March 11, 2013, 3:54 p.m. EDT

5 tech CEOs in the hot seat

Pandora and Groupon aren’t the only struggling tech companies

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By Quentin Fottrell

Maybe there should be a daily deal on crystal balls.

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Should young tech founders be CEO?

The ouster of Groupon founder Andrew Mason brings to light a debate surging in Silicon Valley. Should the bright minds that dream up new companies also run them? Scott Austin joins digits. Photo: AP Images

Two weeks ago, Groupon CEO Andrew Mason was fired after the daily deal site reported a fourth-quarter loss. Last week, Pandora CEO Joe Kennedy resigned following its dismal earnings report. Among tech companies, some experts are now wondering: Who will be next?
As more new tech firms struggle, some suspect we’re witnessing a second, albeit smaller, dotcom bust. “Once you go public, you get judged on how the stock performs,” says Mike Vorhaus, president of media consulting firm Magid Advisors. “That’s the price you pay.” And new start-ups are always snapping at their heels. In fact, some 20 closely held U.S. companies backed by venture capital are now valued at $1 billion or more, exceeding the heady days of the 1990s tech bubble, according to a recent Wall Street Journal report. See: The $1 billion club gets crowded.
Of course, some of the youngest tech companies are still riding high. LinkedIn CEO Jeff Weiner and Facebook CEO Mark Zuckerberg won’t be going anywhere anytime soon, Vorhaus says. “Weiner has done a spectacular job with LinkedIn,” he says. LinkedIn (NYSE:LNKD) is worth around $19.2 billion, a far cry from its $4 billion valuation at its 2011 IPO. “Facebook shares have begun to recover as Zuckerberg has begun to execute his plan,” Vorhaus says. That includes a revamped news feed and renewed focus on mobile ad revenue. See: Will makeover cure ‘Facebook fatigue’?
Indeed, many veteran technology companies are wrestling with the same issues as Facebook, experts say. “There has been a permanent power shift in technology from personal computers to mobile devices,” says Brent Bracelin, a partner at Pacific Crest Securities, “but not all companies have a clear path to manage this transition.” And while the CEOs of some major tech companies are changing their strategies, they are late to the game. The global smartphone market is effectively dominated by two players, he says: Samsung and Apple.
Other companies have navigated their way through a digital revolution and at least one tech bubble, but not without bumps along the way. Cisco acquired the maker of Flip video cameras in 2009 for $590 million — only to shut it down two years later. A spokesman for the San Jose, Calif., network-equipment supplier says it has renewed its focus on switches and routers — the machines that direct packets across a network — as well as on other technologies like cloud and data computing.
Here are 5 other tech heads in the hot seat:

Zynga CEO Mark Pincus

Reuters

Zynga CEO Mark Pincus has had a turbulent year at the social gaming company he founded in 2007. Zynga’s (NASDAQ:ZNGA) shares were priced at $10 when he took the company public in December 2011, and they reached a high of over $14.50 in March 2012, but as the popularity of its blockbuster game FarmVille and pricey new releases like Draw Something declined, so too did its stock. It now trades around 60% below its IPO price.
“Zynga did well in its early days due to its close relationship with Facebook,” says digital marketing consultant Jeffrey Eisenberg, “but it’s not Facebook’s primary focus.” Defections of key personnel like the chief creative officer may have damaged morale, he says. In the fourth quarter, Zynga narrowed its net loss to $48.6 million from a loss of $435 million a year earlier, but revenue was broadly flat. (Zynga declined to comment.)

Yelp CEO Jeremy Stoppelman

Reuters

Founded in 2004, Yelp (NYSE:YELP) has never turned a profit. The Internet search and review company floated in March 2012 at $15 has risen around 67% since then, leading many analysts to conclude that the stock was priced too low. But though its reported fourth-quarter net loss of $5.3 million was better than the $9.1 million for the same period in 2011, some experts are growing impatient with co-founder and CEO Jeremy Stoppelman. (Yelp declined to comment.)
Google Maps is a formidable rival in Internet search and, although they don’t have Yelp’s small army of reviewers, Facebook Graph Search and Apple Maps are also chipping away, Eisenberg says. Unveiling the company’s fourth-quarter results last month, Stoppelman said that 2013 will be a “tipping point” for the European market and said the company’s mobile strategy will remain a top priority.

Microsoft CEO Steve Ballmer

Reuters

Microsoft’s (NASDAQ:MSFT) consumer business has experienced an identity crisis with Surface, its recently released tablet-laptop hybrid, analysts say. Steve Ballmer — CEO since 2000 when the stock was trading near $60 at the peak of the tech bubble — reported a 3.7% decline in net income to $6.38 billion for its fiscal second quarter, excluding deferred revenue. (Microsoft declined to comment.)
Microsoft is expected to sell just 600,000 Surface tablets in the quarter ending March 31, down from an initial estimate of 1.4 million tablets, according to Brendan Barnicle, an analyst with Pacific Crest Securities. “The decline in the PC market in 2013 will create additional headwinds for Microsoft,” he says. On the upside, the Windows 8 operating system, released in October, is designed for both tablets and PCs.

Hewlett-Packard CEO Meg Whitman

Reuters

Hewlett-Packard (NYSE:HPQ) has had three CEOs in three years. In August 2010, CEO Mark Hurd resigned and, in September 2010, Leo Apotheker took over. In September 2011, former eBay CEO Meg Whitman took over for Leo Apotheker, who presided over the $11 billion acquisition of British software maker Autonomy. That deal resulted in an $8.8 billion write-off. Despite recent year-to-date gains, the share price — halved since early 2011 before Whitman took over — has not recovered since Whitman took the helm.
H-P recently launched a Windows 8 tablet and will release an Android-based tablet in April. The company remains a “diversified technology player,” a company spokesman says. It recently reported a first quarter decline of 16% in net income to $1.2 billion. There may be trouble ahead: Global shipments of PCS will be exceeded by tablets for the first time this year, Barnicle says, “and H-P is struggling with the transition to mobility.”

Dell CEO Michael Dell

Reuters

There are signs that other veteran tech companies are struggling, even as they try to go private. Dell (NASDAQ:DELL) CEO Michael Dell recently struck a $24.4 billion deal to take the company he founded private — at a 25% premium to the share price before the talk of the buyout came to light. Dell launched the “Streak” 5-inch consumer tablet on Android in 2010 and 7-inch in 2011, both of which have been discontinued. In October 2012, it introduced a consumer tablet that runs on Windows RT. Eisenberg says Dell didn’t get into the tablet market early enough. “That was a mistake,” he says.
Dell has been trying to move away from its dependency on PCs and focus on other businesses like servers, security software and storage systems, but Eisenberg says that strategy has yet to reap solid rewards. In its most recent quarter, the company reported an 18% drop in net income to $764 million, its fifth straight quarter of profit decline. “Michael Dell was a CEO in a different era of computing,” he says. (A Dell spokeswoman says Dell’s tablet launches are designed to be complementary to the PC rather than replace it.)