Telecom NZ rewards ex Chief for Mediocrity

The smack in the face to investors that is the Teresa Gattung payout brings more questions than answers. Gattung was paid $5.4 million during her final year with the company, which has just been released in the 2007 Annual report.

Gattung ran Telecom New Zealand [TEL.NZ] for almost ten years and in that time was responsible for more destruction of wealth for New Zealand public shareholders in any one single listed company in this countries history.

When she took the helm in the late 90s the TEL share price had reached almost $10 and profit peaked at NZ$820 Million dollars in 1998 . Since then profit has struggled to grow and has remained basically flat until 2007 profit of just north of $900 million. Next year the company will struggle to make $650 million because of the sale of one of the companies core assets, the Yellow Pages, a decision arrived at while Gattung was at the helm.

When Gattung left the share price was barely over $4 and the company has been left with problems surrounding decaying infrastructure and obsolete technology like their 027 mobile network ,which was redundant technology even before it was introduced not so long ago.

I cant work out whether Gattung didn't get much criticism for her truly awful reign at the top of Telecom because she is a woman or because brokers and large institutions had so much money invested in the company that there wasn't that much critical opinion to be written about by our mainstream business media writers. It was probably a little of both.

Teresa Gattung was a short term thinker in business and wasn't able to grasp where the company would be in 10 years. Under-investing in the business, reactive rather than proactive, marketing spin and poor service were the hallmarks of her time at the top and the position she had the company in when she left has the company directionless, treading water and fearful of competition.

Clearly she left the company in a worse state than when she started and the $5.4 million she was paid out before she left, including over $2 million in "incentives," was a kick in the collective teeth of Telecom shareholders who had to suffer through what was one of the biggest losses in New Zealand corporate history last year.

The news that Ms Gattung has had "several job offers" from companies should leave those that have offered shaking in their boots were they to read the last 9 years of Telecom balance sheets.


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Of Tulip Bulbs and Tooth Fairies

Fortune Cookie Zine, September 6, 2160

By Share Investor V

See link for story background

Markets today have reacted wildly to the latest increase in the market price of horseshoe credits.

Horseshoe credit prices on the listed [HRSHT] hope index have increased by more than 66.6% overnight as investors perceive a shortage of luck coming over the Northern Summer, as temperatures fell to 20 year lows, cementing the studies done by leading climate scientists for many years that surely prove that we are now in the midst of a new ice age.

The horseshoe credit market or HC as it is now known, has had a stellar run since its inception more than 5 years ago. Many Trillionaires have been made through HC trading as the world's luck had run out shortly before trading in this rare commodity commenced.

Of course now that HC trading has become the success that it has, the world's luck has remained at all time highs. Last nights 66.6% rise in HC prices has increased the world's luck quotient to a point where the world may not be unlucky at all again anytime soon reports Al Gore X, a broker from the Beijing Street trading giant Leeming Brothers.

Gore stated, "this sort of luck hasn't been seen since the great tooth fairy mining rush of 2150". "Looking forward", says Gore, "We don't see luck running out anytime soon. The only negative that we see is from HC deniers, led by George Bush VII, who are pushing us to relinquish the world of luck and leading us back to a world where reality, rather than luck, rules the day".

"That just cannot be allowed to happen," says Gore, "because I certainly didn't get to where I am by using reality in any way. Clearly it would be a mistake to let reality get in the way of the world's luck. Pushing the HC trading market will allow the world to continue to get its share of luck credits and any impediment to that would surely mean the world's luck will eventually run out."

HC skeptics have spearheaded a campaign to abolish the HC market and the luck that backs them, in favour of reality but this has proven difficult in the face of the Trillions of dollars that this market was worth.

The spokesman for the largest HC skeptics group, George Bush VII, from Hallichevron, lists history's failed rushes towards what he calls "loony tunes schemes" as reasons for not continuing to pursue HC trading. "Tulips Bulbs, Internet bubbles, carbon trading and 10 years ago the tooth fairy rush are examples of what history has taught us. Let us learn from history and ditch this HC trading right now."

Let us make our own luck indeed.


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c Share Investor 2008 :)

Fisher & Paykel: A Tale of two Companies

The two Fisher stocks, Fisher and Paykel Healthcare[FPH] and Fisher and Paykel Appliances[FPA] are interesting propositions when looking to top up the portfolio with a potential good long-term growth company.

These two stocks used to be parts of one company and lately the share prices of the seperate companies have been trading at a similar level.

The long-term growth story and prospects for FPA and FPH could not be more different though.

Fisher and Paykel Appliances, the small white ware producer is struggling at present.

While FPA has done well in the past and continues to grow revenue, its profit margins continue to slip as competitors have produced cheaper product with more advanced technology, previously the sole domain of FPA. Their best days appear to be behind them.

The company has responded to cheaper and more savvy foreign product by cutting production in New Zealand, their home base and moving to cheaper cost bases in Thailand.

In my opinion, this will be the only way they can continue to compete with global giants such as LG and clearly this is a case of ever diminishing returns with a finite term for cost savings. FPA simply cannot compete successfully long-term with their much bigger global competition.

Management at FPA seem to be a little confused about what direction they are heading in though. They want to compete by producing more white ware units but say they want to be a niche player with higher margins. They cannot compete as a high volume producer because they are simply too small and even as a niche player they struggle against competitors flashier product.

I have a more positive spin with regard to Fisher and Paykel Healthcare though.

The only black spot that I see on the horizon for FPH and something that it shares with FPA, is the high New Zealand Dollar but that is going to be a temporary thing as the status quo for our currency is usually for it to be weak and there is no reason why that wont be the case again given the sad state of our economy.

FPH is a company on a continued drive, in its niche market as a health equipment products producer, to expand the company through innovation, technological advantage and being at the cutting edge of its business by investing in research and development to keep its very high margins.

The margin story for this business is one of the most exciting parts, apart from the technological breakthroughs they have made for the likes of sleep apnoea and various breathing apparatus.

Most companies would kill for the margins that FPH provide for their shareholders and this puts them in good stead as they move forward and continue to innovate with new products and therefore hopefully similar high margins.

The biggest breakthroughs and innovations seem to be coming from the new sleep apnoea products range. In the year to March 2007, FPH's revenue from sleep apnoea products rose 27 per cent to $162.1 million.

At last month's annual meeting, CEO Mike Daniell estimated that F&P had around 7 per cent of the global market for such products, which is growing at about 15 per cent a year.

These products will help FPH to compete with its competitors Respironics and ResMed , its two main rivals, which both sell these products.

This kind of innovation is part of the culture of the company and it will clearly continue to be a driver of profit growth as the company gets bigger.

The two Fisher stocks were split for a reason. Management knew this at the time of the split and the tales of both companies since tell the story that management probably knew as they were taking the knife to the combined company.

"Mr Market" moves in mysterious ways and I'm still a little curious as to why he has valued these two companies with a similar share price because their future prospects couldn't be more different.


*Disclosure: I own Fisher and Paykel Healthcare


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Auckland Airport Merger: The Canadians have Landed

The Dubai Aerospace Investment(DAE) bid,in its current form, for Auckland International Airport (AIA) has inevitably fallen over but one of the many bidders waiting in the wings has finally shown its hand.

The Canada Pension Plan Investment Board wants to buy 49 per cent of Auckland International Airport(AIA) through a proposal that would see the Auckland and Manukau City Councils maintain their combined 22 per cent stakes.
The Canadians said this morning they had largely completed due diligence on the airport and were now considering their options ahead of a formal proposal to airport shareholders.

The group, said it was committed to two main points. These were limiting its share to 49 per cent and allowing the two city councils to maintain their existing shareholdings.

Any proposal would involve the issue of new shares.

Nothing so far in the whole AIA merger/takeover saga has been simple. Complication seems to be the order of the day and the Canadian offer looks to be following this trend.

The 49% limit to the Canadian bid to get around local council politics with the combo of the issuing of new shares means a dilution in ownership for those shareholders who choose not to sell.

As I have said before, I dont mind selling my shares to an overseas concern, as long as the price is right or I am not going to be disadvantaged in any way.

I wasn't ready to sell to DAE for obvious political and security reasons but I'm willing to make an exception for those wealthy Canadians because if I stay a shareholder in such a complicated shareholding structure I am likely to be subject to political maneuvering and all that entails.

The deal between The Canadian Pension Plan and AIA is by no means a foregone conclusion,
because there are individuals in local councils and National politics who are dead against selling to any foreign buyer. It maybe wise for those short-term shareholders who think that this or any other deal may not succeed, to offload their shareholdings at any material increase in share price due to a concrete offer.

If of course if the structure of the company stays as it presently is, if no deal will succeed because of political pressure, then I will be happy to remain a shareholder.

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c Share Investor 2007