On what would otherwise be a day to celebrate, Swiss automation and engineering giant ABB Inc.'s record fourth-quarter revenue was overshadowed by the unexpected announcement of CEO Fred Kindle's departure.
Citing "irreconcilable differences" over how best to direct the company's strategy, ABB said that Kindle, who assumed the top spot in 2005, has left the company. ABB CFO Michel Demaré has taken on the role of interim CEO while the company conducts an executive search of internal and external candidates for a permanent replacement.
Under a barrage of analyst and media questions on a conference call today, Demaré and ABB Chairman Hubertus von Grünberg steadfastly refused to divulge the details that led to Kindle's departure.
Von Grünberg also sought to refute a number of theories about events that might have contributed to the parting of ways, saying it was not the result of any discord over ABB's acquisition strategy, nor any malfeasance on the part of Kindle.
"There's no ugly thing associated with Mr. Kindle's departure ... There's nothing lurking in the bushes," von Grünberg stressed.
Over the past year or so, analysts have been buzzing with anticipation of a big acquisition by the company, but von Grünberg dismissed speculation that this was a source of tension. "What we have looked at so far was interesting, but the executive team, supported by [Demaré's] financial analysis and [Kindle] as the CEO then, and the board, jointly found this was not the best application of ABB's financial resources so far," he said, noting that that analysis may change in the future.
In his three years at ABB, Kindle presided over a period of expansive growth and improved sales at the automation and power company. Indeed, under the storm cloud of his departure, the company today reported a record quarter of results for the period ended Dec. 31, 2007.
Analysts were caught off guard by today's news. "The only thing I'll say is that it is a total surprise to us and we thought that Mr. Kindle had done an excellent job of turning the company around," offered Larry O'Brien, the research director of ARC Advisory's process automation practice.
The turnaround involved ABB's resurrection earlier this decade after asbestos lawsuits targeted at its Combustion Engineering and Lummus Global units sent the company scrambling for bankruptcy protection. ABB's mid-2007, $950 million sale of the Lummus unit freed the company to focus on its two core business of automation and power products. It also had a big impact on ABB's income in the most recent quarter.
Net income in the fourth quarter soared to $1.8 billion, up from $422 million in the year-prior period. Excluding the one-time infusions of $530 million from the Lummus sale and $475 million from deferred tax assets, ABB still managed 77% growth in net income.
Top-line metrics also showed marked improvements, as orders jumped 24% to $8.9 billion and revenue grew 27% to $8.7 billion. Full-year growth was nearly identical to the fourth-quarter results, as orders grew 27% to $34.3 billion and revenue climbed 25% to $29.2 billion.
As for whether the departure of Kindle would disrupt the company's growth prospects in the coming year, both von Grünberg and Demaré were emphatic that it would remain business as usual at ABB.
"As rough as it may sound to lose our captain, the fact is he had well structured his management team to operate autonomously, and not to depend on just one person," Demaré said.
Echoing the stance of many of ABB's fellow automation suppliers, he noted, "We have to keep in mind the fact that ABB is a very global business model, and that a slowdown in the part of the world like we have seen in the U.S. can also be compensated by still very solid business developments in areas like China and India."
He also said ABB would not give specific number guidance going forward.
After an initial sell off of ABB shares following this morning's news of Kindle's parting, the company's stock rebounded in the afternoon.