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Summary

  • Three top executives have left... all in the past 12 months.
  • The company hired a new CFO from within at a time when it needs new leaders.
  • The fact that they hired internally could be a sign that the company's "rich" compensation packages are viewed as worthless as the stock hit a 52 week low today.

To those who follow the company, Millennial Media's (NYSE:MM) struggles are well documented. The company is down 68% YTD, so when the company announced that CFO Michael Avon would step down after Q2 2014, there was reason for investors to have a glimmer of hope for a potential turnaround. As I have written before, the company sure knows how to reward executives. So, perhaps the company could attract an executive with top talent for the CFO position, by pitching it as a turnaround job that could end in riches if done successfully. To refresh your memory the company's stock-based compensation has soared while its share price has cratered. That is why the company's announcement that Andrew Jeanneret, previously the company's Chief Accounting Officer, would take over as CFO was met with disappointment from the market. Millennial Media finished the day down over 6%, which I believe implies the market was hoping for a better replacement. I draw three takeaways from the departure of former CFO Michael Avon and the hiring of Andrew Jeanneret as CFO.

1) Three top executives have left YTD, namely the CEO Paul Palmieri, the CFO Michael Avon, and Mollie Spilman EVP of Global Sales & Operations. Noticing a trend? If you read past conference call transcripts or mobile technology webcasts, all three of them stated in the last year of their respective tenures that Millennial Media has an incredibly bright future…but clearly not bright enough for them to be a part of.

2) I would classify the hiring of the Chief Accounting Officer to become the CFO as uninspiring, and clearly the market does as well. The company has not been successful to date, and I think they should have looked to hire an executive from outside of the company. By hiring internally it means the company is likely to continue to trend in the same downward trajectory it has been in since it went public. Additionally, from a cultural standpoint it signifies to employees and investors that they will see more of the same at a time when new ideas and new directions are clearly needed. I would not underestimate the last point, as Millennial Media is a very sales oriented company. Morale appears to be low when looking at the company's recent reviews on Glassdoor. As one person put it: "Most of the pros sadly are from before the co-founder and CTO left." When morale is low in a sales oriented business that does not bode well for the future. In a time when new direction was needed, the company instead chose to hire internally-a mistake in my opinion.

3) Lastly, the very fact that they hired the Chief Accounting Officer when it was very clear they needed outside help indicates to me that the company could not attract a top talent. Considering it took several weeks to appoint a new CFO, I believe the company went to look externally for a CFO but could not find anyone to take the position. If this is indeed true, as I believe it to be, it should be another huge red flag for the company, considering they tend to reward executives handsomely, as I mentioned above.

From the recent departures and the fact that the new CFO was hired internally, it seems to me that executives know that any stock based compensation they earn will likely be worthless and that is why they chose to leave, and that is likely why no outsider would accept the role as CFO.

Source: Millennial Media: Recent Departures And An Uninspiring Hiring Leave Investors Disappointed