March 24, 2023

A Long Fall for Taiwan Smartphone Maker

Those days are little more than a memory. Its stock price has plummeted more than 88 percent since its April 2011 high. Profits for the second quarter, which ended June 30, were down 83 percent. The company warned that the third quarter looked bleaker still.

It gets worse.

Several of those poached executives, brought onboard to help increase shipments and work on acquisitions have walked away, and there is a growing chorus for the ouster of the embattled chief executive, Peter Chou, as reports filter out of Taipei about an autocratic leader who is out of touch with the industry.

There were also the arrest last week of five departing executives accused of stealing company secrets and padding expense accounts. HTC had filed a complaint against the executives, who included the vice president of product design, Thomas Chien, and the research and development director Wu Chien-hung.

“We are cleaning up inventory and at the same time rebuilding our brand,” said the company’s chief marketing officer, Ben Ho. “If we don’t, there really is no tomorrow for us. The shock came last year. This year we have tried to repent. Are we forgiven? No, the markets will punish you if you don’t repent and recover fast enough.”

Former employees say that marketing, sales and distribution problems, along with spiraling inventory costs, have killed momentum and are dragging HTC into unprofitability.

In the quick-moving mobile devices industry, a lack of momentum is tantamount to a death sentence. Just ask Motorola or BlackBerry.

HTC set up shop as a contract electronics maker in 1999. Founded by Cher Wang, daughter of the billionaire former chairman of Formosa Plastics, Wang Yung-ching, it had to worry only about its margins. The clients took care of the rest. Business was good.

In 2002, it listed on the Taiwan Stock Exchange, starting a run of profitable quarters that will most likely be snapped with the next earnings report. HTC has said that it expects an operating margin of zero or a loss of as much as 8 percent for the third quarter.

By 2006 it had grown weary of slapping other companies’ brand names onto its products and decided to go it alone. A few years later, HTC developed the first smartphone that used Google’s Android operating system.

“HTC has always made great products,” said a recently departed executive, who spoke on condition of anonymity because of the sensitivity of the situation. “There are no problems on the hardware side of the ball. It just can’t sell to save itself. It’s relied too heavily on operator subsidies, and those are drying up for the premium phone market HTC likes to play in.”

The market research firm Gartner said that HTC had shipped 24.6 million smartphones in 2010, accounting for about one in every 12 smartphones bought globally. In 2011, that share increased to 9.1 percent, with purchases surging to about 43 million units.

In Taiwan, HTC was feted in the local media as the little company that could — the former contract maker now on the big stage for its innovation. Politicians urged the public to buy patriotically. HTC was an electronics flag bearer.

The company went on an acquisitions binge, spending more than $700 million, including splashy purchases of the U.S. graphics maker S3 Graphics for $300 million and the premium headphone maker Beats Electronics for $309 million.

Beats, founded by the hip-hop producer known as Dr. Dre, viewed it as a company on the rise when it sold HTC a 51 percent stake. Investors grumbled that HTC had overspent. Beats eventually bought back half of HTC’s stake in 2012 for $5 million less than it had been paid and is looking to purchase the remaining shares.

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DealBook: Activist Investor to Step Down From Yahoo Board

Daniel S. Loeb, founder of Third Point, at a conference in Las Vegas last year.Steve Marcus/ReutersDaniel S. Loeb, founder of Third Point, at a conference in Las Vegas last year.

4:50 p.m. | Updated

The activist investor Daniel S. Loeb is parting ways with Yahoo.

Mr. Loeb, whose campaign to change Yahoo culminated in the appointment last year of Marissa Mayer as the company’s chief executive, has submitted his resignation from the board, Yahoo said Monday.

Two other directors originally nominated by Mr. Loeb’s firm, Harry J. Wilson and Michael J. Wolf, are also stepping down. The resignations, effective July 31, will leave Yahoo with a seven-member board, the company said.

In addition, Yahoo has agreed to buy 40 million shares of its stock from Mr. Loeb’s firm, Third Point, at a price of $29.11 a share, the closing price on Friday. That will leave Third Point with about 20 million Yahoo shares, or less than 2 percent of the common stock outstanding.

Third Point, which initially disclosed a 5.15 percent stake in Yahoo in September 2011, more than doubled its investment in less than two years. It initially paid about $509 million for 40 million shares, which it sold on Monday for $1.16 billion.

Shares of Yahoo fell $1.25, or 4.3 percent, to close at $27.86 on Monday.

The hiring of Ms. Mayer from Google last July was considered a coup for Yahoo, an aging technology company in need of a new direction. She has overseen a string of acquisitions since then, including the $1.1 billion deal for Tumblr in May.

“Since our board’s rigorous search led us to hire Marissa Mayer as C.E.O., Yahoo’s stock price has nearly doubled, delivering significant value for shareholders,” Mr. Loeb said in a statement.

Mr. Loeb spearheaded a hard-fought campaign that led to the ouster of the previous chief executive, Scott Thompson, in May 2012.

Yahoo said on Monday that Max Levchin, a co-founder of PayPal, would remain on the board. His appointment in December was supported by both Third Point and the board.

The share repurchase plan announced Monday is part of Yahoo’s previously announced plan to buy back $1.9 billion of stock, the company said.

“Daniel Loeb had the vision to see Yahoo for its immense potential — the potential to return to greatness as a company and the potential to deliver significant shareholder value,” Ms. Mayer said in a statement. “While there’s still a lot of work ahead, they’ve given us a great foundation.”

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DealBook: A Chief With Flair Falls From His Perch

Robert Diamond, the American born chief executive of the British bank Barclays, resigned on Tuesday.Daniel Lews/Visual Media, via Bloomberg NewsRobert Diamond, the American born chief executive of the British bank Barclays, resigned on Tuesday.

LONDON — Robert E. Diamond Jr., a fiercely competitive Wall Street executive who hated to lose, recognized late Monday night that he was losing.

Until then, the American-born chief executive of the British banking giant Barclays was convinced that he could survive the rising calls for his ouster after accusations from regulators in Britain and the United States that Barclays had manipulated important global interest rates with the knowledge of senior management.

On Monday, the 60-year-old executive wrestled with the pressures confronting his bank from regulators and British politicians. Realizing that he had become a lightning rod, Mr. Diamond decided to resign, according to a person with direct knowledge of the matter who spoke on the condition of anonymity because the discussions were meant to be private.

“My motivation has always been to do what I believed to be in the best interests of Barclays,” Mr. Diamond said in a statement on Tuesday. “The external pressure placed on Barclays has reached a level that risks damaging the franchise. I cannot let that happen.”

People who know Mr. Diamond well say that because his wife and three children live in the United States, the idea of remaining in a city where he had become a public enemy of sorts had lost all appeal.

It was an abrupt downfall for a man who over two decades had built an investment banking powerhouse nearly from scratch at Barclays, a 322-year-old British bank previously known as an old-fashioned financial institution.

In every way, Mr. Diamond, who grew up near Boston but eventually became a British citizen, brought American flair to the stodgy world of British banking. Charming, with a gleaming smile, he was a relentless promoter of the Barclays brand, attaching it to golf outings, soccer leagues and even to London’s new public bicycle rental system.

But his embrace of the American-style pay and bonus culture became one of his main vulnerabilities.

Mr. Diamond paid his people, from whom he demanded and usually got unstinting loyalty, extremely well — and he was very well rewarded himself.

Mr. Diamond was awarded £6.3 million, or $10.3 million, in pay and perks for last year. The pay of two of his top executives, Jerry del Missier and Rich Ricci, has not been officially disclosed. All of them, including Chris Lucas, the chief financial officer, have said that they will give up their awards for 2011.

Many shareholders in Britain were offended by these compensation levels, as well as Mr. Diamond’s practice of deploying significant financial resources to the riskier areas of the bank. At the shareholder meeting in April, Mr. Diamond faced a crowd of hecklers, some of whom dressed as eagles, reflecting the bank’s logo.

And he also drew frequent rebukes from regulators and politicians for Barclays’ numerous efforts to reduce its tax liabilities and those of its clients.

Despite his reputation as being as hard-charging as a trader, Mr. Diamond always saw himself as a builder of businesses. His stint early in his career as a bond trader on Wall Street at Morgan Stanley was relatively short. His hunger to design, build and administer investment banking operations — and instill a binding culture within them — drove his subsequent career.

Mr. Diamond is said to have believed deeply in the idea that a common culture underpinned a bank’s success, and he spoke frequently of his “no jerks” policy — a reference to eliminating any bad apples in his bank.

But, the gloating e-mails from his traders who have been accused by American and British investigators of engaging in the interest rate deceptions suggest that a different type of culture prevailed among some of his bankers.

The son of teachers, Mr. Diamond was a business school professor at the University of Connecticut before taking his first job in banking in the 1970s, in the information technology department of Morgan Stanley. He soon rose to become a senior bond executive at that company.

In 1996, he came to London as an investment banker. Forced out of a senior job at Credit Suisse that same year, he was tapped by Barclays to run its small bond division.

Back then, old-line commercial banks like Barclays were eager to build more profitable banking operations that would trade derivatives, bonds and foreign exchange — activities for which London has emerged as a global trading hub.

Soon, Mr. Diamond was delivering most of Barclays’ profits. His reputation as a seizer of opportunity was solidified when, after the cataclysmic collapse of Lehman Brothers in 2008, he arranged for Barclays to acquire the salvageable pieces of that bank for $1.75 billion. When he toured the trading floor of Lehman for the first time in September 2008, the loudspeaker blared “God Save the Queen.”

Next to the Lehman acquisition, Mr. Diamond’s other notable achievement was his securing of an investment lifeline from Middle East investors in 2008 that kept Barclays from having to accept government money, as other troubled banks in Britain had to take.

When John S. Varley retired as Barclays’ chief executive in early 2011, Mr. Diamond was able to grab the prize he had longed for: the opportunity to run his own bank, one that ended last year with £1.5 trillion, or $2.3 trillion, in assets and £5.8 billion in pretax profits.

The problem, however, was that running a commercial bank in Britain in 2011 had become a largely political affair. After the global financial crisis and the subsequent economic slump in Britain, regulators, politicians and not least the governor of the Bank of England, Mervyn A. King, took aim at British banks deemed too reliant on risky trading profits — the very business that Mr. Diamond had created.

Mr. Diamond did his best to try to assuage skeptical British regulators and politicians. He cultivated ties with Peter Mandelson, the influential Labour politician who had earlier called Mr. Diamond “the unacceptable face of banking” in Britain. He maintained a close working relationship with Paul Tucker, the deputy governor of the Bank of England. In late 2008, he had a conversation with Mr. Tucker over the setting of Libor rates — the issue at the heart of the controversy.

But diplomatic outreach could not overcome disputes over his pay, embarrassing disclosures over taxes and ultimately a widely accepted view here that Barclays, with assets about the size of the British economy, was too risky for its own good — not to mention that of the country.

Speaking before a Parliamentary committee last year, Mr. Diamond declared that “a period of remorse and apology for banks” needed “to be over.”

On Wednesday, when he testifies to Parliament about the Barclays debacle, he is expected to offer apologies, even as he defends himself and the bank.

Stanley Reed contributed reporting.

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