June 12 (Bloomberg) -- Lehman Brothers Holdings Inc. replaced Chief Financial Officer Erin Callan and President Joseph Gregory after the firm failed to quell speculation about mounting losses and stem a 60 percent plunge in the stock this year.
Callan, 42, who has been Lehman's public face in television appearances and magazine profiles since she was promoted to CFO six months ago, will return to the firm's investment banking unit and be succeeded by co-chief administrative officer Ian Lowitt. Herbert ``Bart'' McDade, the 48-year-old head of the equities business worldwide, will replace Gregory, the New York-based firm said today in a statement.
Chief Executive Officer Richard Fuld has seen Lehman's ability to remain independent called into question this week after the company posted the first quarterly loss since it went public in 1994 and turned to outside investors for a $6 billion cash infusion. Merrill Lynch & Co., Wachovia Corp. and Oppenheimer & Co. cut their ratings on the stock and hedge-fund manager David Einhorn said the firm hasn't fully disclosed its high-risk assets.
``The new investors who bought in this week probably asked for some heads to roll,'' said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors, which oversees $13 billion and invests in options to buy and sell Lehman shares. ``But when you don't bring a proven captain to turn things around, it's more like re-arranging the deck chairs on the Titanic. This might be too little at this point.''
Lehman, the fourth-biggest U.S. securities firm, rose 20 cents, or 0.8 percent, to $23.95 at 12:31 p.m. in New York Stock Exchange composite trading.
No Material Change
``News like this, totally unexpected on the heels of a large share offering, rattles investors,'' said David Killian, a portfolio manager at Malvern, Pennsylvania-based Stoneridge Investment Partners, which sold the last of its Lehman shares yesterday. ``When their CFO leaves, it raises concern about the accuracy of the financials. Has the CFO been taken out of the position because there is a mistake yet to be disclosed?''
Lehman said in a separate statement today that it doesn't expect to disclose any ``material changes'' to the preliminary financial results released on June 9. The firm will publish final figures for the quarter on June 16.
Fuld's decision to push aside top executives amid the credit- market turmoil mirrors steps taken by his counterparts at rival Wall Street firms.
Cayne, Mack
Bear Stearns Cos. CEO James ``Jimmy'' Cayne ousted co- president Warren Spector in August, and wound up losing his own post and then his firm to a takeover by JPMorgan Chase & Co. Morgan Stanley CEO John Mack has fared better since firing Co- President Zoe Cruz, whom he held responsible for the bank's mortgage-related losses.
Gregory ``has been my partner for over 30 years and has been a driving force behind who we are today and what we have achieved as a firm,'' Fuld, 62, said in the statement. ``This has been one of the most difficult decisions either of us has ever had to make.''
Callan got high marks from investors and analysts during her first earnings conference call after being appointed in December for being direct and open about the firm's finances. Portfolio magazine dubbed her ``Wall Street's Most Powerful Woman'' in an April profile. Then Einhorn, who has bet Lehman shares will fall, challenged her credibility in a speech last month, saying she spoke with him privately and later changed her story about how the firm had valued a private equity investment.
`New Face'
``Six months ago everybody loved her as the new face,'' said Tom Jalics, a Cleveland-based analyst at National City Bank, which manages $34 billion, including Lehman shares. ``But the Einhorn dispute did her in.''
Callan wasn't immediately available to comment today, according to a company spokeswoman.
Gregory, six years younger than Fuld, ran the day-to-day operations of the firm and hasn't been involved with trading, which is Fuld's strength.
McDade, who ran the fixed-income division for three years before being appointed to head equities, is considered by current and former Lehman executives to be a leading candidate to succeed Fuld. The equities division grew during McDade's tenure to account for one third of the firm's revenue, as Lehman became the largest trader of stocks on the London Stock Exchange and Euronext.
``It's positive that Fuld isn't bringing people from outside,'' said National City's Jalics. ``McDade has been around for 25 years, knows the firm well, ran fixed income then equities. He's a good choice.''
Lowitt, 44, was the treasurer of the firm between 2000 and 2005 before being appointed as chief administrative officer. He has been with the bank since 1994.
Strategic Partner
``By bringing in new players, you could have a new set of eyes to validate prior disclosures,'' said Stoneridge's Killian. ``It could also indicate that they're ready to evaluate strategic options and partner with a larger, more diversified firm.''
While Lehman may consider selling a stake to a strategic partner, Fuld is unlikely to sell the whole firm, UBS AG analyst Glenn Schorr said in an interview last week. Many of Lehman's bigger rivals have also been weakened by the subprime crisis, making it unlikely they could buy the firm, Schorr said.
To contact the reporters on this story: Yalman Onaran in New York at yonaran@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.
No comments:
Post a Comment