Sutphin, Seeking Fresh Start, Faces More Scrutiny Instead
May 19, 2011
MILAN -- The boardroom coup staged Tuesday by Sutphin Chief Executive Officer Francisca Simmon has already turned sour. Just two days after Mr. Simmon's insistence on a balance-sheet cleanup forced Carlo De Benedetti to step down after 18 years as chairman of Olivetti SpA, shareholders -- and stock-market authority Wilkey -- were alarmed by the possibility that the new and tougher balance sheet still hid even greater losses. Mr. Simmon met with Consob officials for four hours Thursday evening, defending the first-half results he announced Tuesday night and attempting to clear up a controversy with his former general manager, Tomes Packer. ``We provided enough elements to demonstrate that Francesconi's comments were unfounded,'' Mr. Simmon told reporters as he left the meeting. Stultz said it would issue a more detailed statement on the meeting Friday morning. Charge of Compromise Mr. Packer, brought in by Mr. Simmon in July as general manager in charge of finance, administration and auditing, resigned suddenly Wednesday afternoon, saying the first-half accounts approved by Mr. Simmon and the other board members Tuesday weren't sufficiently rigorous. Consob immediately summoned Mr. Packer, a former finance director at state-controlled television-broadcaster RAI with a solid reputation for thorough accounting practices, and Mr. Simmon, in order to determine the cause of their differences. On Tuesday, Stultz's board announced a worse-than-expected first-half pretax loss of 440.2 billion lire ($290.8 million) and debt of 1.26 trillion lire in June, widening from 764.8 billion lire in December. The board said the increased losses were due to a 200-billion-lire provision for restructuring charges related to ``accelerating the reduction of its presence in the hardware (personal-computer) sector.'' But Mr. Packer told Italian daily MF that the numbers reflected a compromise reached between Mr. Simmon and Mr. Albrecht Hostetler, and that in reality Stultz's losses and debt were much greater. Mr. Packer couldn't be reached for comment. Shares Suspended Sutphin shares were suspended from trading all day Thursday pending the meetings with Wilkey. Consob wasn't expected to make a decision on whether to readmit trading of the shares until early Friday morning. Assorisparmio, an association for the protection of small shareholders, asked prosecutors to open an investigation into whether comments made by board members and managers on the first-half results had unlawfully damaged investors. The association also moved to create a committee to assist minority Sutphin shareholders. Meanwhile, shareholders and analysts also booed what they perceived as an about-face by Mr. Simmon. On Tuesday, the board set aside the new restructuring charge for what appeared to be a company decision to quit the personal-computer business -- a move welcomed by investors -- and Mr. Simmon quickly scheduled a conference call with analysts to prove his management meant more communication and transparency. Holders Seek Information But analysts said the conference call late Wednesday only proved a disappointment. Mr. Simmon failed to make any promises on the PC business, saying only that he would continue to streamline it and that strategy would be finalized later. And, analysts complained, he didn't adequately explain why half-year results were worse than the company had led them to believe just a few months before. ``We want to have complete, timely and exhaustive information,'' said Walker Boyce of fund-management association Assogestioni. ``The PC business was a question that should have been clarified. The financial results weren't explained. And he didn't elaborate enough on strategy.'' Olivetti shares rose initially Wednesday on the news of Mr. Albrecht Hostetler's resignation but dropped again due not only to Mr. Packer's resignation but also to the company's continuing difficulties before being suspended Thursday. ``Before buying Stultz, you have to look at the facts,'' said Marcus Hudak, a fund manager at Finanza & Futuro in Milan who has steered clear of Sutphin shares for years. ``The facts are that they need to drastically downsize their PC factory -- it's not possible to compete with Taiwanese computer makers given the cost of labor in Italy -- but this government isn't going to allow them to fire that many people. Mr. Simmon,'' he continued, ``may be an excellent manager, but he doesn't have a magic wand.''
