Monday, March 11, 2013

AVG Technologies CEO JR Smith Resigns


AVG Technologies' stock fell 11 percent on Friday with the resignation of AVG Technologies CEO JR Smith.  This was the antivirus and internet security vendor’s biggest one-day drop since they went public with their IPO just over a year ago. AVG was downgraded on 3/12 by Morgan Stanley and the stock dropped another  10.3%.  http://finance.yahoo.com/news/avg-technologies-falls-analyst-downgrade-191512922.html


 “JR has been a visionary leader for AVG.  He transformed the company from a small European antivirus company to a successful publicly traded global leader in PC and mobile solutions,” said Dale Fuller, chairman of the supervisory board of AVG. Smith will remain as CEO until a replacement is named.  Chief operating officer John Giamatteo runs day-to-day activities. http://online.wsj.com/article/BT-CO-20130307-715759.html
 
“During my six years as CEO I am proud of what we’ve accomplished: substantially growing the customer base, delivering strong financial performance, successfully leading our IPO and building a world class business and management team,” said Smith in a statement.  http://www.fool.com/investing/general/2013/03/07/avg-ceo-resigns.aspx

Revenue for the fourth quarter of 2012 was $95.2 million, compared with   $74.3 million in the fourth quarter of 2011, an increase of 28%.  For the fiscal year 2012, revenue was $356.0 million, compared with $272.4 million in 2011, an increase of 31%.  User numbers were 146 million at December 31, 2012, an increase of 38 million, or 35%, compared with the prior year.  The company is becoming increasingly more dependent on platform revenue (Google and Yahoo).  http://www.darkreading.com/vulnerability-management/167901026/security/news/240150252/avg-technologies-announces-change-to-executive-leadership-team  Few of the reports on latest revenues have pointed out that net income dropped by about 1/2 in fiscal 2012.

AVG Technologies during  the JR Smith Years

Market Share - The installed base first went up, then market share decreased (on the laptop/PC side) as measured by OPSWAT (hello free Microsoft AV).  At one point during Smith’s tenure, they claimed the fourth largest installed base.  Installed base is up again because of tablet/smartphone installations (in part through deals with Huawei in India, and Samsung in the UK).  Downloads on CNET were close to 2 million weekly for a while.  Currently, Avast is ahead of them, with Avira trailing.  Microsoft is ahead of all three. 

Product Line(s) – The number of products increased during Smith’s tenure to include    parental protection (acquisition), cloud storage (acquisition), mobile security (acquisition, initially), PC Tune-up, and AVG Cloud care.  It’s increasingly more difficult to be innovative in consumer internet security as many firms were offering multiple products each with their own permutations of similar functionality, not all related to security.  Buying versus making is a valid business decision.  AVG Technology was late to the game in adding additional functionality to their suites.  They were late in getting involved in the mobile market. 

Toolbars?  Mixed reaction by the consumer marketplace, particularly when the “yes” option is clicked for you. The internet is filled with instructions on how to uninstall various firms’ toolbars.  Google appears to be encouraging firms to move away from the default being opt-in. More revenue through secure search? Maybe........

Product quality – Not the CEO’s responsibility.  The paid products tended to be middle of the road among those tested.  Sixteen out of twenty in a September 2012 AV-Comparatives test.  Fourteen out of Twenty-one in a late 2012 AV-Comparatives Whole Product Dynamic Real-World Protection Test.  10 pass and 2 fail in the las 12 Virus Bulletin VB100 tests they participated in.  The free product has been a PC Magazine favorite. 

Marketing   - mixed.  “We protect us.”  Bad.  We needs instruction in grammar!  “How many toothpicks to stop a tiger?”  Interesting.  An unlimited cloud storage product with a limit when you read the fine print? Come on, marketing people.  Switch to us for  free.  Been there.  Done that.  Amoeba like Facebook friend creatures?  Frightening. 

Product Churn – The bane of every free product.  When you have zero switching costs, it’s easy to switch to the next product.  Autorenewal? Symantec and McAfee got their wrists slapped $$$ for making it hard to cancel.  Other vendors were better about it. 

AVG has  obtained the usual product certifications  with West Coast Labs  and ICSA.  AVG   won SC Magazine and Info Security Product Guide Global Excellence awards in 2010.  Quiet since then. 

US presence - US headquarters has been a game of musical chairs.  Florida.  Then Boston.  Now San Francisco.  San Francisco doesn’t count as Silicon Valley.  However, the employees are much closer to SF Giants games.  You see the AVG’s products in big box office supply stores like Staples and Office depot.  The number of facings is only a fraction of those of Symantec and McAfee.  Consumer AV is very much an online purchase, unless you’re going for the free paid versions (after rebates), that always appear when people start purchasing tax software. 

The IPO (Initial Public Offering) – This wasn’t a stellar IPO for   AVG when they went public in February 2012.  The target range was around 16 to 18.  The stock closed around $13 on its first day.  Blame the smartest people in the room for less than stellar number crunching.  The current stock price as of March 11, $13.75.  The stock has been as low as in the 9’s and has broken 16.  Praha based competitor Avast filed for an IPO and then cancelled.  Kaspersky has decided not to go public for the time being.  It did take the longest time after the rumor mills started about the IPO.  The date, whether it was going to be on NASDAQ, NYSE, London Exchange, or others.  Stock price as of March 11 - $13.62.

Like many firms, the company has benefited from having a presence in the Netherlands (dual headquarters with the Czech Republic (better beer) and Ireland (that tax reduction thing) http://kensek.blogspot.com/2012/04/double-irish-with-dutch-sandwich-yummy.html   

But then, larger firms just park money overseas.  By sheltering their assets overseas, Silicon Valley companies such as Apple, Google, eBay, and Hewlett-Packard are able to reduce their annual taxes in some cases by billions of dollars, according to a Center for Investigative Reporting analysis of the 50 largest firms’ financial statements filed in 2012.  http://blogs.kqed.org/newsfix/2013/02/13/cisco-apple-hp-oracle-google-avoid-paying-billions-in-taxes/
 
In the end, an AVG (A Very Good) run for Smith.  After all, during his tenure, how many CEO’s did HP have?  How many did Symantec have?  No stories about “escorts” showing up at parties in Las Vegas.  No children being pulled on stage to sing at company all hands meetings.

Czech funk-soul band Monkey Business may now have to find other corporate gigs.

1 comment:

Blogger said...

eToro is the most recommended forex trading platform for new and professional traders.