Maxtor CEO Bolts

Maxtor Corp. (NYSE: MXO) has lost another CFO -- but this time he also happened to be the CEO of the struggling disk-drive manufacturer.

The company announced Monday that Paul Tufano has stepped down as CEO, president, and acting CFO -- the last job one he assumed after two CFOs left in sequence earlier this year.

On Wednesday, Maxtor released news that Michael J. Wingert is its new president and COO (see Maxtor Names President). Wingert worked for ten years at Maxtor and was most recently executive VP and general manager of the Server Products Group there. He left the company in June 2004 to become COO of Cornice, a maker of compact storage devices for consumer electronics. Wingert was promoted to CEO of Cornice in September, but apparently has decided to return to his roots after just four months away.

Though Wingert will be president of Maxtor, he won't be CEO. That post is now held by C. S. Park, who was Maxtors president and CEO in 1995 and 1996 and has been on Maxtor’s board since 1994. Wingert will report to Park. Tufano had been Maxtor's CEO since 2003. The board continues to search for a CFO.

No reason was given for Tufano's departure, but financial analysts suspect he was pushed by the board after a series of snafus. The company lost $90.6 million last quarter and forecast losses of $45 million to $55 million this quarter (see Maxtor's Stuck in the Mud). Then, there were the CFO boltings, a large layoff, and embarrassing product problems earlier this year.“Given the abrupt nature of his departure, we believe the board of directors asked for his resignation given Maxtor’s poor performance over the last four quarters and the unclear future path to profitability,” Piper Jaffray's Les Santiago writes in a research note. Santiago also writes that the given move is likely to be viewed as a positive.

Gabriel Tsuboyama of Deutsche Bank agrees on both counts: Tufano was pushed and the move will be considered positive. “We believe Tufano’s departure was forced by the board of directors,” he also writes in a research note. “We believe this move could be viewed as a positive, proactive step by the board.”

A change is clearly in order. It's not as though things have been running smoothly for the Milpitas, Calif.-based company.

Robert Edwards resigned as CFO in March to take the CFO job at Safeway, and his replacement Michael Bless left in October after less than two months on the job (see Maxtor Gets New CFO and Maxtor's Bad Hair Day). When Maxtor reported earnings October 20, Tufano called Bless’s sudden departure “the white elephant in the living room” but said the CFO left for personal reasons and his exit should not be seen as a negative on Maxtor’s financial practices.

Maxtor had other problems besides CFOs changing as often as Spinal Tap changed drummers. It announced the layoff of around 450 employees in July and was forced to re-qualify drives with Dell Inc. (Nasdaq: DELL) because of production issues in the second quarter (see Maxtor Cuts Heads, Guidance).What will change now? In a statement released today, Park said the executive team “will be working hard to return the company to profitability as soon as possible." Analysts suspect that means dumping unprofitable parts of its business, forming partnerships, or becoming an acquisition target.

“We also cannot rule out the possibility of the company positioning itself to be acquired due to this sudden and drastic change in leadership,” Santiago writes.

Tsuboyama last week issued a note speculating that Hitachi Global Storage Technologies (Hitachi GST) and Samsung Corp.’s disk-drive division might buy Maxtor. After today’s news, however, he writes that a takeover by either company is not likely, although he believes “Maxtor is exploring all opportunities.”

C. S. Park was most recently a managing director and investment partner at H&Q Asia Pacific. He has also been CEO of Hynix Semiconductor and MMC Technology, Maxtor's disk-media manufacturing subsidiary.

— Dave Raffo, Senior Editor, Byte and Switch0