CDK executives blame the reorg but why would a company do a reorg every 6 months. Are they not able to get it right first time or after multiple attempts? Leadership is in such a bad state that they are now justifying the need to keep changing the vision and goals every 6 months. My whole product wing (very talented) was fired and our product is doing really well in the market. Somehow it seems ELT have no clue on what they are doing and the people don't really understand all the business around a dealership except DMS. I feel other competitors should hire us and together we will show CDK how a business is done. They are just run by a group of old executives who have lost the knack for technology and sense of how a product company should innovate and disrupt a market.
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They just need to sell it.
Assuming they are still looking for $10-12 billion, are there any plausible potential buyers?
By the way, the company netted 15M from the corp tax cuts. It’s “restructuring” (aka severance packages) expenses will be 25M this year. Make of that what you will.
It hasn’t been about Product in several years. We were spun out without enough debt which was basically chum in the water for activist investors. Once they also found R&R was running at 45% vs our 20%, they had all they needed to attract a different kind of shareholder, one who was really only interested in short (3-5 year) term results rather than long term stability and dividends (ie not ADP type shareholders). The game plan shortly after they got involved was pretty straight forward:
0) find a CEO and executive team willing to do the dirty work
1) take on debt ($400M last year alone) and use the proceeds to buy back shares which pumps up share price,
2) cut $400M in costs, probably 250M of which is in compensation. I believe I once calculated that at about 3500 of our then 9000 Associates. I’d guess this latest round got them to 2500-3000 since the spin out, though many of those heads were replaced in India.
3) create a story that will be intriguing to a buyer who can take it private and milk it now that all of the hard restructuring work is done. They can take over as an “under new management” savior who will bring in a management team actually interested in runnng a software company. “Sorry customers, Associates, market... yeah those last guys were a--holes, but we’ve got this now”. It may not work and the brand may be irreparably ruined, but the current guys (board, exec team and shareholders) don’t really care. They just need to sell it.
4) cash out and move on to the next victim