Why Is a Technology Executive Leading Sears?


Lou D'Ambrosio will join Sears Holdings (SHLD) as CEO. The temporary CEO, W. Bruce Johnson, who has run the retailer for the past three years, will become executive vice president of off-mall businesses and supply chain and stay on the Sears board.

D'Ambrosio is an odd choice. He has been a technology executive until now. He was CEO of telecom equipment company Avaya, which he left for medical reasons in 2008. Before that, he worked at IBM (IBM) for 16 years.

D'Ambrosio has been a consultant to Sears for six months, advising the board on strategic issues. Still, the selection of a technology executive as CEO is a strange one. Many people believe Sears needs a seasoned manager with a background in retail.

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The company has fallen apart over the last five years. Its shares have dropped 25% while the S&P has been about flat over the same period. The stock's performance has been notably weak in the last year, down about 10% compared to a 20% gain by the S&P. Thursday morning the retailer announced that fiscal fourth-quarter net income declined 13% on flat sales. For the quarter ended Jan. 29, earnings fell to $374 million, or $3.43 a share, from $430 million, or $3.74, a year ago. Adjusted earnings for the quarter were $3.67 a share versus $3.69 a year earlier. Revenue slipped less than 1% to $13.14 billion from $13.25 billion.

There is some precedent in recent years for companies looking outside their industries for CEOs. Ford (F) is the most successful example. In 2006 it brought in Boeing executive Alan Mulally and he engineered one of the great large-company turnarounds of the decade. Like Mulally, D'Ambrosio is something of a long shot. Sears is a very troubled company. The board may eventually come to regret not bringing in a seasoned executive from a firm like Macy's (M) or Walmart (WMT).

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