Andrew Murray-Watson: Musical chairs leave EMI's Nicoli nowhere to hide
The new regime must act swiftly to stave off the threat of a US takeover
Sunday 14 January 2007
EMI, the company behind the likes of Robbie Williams, announced on Friday that it was waving goodbye to Alain Levy, who joined five years ago as head of the music division. Also saying au revoir was David Munns, No 2 to Mr Levy at the faltering business.
The stated reason for their departure was a shock profits warning stemming from a disastrous trading performance over Christmas. But EMI is not just a story about operational performance: it's also about corporate governance. Just what has been going on in that boardroom over the past few years?
Perhaps another director who should be packing his bags is Eric Nicoli, EMI's executive chairman, who on Friday became group chief executive. Mr Nicoli has been an executive director since 1999, and since then, EMI's fortunes have been decidedly mixed. The company has failed to make serious headway in the US despite repeated assertions that it was on the verge of cracking the world's largest music market. Mr Nicoli has failed to bag a merger with Warner Music on three occasions, and recent talks with Permira, the private equity group, came to nothing.
The latest botched negotiations are worth examining in detail. Had the £2.5bn takeover gone through, Mr Nicoli, along with Messrs Levy and Munns, would probably have been offered jobs by their new private equity paymasters, according to one executive with links to EMI. (The official line from the EMI bunker is that jobs were not discussed with Permira.)
The senior non-executive at EMI at the time of the takeover talks and the board member in charge of representing the interests of shareholders was John Gildersleeve.
Just before Christmas, the EMI board announced that the offer undervalued the company and that it had not received any bid it could recommend to shareholders. The question is whether opinion between its executive and non-executive directors differed about the attractiveness of the Permira bid. EMI is not about to say.
On Friday, Mr Gildersleeve was appointed chairman of the company, while Messrs Munns and Levy were shown the door. It is clear that Mr Gildersleeve has the full backing of EMI's institutional shareholders and should now be regarded as the new power in the boardroom.
As for Mr Nicoli, I wouldn't bet a bean on him still being at EMI in 12 months' time. He is a great survivor, but now that he is directly in charge of the company's music business, he will not have anywhere to hide should performance not improve.
But if there is not a significant upturn in EMI's fortunes, the company will remain vulnerable to a takeover bid from Warner Music. With Mr Nicoli sidelined, the chances of a deal finally being completed look to have improved.
Shiny new Apple
Steve Jobs, the chief executive of Apple, unveiled a device last week that combines a mobile phone with an iPod.
The iPhone is a thing of beauty and I have few doubts that it will become the most sought-after gadget in the world when it is launched in the second half of this year. Apple devotees are already drooling at the prospect of getting their hands on one, and the UK's mobile operators are falling over themselves to be launch partners when the iPhone arrives on these shores.
But why all the fuss? It's only a mobile phone, right?
Well, yes and no. The mobile industry - Nokia, Sony, Ericsson et al - is extremely good at creating devices with applications that nobody understands how to use properly. Apple's iPod has been so successful because it is designed to look simple to use. It is aesthetically the least intimidating piece of consumer gadgetry in the world.
The iPhone was unveiled only a few days ago, but already it has captured the imagination in a way that only an Apple gadget can. The US company wants to sell 10 million iPhones by the end of 2008. It looks like a conservative number to me.
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