October 10, 2007 4:00 AM PDT
Can Carl Icahn help or hurt BEA?
- Related Stories
Icahn's showdown with Motorola reaches final hourMay 7, 2007
Another salvo in Icahn's bid for Motorola board seatMay 1, 2007
Investment advisers weigh in on Motorola and IcahnApril 25, 2007
Icahn seeks to derail Google as AOL partnerDecember 19, 2005
- Related Blogs
Daily dose of BEA? Icahn raises stake--again
October 4, 2007
Icahn buzzes closer and closer to BEA's hive
October 3, 2007
Are CEOs ready to invest in Icahn's investment firm?
August 10, 2007
(continued from previous page)
"Carl and his proxy contest was a wake-up call," said Harris, who noted that while Motorola has seen some financial improvements with its long-awaited 3G version for its popular Razr cell phone, the company is not out of the woods yet. The company, for example, faces stiff competition from Apple's popular iPhone.
Icahn attacked Time Warner in 2005 on a range of issues, including calling for a large $20 billion stock buyback and spinoff of Time Warner Cable, as well as demanding an exclusive search deal between Google and Time Warner's AOL be nixed.
Last year, Icahn and Time Warner reached an agreement to call a truce, with Icahn canceling plans to launch a proxy fight with an opposing slate of directors and the media giant agreeing to increase its share buyback program to $20 billion, add two new independent directors to the board with input from major shareholders, including Icahn Partners, and set a goal of doubling its two-year cost-cutting efforts to a total of $1 billion as of the end of this year.
But one high-level insider who spoke on the condition of anonymity at Time Warner said Icahn's proposals were nothing new to the media giant and, in the end, had no significant net effect on the company.
"There was no disruption with the company. There was an agreement to do a stock buyback, but Dick (Parsons, Time Warner chief executive) was planning to do that anyway. There was the addition of two board members, but Dick was planning to do that anyway," the source said. "I think the investor world seemed to agree it was the nonevent of the century."
The source, however, acknowledged that Icahn comes to the table with specific ideas of what he wants the company to do to improve shareholder value, rather than offering up vague generalities.
"He just doesn't appear on the scene without specific ideas of what management should do to increase shareholder value, whether it's selling part of the business, buying back stock, or adding more debt to buy back more stock," the source said.
Icahn also had a list of specific ideas when he took on biotechnology company ImClone Systems. Shortly after his arrival on the board, Icahn was named chairman and was the driving force behind a number of significant operational changes at ImClone that have benefited the company, said Dr. David Sidransky, an ImClone director who served on the board prior to Icahn's arrival and has stayed on.
"The board was divided with different strategic alternatives in mind," Sidransky said. "Although he was in the minority...he presented a plan and said this is what I want, and this is how I want to achieve it. He got people interested in that plan and eventually gained a majority support on the board."
Icahn, during his proxy fight, advocated taking ImClone's core cancer drug Erbitux, which is used for combating head and neck cancers, and aggressively expanding trial tests for other uses. The former corporate raider also called for finding a permanent CEO after a lengthy period with an interim CEO and tying executive compensation more tightly with ImClone's stock price.
"Carl is very convincing and has passion. He convinced me that we could do it--that we could get the drug going and expand the company. We've since hired a competent CEO and the right management," Sidransky said. "This is a complete turnaround. This board is going in a completely different direction now, than before Carl came aboard."
Analysts who follow ImClone hold similar views. During the proxy battle, Icahn believed management was not aggressively pursuing promising pharmaceutical candidates, nor seeking new uses for its main cash cow--cancer drug Erbitux.
"Mr. Icahn felt ImClone had some promising candidates that weren't being pursued as aggressively as they should (with clinical studies)," said Brian Rye, a biotech analyst with Janney Montgomery Scott. "But we've seen a pickup in the pace in the last couple of months, and the hope is down the road they'll see improved profits."
Icahn also has played a role in bringing stability to ImClone's management, Rye said. The company's interim CEO resigned a day before Icahn was appointed chairman of the board last October. Last month, the company hired a former Johnson & Johnson executive, who had headed its biopharmaceutical unit.
"He wanted a permanent CEO with a good track record and brought in the head of Johnson & Johnson's worldwide biopharmaceutical unit," Rye said, adding, "ImClone's stock has moved up as investors feel a greater comfort level with the management structure."
ImClone's stock also has risen recently, following studies that show Erbitux is effective in fighting lung cancer, Rye said.
Blockbuster analyst Stacey Widlitz, a research analyst with Pali Research, said while Blockbuster's stock has not performed well since Icahn's arrival on the board, he has made the company's management more accountable.
Icahn and Blockbuster former CEO John Antioco agreed on the strategy for the company, but fought over accountability and compensation issues, Widlitz said.
"They now have new management with a reasonable compensation package that is tied to performance of the company and appropriate," she noted. "He also hired someone with an eye toward profitability and who has led turnarounds before. Under the old management, you had someone who was throwing money at advertising without asking what is the (return on investment)?"
1 commentJoin the conversation! Add your comment