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Why did Polycom Burn CEO Andy Miller Publicly for "Expense Account Irregularities"? - A Theory
The big story in visual collaboration this week is the departure of Andy Miller as the CEO of Polycom who "resigned" from his $819,949 a year job (Businessweek calculated his total comp for 2012 at $7,356,905) over "irregularities" in his expense reports. According Footnoted.com: "Miller isn't exactly walking away empty-handed, according to the separation agreement attached to the 8-K that was filed yesterday. He's getting a $500K lump-sum payment, a pro-rated bonus, and three months to exercise any options that are already vested. But the real cherry-on-top comes from the cache of electronics he's taking with him.� As the filing notes, Miller will be able to keep his two Lenovo Thinkpads, an Ipad and his Samsung Galaxy 4 phone."� Kevin T. Parker, Chairman of the Board, has stepped in as interim CEO.�
The Big Question: Why did the Polycom board burn Andy so publicly over "expense report irregularities"?� Why not let him resign to "spend more time with his family" or some other usual and customary reason? Why bring up the specter of malfeasance at the top which would lead any prudent investor to naturally question if "irregularities" extend to earnings, forward-looking projections, or other denominators of the company's health?�
Here is one hypothetical possibility: To Make Money!
Polycom is sitting on a huge pile of cash. Cash and marketable securities at the end of Q2 2013 totaled�$694 million�or approximately�$4�per share. By the end of 2012 the company had increased its pure cash reserves by 27.07% to $101 million.� The company has been engaged in an aggressive stock repurchase plan and by the end of Q1 2013 the company had repurchased $34 million leaving $39 million remaining in available authorization as of March 31st, 2013.� In May 2013 the company authorized an additional $100 million and by the end of Q2 the company had repurchased an additional $50 million leaving $89 million in remaining purchase authorization as of June 30th, 2013.
The news of Andy Miller's departure and the specter of malfeasance has generated the predicable dumping of shares by the aforementioned prudent investors and as of this writing the stock has tanked over 15% for the week.� This has effectively put Polycom's stock "on-sale" at a 15% discount for a potential buy-back on the remaining $89 million. Shrewd.
This doesn't mean that everything is rosy for the board.� Andy's departure at Polycom is only 1/3 the story.� Polycom is also losing two additional members of the executive team in unrelated departures.� Tracy Newell, Executive Vice President of Global Sales is leaving to head a startup, and Manny Kostas, Senior Vice President, Worldwide Product Management is leaving for the CMO job at Symantec.� These departures come less than six months since the company lost Sudhakar Ramakrishna, President of Products and Services, and Kate Hutchison, Chief Marketing Officer, left in May.� This leaves the leadership team with only a handful of folks who have been in their positions more than a year (CFO, HR, and Legal).� The company still faces the classic "innovator's dilemma" of how to move from the "big iron" video network infrastructure and >10K videoconferencing end-points that defined the past to the virtualized visual collaboration inter-operability platforms running on cloud-computing environments and low-cost/no-cost soft clients and sub-$1,000 HD videoconferencing end-points that define the future.� The company still holds some powerful cards: talented engineers, a leading market share in traditional videoconferencing, big brand-name customers who are locked in to Polycom with a high cost of change in time and treasure, and the previously mentioned big-pile-of-cash.
The key to Polycom's continued success will be finding the right successor to Andy Miller who can effectively chart the company's course through a competitive landscape that is moving, both literally and figuratively, at the speed of light. Stay tuned to Telepresence Options for more developments.�
Howard Lichtman is the Founder and President of the Human Productivity Lab, a consulting firm that helps organizations design visual collaboration strategies, build Video Network Operation Centers (VNOCs), and helps with RFP creation, bid management, and oversight. He is the publisher of Telepresence Options, the leading publication covering visual collaboration where he and his team share the lessons learned from real world deployments and cover the industry's latest advacements.�
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