RE: COOWhat Dundee securities had to say about the management change...
CREO (CRE-TSE) - Management Change
The News
Creo announced that Erez Meltzer is stepping down from his roles as Chief Operating Officer and Executive Vice President, Creo Products Inc. and President of CreoScitex Corporation Ltd (Israel). Michael Rolant, currently Vice President of Business Operations for CreoScitex, will be assuming the role of President, CreoScitex Corporation Ltd (Israel).
Our Thoughts
Rolant joined Creo several years ago as manager of the customer support organization in Vancouver. Under his tenure, the organization has grown from 20 to 450 people, and following the Scitex asset purchase, stands at 1,100. Since September of 2000, Mr. Rolant (a native Israeli) has lived in Israel and has worked closely with the CreoScitex Ltd (Israel) managers. He will be taking on a staff of 1,100, which is a similar sized organization to that which he was running.
Erez Meltzer joined Scitex in the 96/97 time frame as part of the team
that turned around the struggling Scitex. Meltzer is a well-respected
manager, but we suspect that once again, he was much more attuned to the Scitex 'command and control' regime, rather than Creo's more decentralized approach to managing the business.
We believe that this is the last change of substance that will take place at the upper management ranks, as most of the positions held by former Scitex managers have been filled by Creo. We have no doubt that the Scitex asset purchase has been more challenging than originally anticipated by Creo, and much of this difficulty related to starkly different management styles and cultures. We believe Creo assumed, perhaps naively, that their culture would permeate through the traditional European hierarchy of Scitex. This didn't take place. In the second half of 2000, Creo began to take more draconian action with regard to replacing many of the top Scitex managers. This process, now at an end, better positions the company to make decisions and build on their leading share in this growing market.
Quarter is Progressing Well
Operationally, the quarter is moving ahead reasonably well, with better competitive conditions than the fiscal first quarter. We think these business conditions, bolstered by an improving environment for thermal plate pricing, should provide for better financial results on a sequential basis over the remainder of the fiscal year. While a deteriorating economic picture impacts total spending on printing equipment, we think the hardest hit will be the printing press vendors, such as Heidelberg, MAN Roland, and Komori. Given that Creo's CTP solution saves the customer approximately $1 per square foot of plate processing and improves workflow through prepress, the commercial printer can rationalize the purchase of a CTP system. The average payback has been in the order of 18 months, and continues to decrease. Our thoughts are supported by customer feedback.
Creo has held up better than its high-tech brethren in the current bear market. We expect the stock to outperform its peer group over the next 2-3 years and we reiterate our BUY rating.