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The End of Prince's (Purple?) Reign...
By Ian L. Cooper
My wife is an attorney. And she’d make me sleep on the couch if she read this, but attorneys don’t always make great CEOs… at least not recently. Chuck Prince, for one, became CEO of Citigroup in 2003 and has since lead the company down the toilet, struggling to think he may be able to restore some growth. But shareholders are growing impatient… just as Home Depot or Gap Inc. shareholders.
Will the company’s December 14, 2006 projections for the resumption of growth and profit sustainability be substantiated in 2007? I, for one, wouldn’t hold my breath. And it doesn’t pain me to say it may be time to end Prince’s reign. Consider this. Under Prince’s leadership, the company has achieved nothing but poor results and a struggling stock price.
And it’s not as if the second management shake-up is helping. Instead, it’s leading us to question Citigroup’s ability to turn itself around at all. Quite honestly, we wouldn’t even think of buying the company until Prince is out. Buying it here isn’t a good move, in our opinion, which leads us to the ridiculous upgrade of the week.
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According to Briefing.com, Prudential upgraded Citigroup from Overweight to Neutral based on the “possibility” that management changes will “lead to better operating leverage and possibly additional proactive shareholder measures.” In our opinion, that’s not going to happen. What will happen is this. Mind you, this is our opinion. When the company can’t turn things around or improve performance, Prince will be out. We also don’t believe this second round of management shuffling will be the last. What will ultimately see the end of Prince’s reign is the bank’s international expansion.
But for now, Todd Thomson was given the heave-ho as the head of global wealth management. CFO Sallie Krawcheck will retake that global wealth management position; a position she held with the company in 2002. This comes after promoting Robert Druskin to COO.
Bottom line, investors should absolve themselves of any idea to buy Citigroup shares. The only reason Citigroup shares have moved at all is because of beliefs that Citigroup can turn itself around. That’s not to say a turnaround isn’t possible, though. Prince would have to be replaced to do that.
Speaking of CEO ousters, keep an eye on Steve Jobs and Apple. Ongoing investigations could pack a wallop for the both of them. I’m not inferring anything will happen… I’m just saying you should watch.
Take care,
Ian L. Cooper, Editor, Early Alert Trader