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Thread: Harman Share down 38% yesterday

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    Senior Member 4345's Avatar
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    Harman Share down 38% yesterday

    While the growth fundamentals of our core business remain sound, the difficult portable navigation devices environment presents a challenge," Chief Executive Dinesh Paliwal said in a statement.

    Paliwal added that the company has posted "higher than planned" R&D engineering and material costs. Harman did not provide a current earnings estimate using generally accepted accounting principles because restructuring costs have not yet been determined. Acquisition and restructuring costs relate to a proposed buyout of Harman by Kohlberg Kravis Roberts and Co. and GS Capital Partners, an affiliate of Goldman Sachs, for $120 per share in cash. The takeover soured in September, when the buyers expressed concern over the company's financial health.

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    Moderator / Treasurer/Marketplace Czar boputnam's Avatar
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    Yea, bummer. I thought I'd paste the entire release...

    -------
    HARMAN INTERNATIONAL REVISES FISCAL YEAR 2008 EARNINGS GUIDANCE
    WASHINGTON, D.C. January 14, 2008 – Harman International Industries, Incorporated

    (NYSE: HAR) today revised its previously announced guidance for the current fiscal year ending June 30, 2008. The Company now expects non-GAAP diluted EPS for the 2008 fiscal year to be between $3.00 and $3.10, before after-tax merger related costs of $8.0 million, or $0.13 per diluted share but including the impact of the Company’s ongoing accelerated share repurchase (ASR). Because the accounting impact of previously announced restructuring charges has not been determined, it is not included in the current estimate and, therefore, no GAAP diluted EPS for the fiscal 2008 year is provided.

    The change in guidance was prompted primarily by a major shift in the market for Portable Navigation Devices (PNDs). In recent months this sector has experienced significant pricing pressure which is affecting the entire industry. “While the growth fundamentals of our core business remain sound, the difficult PND environment presents a challenge. As we have indicated previously, we will be launching a record number of automotive infotainment platforms in 2008. Although, we are not happy with the higher than planned R&D engineering and material costs, the additional investment is necessary to deliver the new platforms to our valued customers,” said Dinesh Paliwal, Vice Chairman and Chief Executive Officer. “Harman continues to have excellent business prospects, and we are confident that we will capitalize on these opportunities as we position our Company to achieve its full potential.”

    The Company is implementing a series of strategic initiatives to optimize its global footprint in manufacturing, engineering and sourcing, to drive profitable growth and to enhance shareholder value. The Company will provide further details on these initiatives during its quarterly earnings conference call on February 5, 2008.

    Harman International designs, manufactures and markets a wide range of products for the automotive, consumer and professional markets. Its brands include Harman Kardon®, JBL®, Revel®, Mark Levinson®, Infinity®, Lexicon®, Soundcraft-Studer®, AKG®, Becker® and QNX®. The Company maintains a strong presence in the Americas, Europe and Asia and employs more than 12,000 people. Harman International (www.harman.com) is a leading manufacturer of high-quality, high-fidelity audio products and electronic systems for the automotive, consumer and professional markets. The Company’s stock is traded on the New York Stock Exchange under the Symbol: HAR.

    -----


    Very odd share trading pattern - gaps up and lately, big legs down...
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    If this trend continues, maybe we can take up a collection here and buy out the company!

    John

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    Senior Member edgewound's Avatar
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    This whole movement in HAR's stock price and the buyout scenario smells unusual. Can the company's finances and outlook be that bad?

    Or...is it orchestrated by the buyers to manipulate the stock price to swoop in at a major discount?

    Shareholders....vested Harman employees must be livid...this is a travesty....though HAR has had a great run for more than a decade.
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    Moderator / Treasurer/Marketplace Czar boputnam's Avatar
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    Quote Originally Posted by edgewound View Post
    This whole movement in HAR's stock price and the buyout scenario smells unusual. Can the company's finances and outlook be that bad?
    In this market, yes. As you know, valuations discount the future - which for any/all consumer products companies looks pretty dicey. Inflation racked up a +4.1% increase for 2007, WITH food and energy (anyone who excludes those two must not eat and not commute = moronic). That bites into discretionary spending, which for years was funded through home equity "drawdowns" through escalating refinancings and also lines of credit. Those sources are now gone. Few save. This situation is squeezing the pocket books, big time.

    Quote Originally Posted by edgewound View Post
    Or...is it orchestrated by the buyers to manipulate the stock price to swoop in at a major discount?
    Uh, no. Far too easy to track these days. Any such behavior would be greeted by "big hair" (code name for SEC) knocking at the front door of the buyers.

    Quote Originally Posted by edgewound View Post
    Shareholders....vested Harman employees must be livid...
    It hurts that's for sure. Volume tells that some big holders are liquidating - and are not price sensitive. "Hit the bid" is the mantra.

    The market is quite unsettled right now. Risk is being repriced at an aggressive rate - just look at the rise in the gold price. Investors are seeking safe havens, but are fickle and freaked. This leads to indiscriminate selling...

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    WaPo says Harman to Move DC staff to Connecticut

    Harman to Move District Staff to Connecticut

    By Thomas Heath -
    Washington Post Staff Writer
    Tuesday, January 29, 2008; Page D01 (link to WaPo article)


    Harman International Industries, the multibillion-dollar manufacturer of high-end audio equipment and electronic systems, will move its District headquarters staff to Connecticut by the end of the year, the company said yesterday.

    The company this month informed its 30 or so D.C. employees that it will close its Pennsylvania Avenue office and relocate some of them to Stamford, Conn., north of New York City, where the company's new chief executive works.

    "This is part of a multi-part move," said Harman spokesman Brad Hoffman. "We currently have corporate employees located in D.C.; Northridge, Calif.; and Stamford; and along with some likely cost savings, the bigger part of the picture is really an attempt to consolidate corporate functions in one location close to the New York financial markets to improve communication between these folks and our executive management team."

    Hoffman said he did not know whether the company would technically keep Washington as its headquarters, or whether that designation would change.

    The company has more than 11,000 employees in offices and plants around the world. It had more than $3.5 billion in sales in the fiscal year ended June 30.

    Most of the D.C. employees are part of the executive team and the financial end of the firm. Some will remain in the Washington area, "if not in the Pennsylvania Avenue offices," Hoffman said.

    Hoffman said he did not know whether company Chairman Sidney Harman, an author and philanthropist who is married to Rep. Jane Harman (D-Calif.), would also relocate.

    Sidney Harman is president of the District-based Harman Family Foundation, which has given to such local institutions as the Washington Ballet, the Washington National Cathedral Choral Society and the Phillips Collection. He pledged $20 million for the new Harman Center for the Arts in downtown Washington, which is home to the Shakespeare Theatre Company.

    "I would not be surprised if he continues to maintain a presence in the Washington area," Hoffman said.

    An assistant to Harman said he was on an airplane yesterday and was unavailable for comment.

    Harman International produces cutting-edge electronic equipment, including high-tech home audio systems, concert hall and movie theater sound systems, and automobile infotainment digital platforms. Its nameplates include JBL, Harman Kardon, Mark Levinson and Infinity.

    The move follows several turbulent years for the company. Last April Harman negotiated a deal to sell the firm to buyout giants Kohlberg Kravis Roberts and Goldman Sachs for $8 billion, only to see the deal collapse a few months later when KKR and Goldman reneged. The deal would have allowed shareholders to maintain an interest in the company once it went private.

    Harman and KKR/Goldman then reached a compromise in which the buyout firms purchased $400 million worth of Harman's senior bonds at an interest rate of 1.25 percent. The investment allowed the buyout firms to avoid paying a $225 million termination fee.

    The company last year also hired a new chief executive, Dinesh Paliwal, after a year-long search. A previous chief executive, Douglas A. Pertz, was let go with a $3.8 million severance package after only four months on the job.

    Paliwal has offices in Stamford, where several other Harman managers have joined him. Hoffman said the company did not have a manufacturing facility in Stamford, "but it's close to properties we have in Woodbury, Long Island, as well as smaller Harman facilities in the state of Connecticut."

    Harman stock took a nosedive two weeks ago, shortly before the company cut its earnings forecast. Its shares closed at $42.37 yesterday, up 9.5 percent. The stock is down 66 percent from its 52-week high.
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    Quote Originally Posted by hjames View Post
    A previous chief executive, Douglas A. Pertz, was let go with a $3.8 million severance package after only four months on the job.
    I'm sure stockholders just loved that demonstration of fiscal responsibility. I wonder how much research went into hiring him?

    John

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    Senior Member Ian Mackenzie's Avatar
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    Quote Originally Posted by johnaec View Post
    If this trend continues, maybe we can take up a collection here and buy out the company!

    John
    John,

    In a simplistic sense its the nerve or lack of it that is creating this type of short term risk / opportunistic thinking.

    A business the size of Harman and the types of markest could be doing everthing right and the shares will be all over ther place.

    Although if it took that long to find a new CEO you could be forgiven for thinking if you pay peanuts you get monkeys or its just too difficult to manage.I wonder how the rest of the board measures up?

    That lack of confidence in the U.S and the sub prime lending problem has wiped billions off the Australian share market recently.

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    Moderator / Treasurer/Marketplace Czar boputnam's Avatar
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    Quote Originally Posted by johnaec View Post
    I wonder how much research went into hiring him?
    Quite a bit.

    From 1998 to 2004, Pertz was with IMC Global as President & CEO, then CEO & Chairman. IMC merged with Cargill to form Mosaic, a worldwide powerhouse in fertilizers.

    Certainly HAR sought Pertz for his worldwide knowledge. It could be that what needs to be changed at HAR could not be righted by any single incoming CEO? Legacy is legacy and wonderous as it is, it plagues many companies that struggle to evolve with their market. Pertz clearly did not see eye-to-eye with the Board on what needs be done.

    Pertz has experience in things business, and would not have agreed the position without a guarantee.

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    Senior Member trueview's Avatar
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    (HAR) with a p/e under 10 it seems like a buy...imo

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    Senior Member edgewound's Avatar
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    Quote Originally Posted by boputnam View Post
    From 1998 to 2004, Pertz was with IMC Global as President & CEO, then CEO & Chairman. IMC merged with Cargill to form Mosaic, a worldwide powerhouse in fertilizers.


    Pertz has experience in things business, and would not have agreed the position without a guarantee.
    Well that proves he knows his sh*t, but certainly doesn't have a grasp of the global electronics bizness.

    Wouldn't the economy be so much better if we all got a multi-million dollar guarantee in the case that we can't do our jobs?

    CEO compensation has got to change....this arena is just plain stupid. Guarantee millions to fail? This thinking is perverted.

    C'mon Mr. Bush....up that stimulus to $3.8 mill each, please.....now that'll work.
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    Moderator / Treasurer/Marketplace Czar boputnam's Avatar
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    Quote Originally Posted by edgewound View Post
    Well that proves he knows his sh*t, but certainly doesn't have a grasp of the global electronics bizness.
    Could be true - that is the easy guess by his departure.

    It could also be the hard decisions he recommended were not taken, and in the process the Board was disillusioned by his vision of what HAR needed to do to succeed today. Remember, HAR was left at the altar of a pvt equity deal gone sour. Maybe Pertz engineered that, if floundered for reasons we can only speculate on, and Pertz lost confindence in the Board's previously stated willingness (and eagerness...?) for change.

    Quote Originally Posted by edgewound View Post
    Guarantee millions to fail? This thinking is perverted.
    No, he was not given a "guarantee to fail" - that would be overtly absurd. The fact he was given the departure payment attests to the strength of his employment contract which must have had sufficient protections in the event the Board off'd him without cause. If he had failed to fulfill his obligations as CEO the Board could have dismissed him with cause and no payout. The payout suggests they agreed to disagree and HAR is trying another tack.

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    Moderator / Treasurer/Marketplace Czar boputnam's Avatar
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    Quote Originally Posted by boputnam View Post
    ...his employment contract which must have had sufficient protections in the event the Board off'd him without cause.


    From the HAR Form 8-K filed with the SEC, 24 April, 2006, containing Pertz's employment contract:
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    Senior Member edgewound's Avatar
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    Quote Originally Posted by boputnam View Post
    Could be true - that is the easy guess by his departure.

    It could also be the hard decisions he recommended were not taken, and in the process the Board was disillusioned by his vision of what HAR needed to do to succeed today. Remember, HAR was left at the altar of a pvt equity deal gone sour. Maybe Pertz engineered that, if floundered for reasons we can only speculate on, and Pertz lost confindence in the Board's previously stated willingness (and eagerness...?) for change.

    No, he was not given a "guarantee to fail" - that would be overtly absurd. The fact he was given the departure payment attests to the strength of his employment contract which must have had sufficient protections in the event the Board off'd him without cause. If he had failed to fulfill his obligations as CEO the Board could have dismissed him with cause and no payout. The payout suggests they agreed to disagree and HAR is trying another tack.
    Apparently...the HAR Board is to blame, then...because the rest of the business world saw something they didn't.

    This is from Forbes.com:


    Douglas Pertz’s arrival at Harman International Industires less than four months ago was inauspicious: the audio electronics maker’s stock fell 10% the day after the announcement in April, although you could attribute that to a 4-cent-per-share earnings miss that was reported at the same time.
    Still, you have to wonder why a guy with a resume that included a paper company and a salt maker was named chief executive of a consumer-electronics concern.
    One analyst wondered aloud on the company’s quarterly earnings conference call, and founder Sidney Harman sounded pretty sure of his choice. “We vetted this guy quite thoroughly,” Harman International (nyse: HAR - news - people ) said. “The thing that I thought separated Doug from the rest was experience.”
    Thing is, the experience wasn’t in electronics, as Harman acknowledged. “We have a very interesting business. It is almost impossible to imagine finding a chief executive officer with significant technical experience in the particular field of our engagement. And so what we look for is a literacy in that arena and we found it flourishing in Doug Pertz.”
    Fast forward to Tuesday, and the company had changed its, um, tune: “Doug Pertz is a man of integrity and talent, and we wish him well in his future endeavors,” it said in a news release, announcing his rapid departure, which, Harman said, came about by mutual agreement..
    On Tuesday, Banc of America Securities analyst Ronald Tadross said his checks at the time Pertz took the helm "gave us reservations about the relevance of his experience, and we think this course correction will free Harman to appoint a more suitable candidate."
    Maybe, but you could excuse shareholders for being impatient; the company’s stock, which closed at $102.20 the day before Pertz’s appointment was announced is down to $81.26, the last 4% of that slide occurring on Tuesday.
    Meanwhile, Kevin Brown, Harmon's chief financial officer, will take over as vice chairman and keep his role as CFO, the company said.
    A company spokesman reached via telephone Tuesday said Harman doesn't know what Pertz's future plans are.
    I guess you can say "business is business". But unfortunately....not all industries are the same.
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    Moderator / Treasurer/Marketplace Czar boputnam's Avatar
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    Quote Originally Posted by edgewound View Post
    Apparently...the HAR Board is to blame, then...because the rest of the business world saw something they didn't...
    Yeah, relevant experience would seem a must. One wonders where that nomination started from, and how it won support. :dont-know

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