Gadfly's 2017 Toast to the Departed

Some business stories have happy endings; these didn't quite.
At Closing, January 19th
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It's that special season when we reflect on those titans of business who held center stage this year.

But let's not forget those folks who made an impact just by retreating (or being pushed off) to the wings. 

So here is Gadfly's 2017 toast to the departed.

Travis Kalanick, Uber

Uber Technologies Inc. had weathered many scandals in its relatively short life. But by midyear, mounting legal and moral crises and a leadership drain proved too much, and Kalanick was forced to step down as CEO.

The big question is whether, on balance, he helped Uber more than he hurt it. In part because of decisions he made as CEO, and enabled by many others, the company faces angry regulators, an annoyed judge in a court battle with Google's corporate cousin, a workplace culture cleanup, and a fractured board and investor base. If SoftBank does buy a large slug of Uber stock, it will clarify that the company is worth less than investors believed a couple of years ago.

Skid Marks

Uber is the world's most valuable private technology company, but it is clouded by scandals and questions about its business model

Sources: CB Insights and Bloomberg News reporting

Yet Uber likely wouldn't have become such a force if Kalanick hadn't been a "brilliant jerk," to use the words of one director. Kalanick's legacy now depends on whether his successor can calm Uber's storms and prove the company is financially viable. At stake is not only the billions of dollars invested but the fate of an entire category of post-recession tech startups that were more disruptive than anything seen before -- both in good ways and sometimes destructive ways. -- Shira Ovide

Jeff Immelt, GE

Jeff Immelt held the top post at GE for 16 long years before finally stepping down in August. According to his Harvard Business Review profile (written by himself, naturally), Immelt's legacy is one of innovation, digital investment and the transformation of a General Electric Co. portfolio that "was simply too broad and too opaque." GE's stock price tells a somewhat different story, one of poor capital allocation, a business mix that's still "too broad and too opaque" and a culture where bad news traveled slowly.

Smaller In One Capacity

GE's stock has floundered under Immelt and has taken a particularly sharp dive after his departure -- although not because investors miss him

Source: Bloomberg

Since Immelt's departure, GE has been forced to admit its cash flow isn't sufficient to support a dividend he raised just last year and radically walk back earnings guidance he affirmed literally on his way out the door. Meanwhile, GE hung a for-sale sign on its stake in Baker Hughes, a GE Co., a legacy of Immelt's mistimed oil and gas acquisitions. 

Tight Squeeze

GE still has a cash flow problem even after cutting its dividend

Source: Company reports, Bloomberg

Note: Industrial CFOA excludes deal taxes and pension. New 2017 guidance includes dividend from GE's Baker Hughes energy operations. GE defines industrial free cash flow as industrial CFOA plus Baker Hughes distributions, excluding deal taxes and backing out capital expenditures, capitalized software investments and pension funding.

Immelt did generally have the right idea on investing in software to make industrial machinery run more effectively, but his push to become the be-all-end-all digital provider for industrial companies was too grandiose. GE says his departure was planned years ahead, but there was hardly ever a company more in need of fresh eyes. Maybe it still is. -- Brooke Sutherland

Hugh Hendry, Eclectica Asset Management

Hugh Hendry's September decision to shutter his London-based Eclectica Fund after 15 years highlights the existential threat central banks pose to macro hedge funds. These have struggled for several years as quantitative easing distorts asset prices.

Investors are voting with their pocket books, with even the most storied managers suffering outflows. Paul Tudor Jones, for example, oversaw about $7 billion of assets by the end of the third quarter, half what he managed in mid-2015.

Macro Lags

Returns for global macro hedge funds have been lackluster at best

Source: Hedge Fund Research Inc.

Note: Figures are for 2017 through September.

Hendry lost 3.8 percent in August, mostly betting on rising German bund yields. "The most distorted asset class in the world is the two-year German bond," he told Bloomberg Television on Sept. 15, the day after announcing his retirement as a hedge fund guy.

Not much has changed since. That German two-year yield ended August at -0.73 percent; it's currently -0.67 percent, versus a five-year average of about -0.3 percent. With central banks still setting the price of money, the ranks of the global macro gang keep thinning. -- Mark Gilbert

Mickey Drexler, J. Crew

Mickey Drexler has been hailed as retail's Merchant Prince. His vision fueled Gap Inc.'s 90's-era heyday. Later, he led a renaissance of J. Crew Group Inc., presiding over the period when its bright hues, mismatched prints and sequins-as-daywear aesthetic commanded huge sales and influence.

But he stepped down this summer. Shoppers have been fleeing the chain after several years of ill-fitting garments, baffling price points and a so-so e-commerce plan.

Drexler's fall shows just how much retail has changed. Trends move faster, e-commerce is booming and malls are floundering.

The Lyons, The Prince and The Wardrobe

"Merchant Prince" Mickey Drexler joined J. Crew in 2003 and sparked a turnaround with the help of creative director Jenna Lyons; recently, their hot streak has gone cold

Source: Bloomberg

Drexler and Jenna Lyons -- the creative director responsible for J. Crew's comeback-era look who also left this year -- are glaring examples of hubris. The pair seemed to believe Lyons could simply decide what was cool -- fancy pajamas as an outfit, anyone? -- and shoppers would follow. The rise of social media, however, means fashion springs increasingly from below rather than descending from on high. Lyons and Drexler missed that shift.

Having scored the top job at J. Crew after being forced out at Gap, Drexler may yet rise again. But a resurgence seems unlikely: Apparel finally seems to have outgrown him. -- Sarah Halzack

Joe Jimenez, Novartis

Novartis AG CEO Joe Jimenez accomplished plenty in eight years. He presided over $49 billion in deals; the company's pharma division has mostly weathered generic competition for its former bestseller Gleevec; and a deal with University of Pennsylvania academics led to a pioneering cancer therapy.

But he also leaves a long to-do list for Vasant Narasimhan, who succeeds him in February.

The decision to spin off, sell, or keep struggling eye-care business Alcon has been postponed. Ditto deciding what to do with Novartis's $14 billion stake in Roche Holding AG and its $10 billion stake in a joint venture with GlaxoSmithKline PLC.

There's also the need to deliver a long-promised return to sales growth. Meanwhile, price competition is rising for generic unit Sandoz, and Gilenya, Novartis's current best-seller, comes off patent in 2019.

Work In Progress

Joe Jimenez is leaving his successor with a good bit of turnaround work to finish

Source: Bloomberg

Note: Quarterly sales growth, year over year.

Novartis simply needs more sales drivers -- meaning more deals. But it faces the same obstacles as its peers, especially high valuations, as companies chasing growth who should know better keep throwing good money after bad drugs and everyone crowds into the same drug classes. Meanwhile, no company seems willing to commit to fixing a fundamentally broken drug-pricing model. -- Max Nisen

John Bryant, Kellogg

John Bryant left his CEO post at Kellogg Co. this fall on a soggy note: The cereal giant's stock is having by far its worst year since the last recession.

Special K Diet

Kellogg's revenue growth has flatlined, and investors are giving up on the stock

Source: Bloomberg

Note: Growth figure for 2018 is based on analysts' estimates.

America's leading packaged-food companies face an identity crisis. The very products responsible for turning them into household names no longer fill grocery carts. Away from sugary cereals, it's the aisles where fresh, less-processed and convenient foods are found that have become prime real estate, and upstart brands have seized it.

Long-time CEOs of General Mills Inc. and Mondelez International Inc. also stepped down this year. But Bryant's departure speaks the loudest, perhaps because he's only 52 years old.

His successor, Steve Cahillane, who was hired from Nature's Bounty, has already turned to pricey bolt-on deals to revamp Kellogg's portfolio. Still, the company has a history of dropping the ball on brands it acquires that could have been booming, such as Kashi organic granola. Pricing pressure, intensified by Inc.'s Whole Foods purchase, hasn't helped. It feels a bit like Bryant and the board finally threw their hands up. Unless Cahillane has the right growth recipe, Kellogg could wind up on someone else's shopping list. -- Tara Lachapelle

And with that, it only remains to say (or paraphrase) that sometimes, nothing becomes a person's job quite like the manner of their leaving it. And sometimes, it's just time to go.  -- Liam Denning

-- Compiled by Liam Denning; written by Shira Ovide, Brooke Sutherland, Mark Gilbert, Sarah Halzack, Max Nisen and Tara Lachapelle

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Liam Denning in New York at

    To contact the editor responsible for this story:
    Mark Gongloff at

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