IT outfits run on dysfunctional boards

For some reason IT outfits are being run by clowns who are fiddling while their empire burns, according to the Wall Street Journal.

WSJ analysts sat down and tried to work out which outfits had boards which were about as functional as the Mad Hatter’s tea party. The first thing they had to do was rule out the HP and Yahoo boards. HP and Yahoo were so dysfunctional that they bent space and time and needed a new system of physics and mathematics that could factor in new measurements of stupidity.

They then came up with a list, and what is surprising is that most of them were IT or comms outfits.

Top of the list was Sprint-Nextel which has lost 80 percent of its market value over the last five years. Unable to compete with AT&T and Verizon Wireless, Sprint’s board has consistently backed CEO Dan Hesse. It watched as the oufit bought Nextel for $35 billion. It has lost money for four years and revenue has fallen from $40.1 billion to $32.5 billion over that time. The board applauded as the outfit moved to deploy WiMAX 4G technology, which is not compatible with the 4G systems built by AT&T and Verizon Wireless. While AT&T has attempted to buy T-Mobile to increase the size of its business. Sprint, however, has done nothing as it loses subscribers.

Next on the list was AMD which the WSJ says may be the single greatest failure among large tech companies based in America.

Over the last five years its AMD’s stock is down more than 75 percent. It has lost money from 2006 to 2008, had tiny margins in 2009 and 2010 with net income of $376 million and $471 million, respectively. One of the only reasons that it did so well during this period was the $1.25 billion settlement payment from Intel in 2009 to end patent disputes.

WSJ said that the Board let CEO Dirk Meyer go in January 2011 by “mutual agreement,” apparently because of disputes over strategic direction. In the two years he had been there the company had been slightly less in trouble. However it took the board eight months to find a replacement, and they picked Rory Read who was COO of Lenovo, which, like AMD, was slow into getting into mobile.

The WSJ said that AMD has failed to move into the rapidly growing mobile market and there was also a spate of chip designs put it further behind the results of R&D work by rival Intel in 2009 and 2010.

Cisco came in at number five which is surprising because its CEO John Chambers is a pin-up for most Wall Street types. Its problem was that it allowed Chambers to begin an ill-advised diversification strategy. It bought lots of companies and this caused its profit margins to drop. Cisco’s shares have lost a third of their value in five years.

While it was losing cash on its non-core business, its core router business is under pressure from Juniper and Chinese router makers.

Selling routers and switches is slowing and the outfit can’t deal with tough competition from upstarts like Aruba Networks and F5 Networks. The WSJ thinks the problem was that the Cisco board gave Chambers too much support and allowed the company to stay on the same road to no where for too long.