DivX announced Tuesday, that John Tanner, their Chief Financial Officer, has resigned for âpersonal reasonsâ? and will be leaving the company at the end of May. Tanner has spent the last 2 and a half years working for DivX and to see him leave, less then a year after the company went public, does comes as a bit of a surprise.
Understandably, the market is concerned over the development. Shenandoah Capital calls the event a âlegitimate red flag.â?
Irrespective, upper-echelon management leaving is a legitimate fundamental red flag. In the specific case of a CFO change, a decline in results is a reasonable expectation. It is the âunexpectedâ? change, rather than the planned change that produces the warning.
Itâs hard to argue that the loss of Tanner is a positive catalyst for DivXâs stock, but other then whatever lingering regrets, Tanner might now have about getting that DivX tattoo Iâm not convinced that this news is really bad for anyone.
DivX of course, has not publically shared the details behind Tannerâs âpersonal reasonsâ? for leaving, but the lack of things like facts and details, rarely stops us pesky bloggers from speculating on what we think is really going on, so here is my take on the news.
I think that DivX originally brought Tanner on, specifically to take them public and that âpersonal reasonsâ? is really code for the Pacific Ocean.
When DivX first hired Tanner, the company was very much focused on trying to get the company to the next level. DivX CEO Jordan Greenhall described Tanner as being an âeminently qualified, intelligent and experienced CFO who brings extremely relevant expertise guiding technology companies through growth periods.â?
DivX knew that they had the potential to go public, but they also knew that they needed help, so they brought in Tanner, who has been a proven rainmaker in raising funds. DivX was the fourth company that he helped to take public, the second as a CFO.
Before joining DivX, Tanner helped to take the company AdForce from a 35 person start up to a Nasdaq registrant that eventually sold itself to CMGI in a $1.7 billion buyout. Prior to AdForce, Tanner helped oversee the financial turnaround of NCD, Inc. and prior that he helped to grow revenues at Aspect Communications from $11 million to over $300 million. Since joining DivX, Tanner saw the company go from $16 million a year in revenue, to over $59 million for all of 06. During that time, earnings went from -$4.3 million in 2004 to $16.4 million in ’06.
Itâs important to consider Tannerâs recent move in a historical context because the DivX of today is a very different animal then the DivX Tanner joined at the end of ’04. Tanner helped to successfully take DivX public, but now that DivX has access to $150 million in cash, the company needs a CFO with a different skillset then an IPO specialist.
For the pessimists out there, you can look at this change as an early signal of problems at the company, but as an optimist I see this as an opportunity for management to strengthen their team with a CFO better suited for managing a growing public company.
Even before Tanner left, DivX has been making changes to their staff. On March 27th, they promoted Kevin Hell to be the President of the company and a week before that they announced that they hired Patrice Lagrange (formerly with Adobe) and Mark Viken (a Sony Electronics veteran).
DivX has done a great job of attracting highly skilled employees, even from the start. Check out WebTVWireâs interview with CXO Darrius Thompson and you can tell that these guys understand digital technology.
In Tannerâs case though, DivX has also shown, that they know when itâs important to bring someone in from the outside. We will know more about DivXâs plans for finding a new CFO, when they report earnings next week, but I think that Wall St. will eventually want to see someone in the CFO position that they feel is looking out for their interests.
Tanner had experience in the public markets and was the perfect Yin to Greenhallâs Yang. Greenhall is a great visionary, but it was Tanner who knew what Wall St loved to hear. He would always bring investors back to DivXâs commitment to growing their business, but to do it as fiscally responsibly as possible. Tanner will be missed of course, but itâs hard to tell if this really will be a negative until we know who DivX plans on replacing him with.
Davis Freeberg is a technology enthusiast living in the Bay Area. He enjoys writing about movies, music, and the impact that digital technology is having on traditional media. You can read more of his coverage on technology at www.davisfreeberg.com.
It is than.