First Quarter Points Toward Turnaround Actions and Strategies

With the earnings reporting coming out now for the first quarter of 2012, it’s instructive to take a look at a few turnaround actions and strategies.
We provide CFO services, typically for businesses of $1 million to $30 million in revenue, but we are always trying to learn lessons from businesses of all sizes, large and small.
The first lesson we learned from watching the financial news this quarter is that leadership can really matter. Sometimes the hardest decision to make is to fire a CEO, especially when it’s the CEO himself making that decision. That’s just what happened at Ford:
Ford began its turnaround in 2006 when Bill Ford Jr. fired himself as CEO and hired Alan Mulally from aviation giant Boeing Co. The automaker used the billions it borrowed — which Mulally calls a “giant home improvement loan” — to close plants, shed brands and cut its global workforce by one-third. Ford has paid back much of that debt. It also resumed paying a dividend last month for the first time since September 2006.
What was interesting to us, that we didn’t know until we read that story, was that one of the things that Ford used as collateral for the billions that it borrowed was the iconic blue oval with the word Ford inside of it. That was an asset that the company was able to use, and because of the turnaround of the company it should be able to get that out of hock this quarter. Good for them.
Another method of getting a turnaround is to introduce a new product. Sometimes that works, and sometimes not.
HTC reported a terrible first quarter, but said that it expects a massive turnaround based on a new Android phone coming out soon. If that product doesn’t absolutely take off, well, there may not be another product or a change in leadership that can help it at that point.
The other thing a company can change, other than leadership and products, is strategy. That’s what Nokia is reportedly doing.
The first-quarter results unveiled last week were no great surprise, coming just days after Nokia issued a profit warning that flagged the impact of intense competition on its devices and services division. It was the second disappointing quarter for Nokia, which is in the midst of a complete strategy overhaul at the hands of Chief Executive Stephen Elop. As part of the shift, Nokia is focusing on cost savings and accelerating innovation, and has made Microsoft Corp.’s Windows Phone the operating system of choice for its smartphones, instead of its own Symbian system.
Will the strategy of partnering with Microsoft be smarter? Microsoft is dealing with it’s own strategic troubles, especially on the consumer side, so it will be interesting to see if Nokia and Microsoft working together will be able to build something to offer a bit of competition to Apple, which reported that it broke its own record for the number of iPhones sold in the first quarter of this year.
Anyway, if you’d like to talk about leadership, products or strategy, or anything else related turnaround actions and strategies, please contact us.

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