Symantec Corp (SYMC.O) unexpectedly fired Chief Executive Enrique Salem and replaced him with Chairman Steve Bennett, who launched a strategic review in a bid to turn around a company whose stock has languished for years.
Shares of the software maker surged 13 percent on the news as some investors speculated that Bennett might consider divesting assets or splitting up Symantec, which also reported quarterly results on Wednesday.
"I took this job because I believe that our assets are better than our performance," said Bennett, a former CEO of financial software maker Intuit Corp (INTU.O) who was also an executive at General Electric Co (GE.N).
He declined to say in an interview whether he would consider divesting any assets but said he was not brought in to sell the company.
"The agreement I have with the board is to create long-term shareholder value," said Bennett, 58. "This is my third job in a 35-year business career. This will be my last job."
Investor disappointment with Symantec's performance traces back to 2004 when Salem's predecessor, CEO John Thompson, announced plans to buy storage software maker Veritas for $13.5 billion.
The deal failed to generate the results that Thompson had envisioned. Symantec reported mixed results in the following years, repeatedly disappointing Wall Street.
Salem, 48, inherited that legacy when he took over as CEO three years ago. The problems continued under his leadership.
Some investors have advocated selling off either the old Veritas division or the company's highly profitable consumer business, which makes the widely used Norton anti-virus software. The company did not meet those demands and Symantec shares now trade for about half of what they were worth the day before the Veritas deal was announced almost nearly eight years ago.
Bennett said that board members decided to fire Salem after determining it was time to intervene to improve the company's performance.
"Our current record hadn't been so good," Bennett said. "We kept on trying to figure out 'Have we been doing everything as a board that we should be doing to create shareholder value?'"
The board discussed the matter at a dinner on Monday evening, then voted on it at a formal meeting on Tuesday, he said.
Bennett visited Salem at his office on Monday to let him know that his job was at risk.
"Enrique is a first class guy and I like Enrique a lot. I'm disappointed that I was not able to help him," Bennett told Reuters.
Salem left the office after Tuesday's board meeting. He could not be reached for comment.
FBR Capital Markets analyst Daniel Ives said that the departure of Salem opened up "a range of possibilities" that could help the stock going forward.
"Investors will interpret this as a clear, positive sign that Symantec and its board are finally willing to move in the right direction," Ives said.
Bennett said he planned to fix Symantec using tools he learned in the first part of his career, a 23-year stint managing a diverse group of businesses for GE.
He said his basic philosophy is not specific to any technology or industry: "Find important customer problems that we can solve better than anybody else in the world and make money."
Bennett will conduct a review over three to four months that will include a "listening and learning tour" to meet with customers, employees and partners around the world.
He said he became proficient at engineering turnarounds while he was at General Electric, where the company gives managers new assignments every three or four years.
"I've done this between five and 10 times in my career. I actually have a methodology and playbook that I go in with," he said in the interview.
GE's practice of moving managers around and charging them with improving the results of their divisions has turned General Electric into one of the largest corporate training grounds for U.S. executives.
Bennett left in 2000 to become Intuit's CEO.
Recent GE alumni include Textron Inc (TXT.N) CEO Scott Donnelly, a former GE aviation executive. Textron shares have since risen about 25 percent from recessionary lows as Donnelly has shaken up management and focused on margin improvement.
Joseph Hogan, a former GE official who now runs Swiss engineering group ABB Ltd (ABBN.VX), has taken another page from the GE play book: pursuing large acquisitions, including a $3.9 billion takeover this year of U.S. electrical components maker Thomas & Betts Corp.
Bennett said he will tell investors how he plans to apply the GE play book to Symantec's problems toward the end of his three- to four-month review.
While they'll have to wait to hear about his big strategic plans, he may announce smaller operational changes sooner than that, he added.
OUTLOOK SHORT OF EXPECTATIONS
Symantec also issued a quarterly outlook on Wednesday that was below analysts' projections.
It forecast fiscal second-quarter earnings per share in a range of 35 cents to 39 cents, below the Street view of 40 cents, according to Thomson Reuters I/B/E/S.
The company also forecast that revenue would drop about 1 percent, to between $1.635 billion and $1.665 billion. That's below the $1.69 billion average forecast of analysts polled by Reuters.
The company, whose rivals include Intel Corp's (INTC.O) McAfee division and EMC Corp (EMC.N), also reported a fiscal first-quarter profit, excluding items, of 43 cents, ahead of the 38 cent average estimate of analysts.
First-quarter revenue grew 1 percent from a year earlier to $1.67 billion, slightly ahead of analysts' average estimate of $1.65 billion.
Symantec shares rose $2.09 to $15.26 in midday trading. They closed at $27.38 on Dec 15, 2004, the day before the Veritas deal was announced.
(Editing by Maureen Bavdek and Bernadette Baum. Additional reporting by Scott Malone in Boston and Supantha Mukherjee in Bangalore)