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sevenbrooks 12/5/2012 | 1:58:33 AM
re: Let's Make a Deal
Geoff,

That feeling applies to the US as well (see Pat Russo).

I think we are on the same page on that. I agree it looked bad, but they did pull things out of close to (what in the US would be called) Chapter 7.

The original post was about how bad that was to the folks to reward them after having trashing the stock. My point was that Parton became leader after the stock had been trashed.

Anyway, I much less happy with Lucent executives who are happily destroying a firm and earning millions at a time. From where I stand, each of them should struggle with looking at a mirror. In particular Janet Davidson, the wireline business craters. They even responded to the FTTP business and lost with QB as a partner when a non-telco vendor (Motorola) got to the shortlist with the same partner. I would have resigned from the embarassment. I am simply stunned that people consider themselves worth millions in salary (let alone bonus) with such performance.

seven


gbennett 12/5/2012 | 1:58:39 AM
re: Let's Make a Deal Hi seven,
Not sure LR and Marconi are good comparisons :-)

I agree with you that the employees of a company should be rewarded when the company does better.

I think a big question, and one that is hard to answer fairly is "how much more should the 'leadership' of a company be rewarded than the 'workers'?". How can we justify a bonus at the top end of the employee scale that would buy 50 average houses in the UK, and at the bottom end a bonus that might not pay the rent on one of those houses for one month?

LR is a still a small company and our leaders still have to do work :-) Also, I'm sure the founders took a significant financial risk when they started the company, and they deserve a reward for taking that risk. There is no equivalent risk to the leaders of large companies (unless they take the kind of ill-advised loans that happened with the Tellium crew). For example, Lord Simpson and John Mayo (former CEO and FD of Marconi) each left with more money in their "golden handshake" than an average Marconi employee would earn in their lifetime.

I don't begrudge Mike Parton and the Marconi executives their bonuses. But I think the magnitude of those bonuses is a bit embarrasing for them, particularly so soon after so many people have been laid off, and so many shareholders have seen so much of their equity disappear.

To clarify my position. I'm an ex-Marconi employee. But I did alright, and left on very good terms to join Light Reading. No complaints here. My strongest bias is to see the company continuing to improve so that friends and former colleagues can retain their jobs.

If you're not based in the UK then you might not be aware that there's a general feeling of unhappiness here about senior executives being paid bonuses for dubious performance. I will stress that I don't classify Mike Parton in that group - as I said I think he's worked a minor miracle to keep Marconi in business.

Cheers,
Geoff
sevenbrooks 12/5/2012 | 1:59:16 AM
re: Let's Make a Deal
Geoff,

My suspicion is that you don't run LR.

If you suddenly did and it did better, should you be rewarded?

seven
gbennett 12/5/2012 | 1:59:20 AM
re: Let's Make a Deal Hi seven,
Technically the current Marconi management were part of the team that "got the company into trouble". In a 3-part interview in the Financial Times, John Mayo (the former Finance Director who was the first to have to fall on his sword) basically accused the new leadership, under Mike Parton, of that very thing. Unfortunately I can't find a link for you, but it was quite the "kiss and tell" scandal for the articles to be published at the time. If anyone does have a link or a copy of the articles, maybe you can post them.

I'm not endorsing Mr.Mayo's comments, but if you check the current executive leadership of Marconi

http://www.marconi.com/html/ab...

You'll see that, while there are a few new faces, the core leadership are all long-serving Marconi people.

Personally I have a lot of admiration for Mike Parton, the CEO. The complexity of the debt for equity swap was incredible, and he stuck to his guns to try and bring the company through it in a workable state (ie. avoiding as much asset-stripping as possible). Parton was absolutely the driving force behind that deal, and the deal saved the company, and hopefully safeguarded thousands of jobs. But the price was paid by the shareholders and (to a lesser extent) the debtholders, of course.

As you said, the sad choice for both Tellium and Marconi shareholders was to be wiped out completely, or to retain at least a fraction of their former investment.

Let's hope we're past those times now, and that companies will learn from those mistakes.

Cheers,
Geoff
whyiswhy 12/5/2012 | 1:59:49 AM
re: Let's Make a Deal Fraud would mean there is something to prosecute. I have no basis to make that statement, and never have.

BUT:

Just because a companies books meet GAAP standards, and passes audit under Sarbanes Oxley, does not mean there is not a hell of a lot of room for "wiggle".

Ask yourself how much material was grown during the bubble, how many sales were booked, both of which are now junk? How many realestate leases were entered into and are now transparent buildings? If you were the landlord and knew they had the cash, would you let them slide out?

Read the book: Perfectly Legal.

What is net likely to happen is sale of the optics unit to Huawei allows the execs to put wads of the cash into their pockets. Less those stored up writeoffs. Still: Nice umbrella.

Happened before when JDS bought SDL. Execs put all the cash in their pockets.

-Why
sevenbrooks 12/5/2012 | 1:59:51 AM
re: Let's Make a Deal
Exclusive of Fraud, which is your implication here, all the money should exist and completely unimpacted by writeoffs (which are in essense cash neutral balance sheet and sometimes income statement transactions).

seven
whyiswhy 12/5/2012 | 1:59:57 AM
re: Let's Make a Deal How much of that cash

1) do you believe really exists,
2) how much will be left after the hidden writeoffs are written off?

Just getting calibrated

-Why
lastmile 12/5/2012 | 1:59:58 AM
re: Let's Make a Deal 'They have single handedly killed the components market, by selling below material cost, let alone zero gross margin.'

With 1.6 B in hard cash they will continue to do that for another 5 year's till the competition drops dead.

But that's JMHO

LM

whyiswhy 12/5/2012 | 1:59:58 AM
re: Let's Make a Deal JDSU is run by a bunch of monkeys that 1) have no experience in optics, 2) didn't make it into management in the bubble. They have single handedly killed the components market, by selling below material cost, let alone zero gross margin. Go for the top line, screww the bottom line. Bookeeping tricks have kept their internal balloon of writeoffs hidden. Selling the near-to-burst balloon to Huawei would be par for the course for those losers. And it couldn't happen to a nicer bunch of ex-military dictators.

But that's JMHO

-Why
sevenbrooks 12/5/2012 | 2:00:02 AM
re: Let's Make a Deal
Since Tellium was a public company its acquisition required a shareholder vote. Now why would you vote for it?

Well, if you were invested in Tellium you were at the roullette table. At least getting bought by Zhone allows you to stay at the table. Cashing out at a loss (probably a huge one) was just not in the cards for Tellium investors.

From a Marconi standpoint, recall that this management team is NOT the management team that got them in trouble. These guys got bonuses for specific financial milestones on the way to recovery. Sorry, but that seems like the right reason to pay bonuses.

seven
Tony Li 12/5/2012 | 2:00:13 AM
re: Let's Make a Deal etter for whom? For the shareholders whose cash is being 'bought'? If they wanted to get into the other business, they would have invested in the other business.

It is a shame that execs treat their bosses -- the owners -- with such contempt. They should return the cash to the investors, and if the business they're running doesn't cut it then shut the doors and send the people off to something that has a chance, even if that's dentistry.

----------------

You're assuming that the execs make the decision. In fact, the board must approve it, and the folks on the board are the major stockholders, normally the VCs. So at the very least the deal should be better for the VCs and execs. Of course, if the company is headed for a wall, the VCs would much rather have their funds re-invested than returned. They need their 10 bagger, and only getting 50% back isn't much different to them than 0%. Might as well take the chance...

Tony
allidia 12/5/2012 | 2:00:33 AM
re: Let's Make a Deal division of JDSU seems more and more likely. JDSU seems poised to leave the fiber optic industry and focus on other commercial markets that aren't eroding. Plus JDSU is becoming a fixture in China anyways.
hyperunner 12/5/2012 | 2:00:48 AM
re: Let's Make a Deal PO said:

Better for whom? For the shareholders whose cash is being 'bought'? If they wanted to get into the other business, they would have invested in the other business.

How many of these deals have been pre-IPO compared with post-IPO? In the pre-IPO cases it's only the VCs who lose out. Since they are supposed to be "experts", then it's their own stupid fault :-)

Personally I was appalled by the Tellium deal. I assume the executives at Tellium were simply bought off (with promises to repay their loans, and then some) for their collusion in this deal. Since it's a Mad World, it's fitting that their motto for the deal was "What, Me Worry?".

Then we have the crop of Debt for Equity deals. The biggest one I know about is Marconi. What say did shareholders have in that deal? Zip. And how much are the executives getting in bonuses? I know it's more than $30M.

Good grief, why would you take the risk of running drugs or stealing cars when you can make some REAL money perfectly legally?

hR.
PO 12/5/2012 | 2:01:02 AM
re: Let's Make a Deal It works when its just cash being bought with stock and the cash gets put into stronger hands Better than going out of business.

Better for whom? For the shareholders whose cash is being 'bought'? If they wanted to get into the other business, they would have invested in the other business.

It is a shame that execs treat their bosses -- the owners -- with such contempt. They should return the cash to the investors, and if the business they're running doesn't cut it then shut the doors and send the people off to something that has a chance, even if that's dentistry.
sevenbrooks 12/5/2012 | 2:01:38 AM
re: Let's Make a Deal
So, people should buy startups because its a cheap way to raise cash? The businesses are worth nada so nuke em and take the cash?

seven
Scott Raynovich 12/5/2012 | 2:01:41 AM
re: Let's Make a Deal sevenbrooks:

It works when its just cash being bought with stock and the cash gets put into stronger hands Better than going out of business.

Also, I thought my writing was pretty clear, I'm saying somebody should take Ciena's cash off their hands, not that they should keep buying.
sevenbrooks 12/5/2012 | 2:01:44 AM
re: Let's Make a Deal
Insert favorite startup here has merged with profit challenged company (pretty much everybody but Cisco). How is this a good idea for anybody other than Ciena (overpaying for junk) or Zhone (the telecom world's garbagemen)?

seven
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