Thanks to deregulation, when it comes to telecom Frederic Salerno has seen it all. Starting 37 years ago as a staff assistant at New York Telephone Co., he had risen to become Nynex Corp.'s vice chairman of finance and business development prior to its 1997 merger with Bell Atlantic Corp. He then served as Bell Atlantic's CFO until its 2000 merger with GTE Corp. New York-based Verizon Communications Inc., with $67 billion in revenues and $389 million in operating earnings in 2001, was the final product of all that consolidation. Salerno has been its CFO and vice chairman since the merger, but recently stepped down as CFO.
While deregulation was an exciting period that changed the complexion and tenor of the industry entirely, it was also a daunting period during which many telecom giants were born, some of which are showing signs of labored breathing. Still, Salerno believes the beleaguered industry is poised for a comeback "in a relatively short period of time" and notes that capital markets have returned to valuing companies on operating cash flows and not market share growth.
Salerno, 58, blames the capital markets for some of the sector's woes. If financial markets had not insisted on such unrealistic growth, the sector might not have engaged in "irrational pricing decreases" to gain market share, which, in turn, led to negative cash flow for some, he says. Those financially unsound firms then affected investors' views of the whole industry.
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He now believes telecom has hit bottom and can begin to improve, spurred by a change of investor sentiment that re-established cash flow as a key benchmark of strength. He predicts another boost in the fourth quarter this year or first quarter 2003, when Salerno expects a reviving economy to rejuvenate the telecom sector.
With the stocks of companies like WorldCom Inc. and AT&T Corp. trading at rock-bottom prices, many observers expect that telecom's recovery will include a round of consolidation that eliminates some of the weaker contenders. But Salerno disagrees. He argues that federal regulators are likely to block mergers, as they did in the case of WorldCom's proposed merger with Sprint Corp. in 2000. Plus, there is the question of how to pay for acquisitions, given the current telecom share prices, their relatively empty coffers and substantial debt load: "I think it's going to be a tough sell to the capital markets," he says.
Salerno won't leave Verizon until this fall when he gives up his title of vice chairman. Though he is retiring from Verizon, his financial expertise won't go to waste. He serves on four boards–Akamai Technologies Inc., Avnet Inc., Bear Stearns Co. and Viacom Inc.–and says he may join more. Salerno notes that with Enron Corp.'s collapse and other events, financial executives with time on their hands are in great demand these days to serve on boards.
Boards need to get "much more involved in what's going on in the business," Salerno says. But he favors giving boards more guidance rather than imposing additional regulations or laws. "If you have a very gray area, it's hard to operate," he says. "If you have … very clear lines that separate what's right and wrong clearly, you can operate much more effectively."
Salerno's successor at Verizon, Doreen Toben, is also a long-time telecom executive. Toben, 52, began her career in AT&T's treasury in 1972, then moved to Bell Atlantic, where she served as controller. Most recently, she was CFO for Verizon's Telecom Group.
Sun Microsystems Inc., the $18.3 billion computer server maker, named Steve McGowan CFO and executive vice president of corporate resources. McGowan, 53, succeeds Michael Lehman, 51, who is shifting to part-time work as a teacher and mentor after almost 15 years with Sun. McGowan most recently served as vice president of finance, planning and administration for Sun's global sales operation. He joined Sun in 1992 from Digital Equipment Corp.
Air Products and Chemicals Inc., a $5.7 billion provider of industrial gases and chemicals based in Lehigh Valley, Pa., named John Owings CFO and vice president. Owings succeeds Leo Daley, who will retire this summer after 23 years with the company. Owings, 52, most recently was senior vice president and director of finance for Motorola Inc.'s personal communications unit and had been at Motorola since 1973.
AdvancePCS Inc., a $7 billion pharmacy management company located in Irving, Texas, appointed Yon Yoon Jorden as CFO and executive vice president. Jorden succeeds Danny Phillips, who was promoted to executive vice president of corporate development. Jorden was CFO of Informix Corp., now known as Ascential Software, in 2000, and earlier served as CFO at Oxford Health Plans and WellPoint Health.
Klaus Stegemann was named CFO of Siemens Corp., the $19 billion U.S. subsidiary of German electronics and engineering company Siemens AG. Stegemann succeeds Gerald Wright, who was named CFO of Siemens Canada. Stegemann has worked for Siemens since 1973 and most recently was CFO of the angiography, fluoroscopy and radiographic systems business of Siemens AG Medical Solutions in Germany.
Dom Cecere joined KB Home, a $4.5 billion, Los Angeles-based homebuilder and mortgage provider, as CFO and senior vice president, replacing Thomas Conforti, who resigned in June 2001. Cecere, 52, most recently was a consultant for Gryphon Investors and previously spent seven years at Owens Corning Inc. in positions that included chief operating officer. He also worked 21 years at Honeywell Inc.
Cleveland-based Eaton Corp., a $7.3 billion diversified manufacturer, appointed Richard Fearon as chief financial and planning officer and executive vice president. Fearon, 46, succeeds Adrian Dillon, who left to join Agilent Technologies Inc. in November 2001. Fearon joins Eaton from Willow Place Partners, a corporate advisory firm he founded in 2001. Earlier, he served as senior vice president of corporate development at Transamerica Corp. and worked at NatSteel Ltd. in Singapore.
Ingersoll-Rand Co. Ltd., a $9.7 billion diversified industrial company with headquarters in New Jersey, hired Timothy McLevish as CFO and senior vice president. McLevish, 47, served as CFO of Mead Corp. from 1999 until February 2002, when it merged with Westvaco Corp. He had joined Mead in 1987. McLevish replaces David Devonshire, who left Ingersoll-Rand in January and has since become CFO of Motorola Inc.
Thomas Miklich was appointed CFO of OM Group Inc., a Cleveland-based maker of metal-based specialty chemicals with 2001 sales of $2.4 billion. He replaces James Materna, who is retiring after 10 years as CFO. Miklich, 54, most recently was CFO for Invacare Corp., a leading maker of wheelchairs, and earlier was CFO of The Sherwin-Williams Co.
Kevin DeNicola has been named CFO and senior vice president of Lyondell Chemical Corp., a Houston company with 2001 revenues of $3.2 billion, when current CFO Robert Blakely retires on June 30. DeNicola, 47, is currently vice president of corporate development. He joined Lyondell in 1990 and has worked in corporate planning, business management and investor relations. Earlier, he worked for Monsanto and Ernst & Young LLP.
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