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Solectron (SLR) CEO Mike Cannon yesterday resigned to take over as president of Global Operations at Dell (DELL).

Solectron CFO Paul Tufano takes over on an interim basis while they search for a permanent replacement. So, I think this pretty much tells you how things are going at Solectron right now: Not a good thing to see your CEO quit to take on a lower level job at another company, even a bigger company. Nope, not a good sign at all. Forthwith, a few comments from the Street:

  • Steve Fox, Merrill Lynch: The timing of Cannon’s resignation will likely raise investor concerns especially since a new CEO could reevaluate current strategies. Thus, the transition to a new CEO raises a risk that the company takes one step back before it takes two steps forward. Rating: Sell.
  • Amit Daryanani, RBC Capital: Remain on the sidelines as management changes should exacerbate the lack of profitability at SLR. Recent results continue to validate our negative stance, and while SLR has made progress on the revenue front it has come at the cost of cash flow and margins, an unsustainable dynamic. Rating: Underperform.
  • Louis Miscioscia, Cowen: We are not surprised to hear about Cannon’s resignation, since it’s been our belief that the board has become increasingly focused on the lack of progress for the multi-year turnaround effort. It has not only been six years since the tech bubble burst, it’s been four with Cannon at the helm of Solectron. On the opposite end, we were somewhat surprised that Michael Dell would select a CEO from a U.S.-based EMS provider given Dell’s Asian-based supply chain and that over time Dell has pulled almost all its business from the U.S. providers and given int to Asian players because of two factors: price and quality. Rating: Neutral.
  • Long Jiang, UBS: The CEO resignation could bring business continuity and execution risks to SLR near term while the company is striving to recover from revenue and profit margin setbacks in FY ‘06. On the other hand, if SLR can bring in a strong outsider to the CEO post, it could be a catalyst for a fresh approach and strategies to tackle current challenges. Rating: Neutral.
  • Solectron today is down 3 cents, at $3.33. Dell is up 55 cents at $24.16.

    SLR vs. DELL 1-yr chart

    dell slr chart

    Source: Solectron: CEO Split for Dell Could Mean Bad News