The charts says it all.
Posted on 06/03/2002 1:21:36 PM PDT by GeneD
NEW YORK (CBS.MW) - Shares of Tyco International lost more than a quarter of their value Monday after Dennis Kozlowski resigned as chairman and chief executive of the diversified conglomerate amid reports that he is under criminal investigation for allegedly avoiding New York sales taxes.
The company said in a statement that Kozlowski had decided to leave the company for "personal reasons."
John Fort, who served as Tyco chairman and CEO from 1982 to 1992, will assume executive responsibilities until a permanent replacement can be hired.
The stock had tumbled $5.94, or 27 percent, to $16.01 by late afternoon trade. Tyco's volume was a heavy 95 million shares, almost quadrupling average trading levels and making it the most-active stock by far.
"The board learned about the investigation last Friday and the end result was Dennis's resignation," said a spokesman for Tyco.
Kozlowski helped transform Tyco into one of the world's biggest companies through a series of acquisitions but also came under harsh criticism in recent months over the plunge in the company's stock price as reports of accounting irregularities came to the fore.
Tyco is among several large firms that have come under increased scrutiny in the aftermath of Enron as analysts and journalists questioned the company's complex accounting methods. The Securities and Exchange Commission has investigated the company for the way it accounts for its acquisitions in the past, but nothing came out of the probes. The Tyco spokesman said the company is not currently being investigated by the SEC.
But Manhattan District Attorney Robert Morgenthau is investigating the possibility that Kozlowski moved hundreds of million of dollars into family trusts and used those trusts to buy goods and services without paying state sales tax, The New York Times reported, citing lawyers involved in the inquiry. See full New York Times story.
The paper said Kozlowski has hired experienced criminal lawyer Stephen E. Kaufman to represent him.
The paper said a grand jury has issued subpoenas and taken testimony, but no charges have yet been filed.
Bermuda-based Tyco is one of the world's biggest companies with some 270,000 employees making everything from electrical components to medical products. At its heyday, it was one of the top 20 companies on the New York Stock Exchange in terms of market capitalization. But since December, Tyco's shares have fallen around two thirds - hurt by the increased accounting scrutiny as well as concerns that the debt-laden company could face a cash crunch following a series of acquisitions, including last year's $10 billion buy of the CIT Group.
Tyco reiterated its commitment to "monetize" its CIT unit through either an outright sale or an initial public offering, and to significantly reduce its debt.
Tyco has been looking to sell the CIT group in order raise money and strengthen its balance sheet. Talks to sell CIT to Lehman Bros. broke down recently after the broker turned gun-shy after the $5 billion offer was revealed publicly.
"We plan to complete the IPO of CIT by the end of June," said Fort. "Also, I fully support the evolution of the company's long-term operating strategy to focus more on organic growth. We will continue with our plans to make return on capital a key part of our compensation system along with earnings growth and cash flow."
Salomon downgrades
Salomon Smith Barney downgraded the shares of Tyco to "neutral" from "buy" following the news.
Analyst Jeffrey Sprague said he was concerned about business disruptions, other possible management departures and the company's ability to complete its restructuring.
"We have been a strong supporter of Tyco and believe there is significant value in its business," Sprague said in a note to clients. "However, this is obviously a material piece of new information and we can no longer recommend the stock despite its low apparent valuation."
Allen Wan is a news editor for CBS.MarketWatch.com in New York.
Which, once again, proves that these stock recommendations are worse than no recommendation at all.
yup, perhaps someday people will finally figure out that free advice from brokers is rarely even worth what they paid for it
rules of the brokerage industry -
1) sell things to customers and generate income for the firm, whether or not the customer makes money is irrelevant
2) if the customer is out of money, find another customer
3) repeat 1) and 2) as necessary
Yeah. They're gonna throw his personal butt in the pokey.
First good news I've had all day. Thanks.
I have always maintained any investigation of corporate hanky-panky must be linked
to the pankying individual's IRS returns. Or did I say something politically incorrect?
TYCO Take Your Company Over
Gonna have to find another saying now. How about Take Your Cash Out?
The charts says it all.
Anyone know why it dipped so hard at the end of April?
Of course, all my taxable goods are up there and not down here in SC...Unlike Mr. Kozlowski...
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