The hope at Lehman Brothers is that a management shakeup Thursday will contain the damage of a stunning quarterly loss – yet some on Wall Street fear this is one more step toward a more dramatic outcome for the embattled investment bank.
The ouster of Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory was an attempt to quell investor anger that Lehman's leadership has failed them. But, with a four-day stock plunge that wiped $4.5 billion from the investment bank's market value, it was unclear whether the upheaval will be enough to satisfy critics.
“These people deserve to be fired,” said Dick Bove, an analyst with Ladenburg, Thalmann & Co. “Their mistakes cost their shareholders billions of dollars in wealth.”
Richard Fuld, who took the company public in 1994, has kept a low profile in recent days by refusing interviews and commenting only through a statement about the dismissals.
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There is growing speculation that Fuld – the Street's longest serving CEO – might scramble to find a major outside investor or negotiate a sale to avoid his own demise by Lehman's board.
Names from private-equity firm Blackstone Group Inc. to global bank HSBC Holdings PLC have been bandied about as possible suitors should Fuld want to arrange a buyer, though none are commenting on the possibility.
Most analysts are confident that Lehman can survive on its own without a suitor, given the underlying strength of its business.
And while Lehman might have bought itself some more time by shaking up its top ranks, the question remains how much it has left.
“I think they have a few options, but they are becoming more and more limited as the stock is pressured,” said Matthew Albrecht, financials analyst for Standard & Poor's.
“It is hard to rule anything out at this point. Confidence in the firm is the paramount issue, and if your counterparties and clients don't have confidence than you can't do business in this market.”