The steady drip of executive departures continues at Houston energy giant Enron (ENE). After the close of markets on Aug. 14, Jeffrey K. Skilling, the company's hard-charging president and CEO, shocked the investment community by unexpectedly resigning. In a conference call with investors, Skilling, said he was leaving for personal reasons, which would remain private. Prior to taking over the CEO post in February, Skilling had been chief operating officer.
While it looks for a successor, Enron says Skilling's duties will be assumed by longtime Chairman Kenneth Lay. "I want to thank Ken Lay for his understanding of this purely personal decision," Skilling said in a statement.
For now, Lay insists that the management shakeup won't result in any strategic changes at the company. But before he can regain investor enthusiasm, he'll have to find a way to prove that Enron's market-making and risk-management skills can be transferred to other industries as successfully as they've been used for energy.
POWERHOUSE. The 47-year-old Skilling joined Enron in 1990 after leading McKinsey's energy and chemical consulting practices. Under his leadership, Enron pioneered the use of risk-management products and new contracting structures in the natural-gas industry. He has since started applying similar concepts in electricity, bandwidth, metals, and a range of other commodity products. Along with Lay, Skilling helped transform Enron from a natural-gas pipeline company into an energy-trading powerhouse.
Skilling has predicted that Enron will surpass $200 billion in revenue this year, making it the second-largest U.S. energy company behind ExxonMobil. Last year, Enron earned $979 million on revenue of $101 billion.
While the company has 25,000 miles of gas pipeline and merchant power plants in the U.S. and abroad producing 9,000 megawatts of electricity, Enron recently has been shedding many energy assets, including its natural-gas and crude-oil drilling unit, to pursue its goal of becoming the industry's leading middleman, bringing together buyers and sellers of energy products.
BLOCKBUSTER BUST. Skilling's tenure in the No. 2 position has been tumultuous -- marred by a huge and costly fight with the Indian government over payment for construction of Enron's $3 billion Dabhol power-plant project and the nasty breakup of a video-on-demand broadband Internet deal with Blockbuster. Skilling's push into broadband has produced lackluster results. The upshot: Enron's stock has fallen from a 52-week high of $90.56 on August 23, 2000, to $42.93 on Aug. 14, ahead of the announcement.
The company didn't immediately comment on what led Skilling to quit, but a spokesman insists it has nothing to do with Enron's stock performance. "We regret Jeff's decision to resign, as he has been a big part of our success for over 11 years," Lay said in a statement. "But we have the strongest and deepest talent we have ever had in the organization, our business is extremely strong, and our growth prospects have never been better."
Indeed, the company says it plans to look for Skilling's successor within the ranks, though it declined to name possible candidates. But some analysts and investors say Enron may have trouble landing a replacement. "Rarely do you find those kinds of organizational and management capabilities embodied in one individual," says analyst Robert L. Christensen Jr. of First Albany in New York. "There's no clear second in command. It's purely a guessing game at the moment."
MURKY DEPTH CHART. Skilling's departure likely won't sit well with investors, who are concerned about Enron's losing a number of key executives recently, including Vice-Chairman J. Clifford Baxter. Kenneth D. Rice, who had been chairman and CEO of Enron Broadband Services, is widely believed to be preparing for his departure from the company within the next four months. "Three years ago, the [management] depth chart was very apparent. The company had started to look like the General Electric of the energy logistics business," says one investor. "Now, I'm not too sure."
Skilling, who wasn't immediately available for comment following the conference call, will remain as a consultant. Lay, who was also unavailable, served as Enron's CEO from 1985 until Skilling's election earlier this year. He has agreed to extend his employment agreement through 2005. Said Lay during the call: "I'm prepared to stay here as long as it takes to get to our next level of succession." If the skeptics are right, that could turn out to be longer than Lay expects. By Stephanie Anderson Forest in Dallas