating officer of Openwave Systems Inc. (Nasdaq: OPWV), he's spent the last two years orchestrating the turnaround of a company overtaxed by acquisitions.
He'll also have the chance to define JDSU's post-bubble identity. Already one change is apparent: As Kennedy replaces JDS Fitel Inc. founder Jozef Straus, JDSU's headquarters will consolidate in San Jose, Calif., dropping Ottawa as a mirror HQ (see JDSU Launches Regime Change).
Kennedy spent 17 years at Bell Labs before joining Cisco in 1994. At Cisco he advanced to the position of senior vice president, but to become a CEO, he would have to look elsewhere -- because, as we know, there can be only one (see Cisco's Kennedy Ready to Leave? and Cisco's Nuti Talks Up Move to Symbol).
In 2001, rumors put him in the running for CEO posts at Nortel Networks Corp. (NYSE/Toronto: NT) and Redback Networks Inc. (Nasdaq: RBAK) (see Cisco's Kennedy: Recruiter's Dream?). Kennedy finally did leave Cisco in August 2001, part of a large-scale reorganization. He joined Openwave days later, not as CEO but as chief operating officer, reporting to fellow Cisco alumnus Don Listwin (see Kennedy Lands at Openwave).
"His desire from what I understood, was to be a CEO," says Scott Sutherland, an analyst who tracks Openwave for Wedbush Morgan Securities.
Openwave was foundering. The former Phone.com had seen its prospects in the Wireless Application Protocol (WAP) market dry up, and a $6.4 billion merger with Software.com was proving burdensome (see Openwave: Wave of the Future or Wipeout?).
"Openwave took off like a rocket and rode the wave of WAP until that crashed," says Seamus McAteer, senior analyst with Zelos Group LLC.
One major change under Kennedy was to emphasize specific products, such as client software for handsets, rather than grand concepts like delivering all interactive services for a carrier. "The objective was to come up with this 'services OS' vision, which never really caught fire," McAteer says.
Analysts consider the turnaround to be nearly done, but the numbers on the way were ugly. Goodwill write-downs led to losses exceeding $1 billion for the fiscal year ending June 30, 2002. For fiscal 2003, Openwave reported a net loss of $217 million on revenues of $268 million. Layoffs are continuing: Still employing more than 1,000, Openwave in June announced a 12 percent headcount cut, following a 25 percent reduction announced in September 2002 (see Openwave Cuts 180 Jobs).
On the plus side, Openwave expects to break even (in earnings before income tax and depreciation) by the end of 2003. Analysts also give Kennedy credit for keeping revenues steady, at around $65 million per quarter, through the rough patches.
"He did a great job. He got them through the tough part," Sutherland says.
With JDSU, Kennedy gets to see the flip side. He'll drive the final lap of the Global Realignment Program initiated by COO Syrus Madavi, who will be leaving the company soon and will not be replaced. (Coincidentally, Openwave won't be replacing Kennedy either; see Openwave Loses COO.)
Madavi's program has gotten past the "big number" stage of layoffs and write-downs, and analysts say he's made good strides in cutting expenses. Kennedy still has work to do, such as stabilizing the revenue slide while the company builds back to profitability, a process that could take more than a year (see Is JDSU's Cap Set Too High? and JDSU Revenues Still Declining).
Aside from bean counting, Kennedy has the chance to make his mark by defining JDSU's future personality. As the optical industry declined, JDSU was still digesting the feast of acquisitions that included the $41 billion SDL Inc. deal, leaving the company no time to create a unified whole out of its collection of parts.
Moreover, 50 percent of JDSU's revenues lately have come from the thin-film business, which includes off-the-wall applications such as pigmentation for U.S. dollar bills. As CEO, Kennedy inherits the question of whether JDSU should focus more on its telecom roots or continue to diversify.
— Craig Matsumoto, Senior Editor, Light Reading