How These CEOs Chart a Course Toward Profits
Brendan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Taking control of a ship’s wheel and leading the crew to safety can be extremely difficult, especially during storms. This is why top executives and world-class CEOs are in high demand. They execute. If not, they won’t remain at the helm for very long.
Leadership gone awry
Groupon (NASDAQ: GRPN) co-founder and former CEO Andrew Mason was fired in February due to “controversial accounting techniques, (Groupon’s) failure to meet its own financial projections, and (Groupon’s) deep and dramatic stock decline.” The following chart portrays the company's plight.
The day after Mason was fired, Groupon's stock price rose about 4%. Although a cause and effect relationship between Groupon’s recent success and Mason’s firing can't be proven, a correlation likely exists.
I used to think that Groupon had no chance to succeed, especially after JPMorgan Chase (NYSE: JPM) purchased Bloomspot, a company similar to Groupon, in order to integrate deals with its credit card business segment.
However, with new management, Groupon’s focus is shifting. Instead of mass-emailing coupons to its subscriber base, Groupon now utilizes a pull strategy in which it uploads deals to its websites for customers to access at their convenience. Further, Groupon is more heavily targeting the mobile market. Deutsche Bank analyst Ross Sandler expects Groupon’s mobile apps and sales to boost revenue 53% from its 2012 level through 2015.
While Groupon is on the right course, its new captain must prove that Groupon can sail with the best.
Good leadership generates value
Known as the King of Wall Street, Jamie Dimon serves as the CEO and Chairman of investment bank JPMorgan. He took control of the helm in 2006 and endured many trying tests, particularly during the market downturn leading into 2009. Thanks to his cost cutting measures, foresight, and leadership, though, the firm is trading near all-time highs—while competitors have yet to reach pre-recession levels.
For example, while competitors were offering subprime mortgages to boost profits, Dimon decided to steer clear. Why? He anticipated that the subprime market would likely collapse. He was right.
As a result of his foresight, JPMorgan greatly boosted its balance sheet strength by acquiring fellow investment bank Bear Stearns. The day of the acquisition, Bear Stearns closed at $30 per share, but JPMorgan acquired it for only $2 a share.
Currently, Dimon must contend with the Fed's decision to artificially hold interest rates low. In his most recent letter to shareholders, Dimon said that JPMorgan could make an extra $5 billion if rates were to rise 3%. If that comes to pass, investors are in for a nice treat.
Transformational leaders carving a path
Marissa Mayer, Yahoo!’s (NASDAQ: YHOO) new CEO, is turning heads -- and for good reason. Since assuming her role, Yahoo! is performing off of the charts.
Mayer is navigating Yahoo! in a fierce battle against Google and other tech firms like Facebook. To remain competitive, she is streamlining businesses processes, cutting unpopular services, and racking up acquisitions. For example, Yahoo! purchased 12 firms so far this year -- six times its total acquisitions in 2012. Its goals: acquire skilled workers, develop a mobile presence, and revive a once-dominant giant.
With $1.2 billion cash on hand, investors may see even more Mayer acquisitions before year's end. And if Mayer and Yahoo! can generate revenue and build synergies among its recent acquisitions, Yahoo! will continue to beat earnings estimates. Under Mayer, Yahoo! is back on track.
Upon becoming the CEO of Hewlett Packard (NYSE: HPQ) in 2011, Meg Whitman stated she would develop and execute a five-year plan. So far, she's pleasing investors. For instance, Whitman increased HP's cash position to nearly $2.8 billion in the end of April (up nearly 175%) so that it could pursue new ventures as described below. And its fiscal second-quarter earnings beat expectations.
Whitman recognizes that HP cannot continue to supply goods for the declining PC industry. As a result, Whitman and her team are committed to generating revenue by offering more products and services in the growing mobile and cloud computing sectors.
For example, HP recently landed a landmark contract as 20th Century Fox’s strategic cloud partner. In this capacity, HP will help Fox drive growth through cloud based services while building and supporting an infrastructure to support technological functions. While the cost of the deal is unknown, HP will likely earn a profit, but perhaps even more importantly, gain the observant eyes of potential future clients.
Understanding the individuals who direct businesses may help lead investors to make better decisions. It is evident that competent leaders are navigating the above firms toward the land of monetary returns. Will you jump aboard?
Groupon’s story is one of the American Dream. The company went from 400 subscribers in 2008 to over 150 million today. While this story is definitely one of triumph on a business level, its success most certainly hasn't been shared by investors. Company shares have fallen over 80% over the past year and left investors panicked. Will this company live out its American Dream, or leave shareholders empty-handed? In order to answer that question, our analyst has compiled a premium research report with in-depth analysis on whether you should buy or sell Groupon right now, and why. Simply click here now to get started.
Brendan Marasco has no position in any stocks mentioned. The Motley Fool owns shares of JPMorgan Chase & Co.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!