NEW YORK (CNN/Money) -
Confession: In my formative years, I was a teenage metal-head. Three-quarter-length concert Ts, minimullet, the whole bit. Yet as an impressionable 14-year-old listening to Judas Priest, little did I know that I'd one day call on singer Rob Halford's pearlet of wisdom, "Some Heads Are Gonna Roll," to guide me through the vagaries of the tech world circa 2002.
But so it is. And so it has been for the last week or so, with every day seeming to bring fresh news of high-level resignations at leading tech firms. The most recent bloodshed has come from Oracle (ORCL: down $0.01 to $8.42, Research, Estimates) and Sun (SUNW: down $0.69 to $6.08, Research, Estimates), with senior execs reportedly heading for the exits at both companies.
Now the handheld computer sector, led by Palm (PALM: down $0.03 to $2.53, Research, Estimates) and Handspring (HAND: unchanged at $2.10, Research, Estimates), is also experiencing some shuffling of heads. Not all of the news involves exits, however. In fact, the folks at Palm were popping open champagne (surely not to celebrate their latest quarterly numbers) after the promotion of Todd Bradley to head up Palm Solutions Group -- the software side of Palm's business. Bradley, formerly the group's chief operating officer, will have the title of president and COO. The company claims that it is still seeking a CEO for the division, which will become a separate entity once the planned bifurcation of Palm into separate hardware and software companies is complete. Bradley isn't a lock for the CEO job, either. "We're building the management bench strength we need to support the eventual external separation of our two Palm businesses," Palm CEO Eric Benhamou said in a statement regarding Bradley's promotion.
Still, the move has many believing that the Palm split -- dividing the firm into PalmSource (for software) and Palm Solutions Group (for hardware) -- will happen sooner rather than later. "I'd look for it to happen this summer," says Dylan Brooks, a senior analyst at Jupiter Media Metrix. "In terms of the way the company functions, it's been splitting for the last year."
For Palm, breaking up might be the easy part; it's what comes next that's the problem. Palm's software business is coming under increasing competitive pressure from Symbian, an operating system supported by Microsoft (MSFT: up $0.23 to $49.79, Research, Estimates) and major mobile-phone makers including Ericsson (ERICY: down $0.08 to $2.21, Research, Estimates), Motorola (MOT: down $0.04 to $14.85, Research, Estimates), and Nokia (NOK: down $0.56 to $14.87, Research, Estimates). Symbian is moving from cell phones to PDAs, while Palm is doing just the reverse. A more pressing concern for PalmSource, however, is shoring up its eroding OS market share. According to Gartner Dataquest, Palm's share of the market slipped from 75 percent in 1999 to 57 percent in 2001.
Alas, there was no champagne in Handspringland, as CFO Bernard Whitney announced on May 2 that he was resigning, effective July 1, for "personal reasons." (That's also the day Sun's Ed Zander is scheduled to depart from his post as president and COO. Hmm.) Frankly, if my professional problems looked anything like Handspring's, I'd want to spend time focusing on my personal life as well. Handspring lost $23.7 million on $59.7 million in revenue for the quarter ending March 30, compared with a $27.2 million loss on revenue of $123.8 million for the same quarter a year ago. Not good.
Handspring realizes that the handheld market can't sustain the kind of growth needed to support the company, so it has branched out to create "communicators" such as the Treo -- a nifty combination PDA and cell phone. Sales numbers for the Treo aren't yet available, but if they're anything less than expected, you can count on seeing a repeat of the glum analyst reaction we saw during the last month.
The move into communicators is an admission that Handspring's strength "might not be as a consumer electronics company," Jupiter's Brooks says. "Handspring is good at innovating, but as other consumer electronics companies move into the PDA space, it becomes a margin play" -- a play that a company of Handspring's size might not be able to win.
Heads are likely to roll downstream as well. Consider the recent comments from Michael Marks, CEO of Flextronics (FLEX: up $0.40 to $12.90, Research, Estimates), a contract manufacturer for dozens of technology companies including Palm and Handspring. Marks says that he "can't remember a more difficult period" and that many of his customers are "losing money and desperate to take costs down." Not surprisingly, Flextronics saw analysts downgrade its stock 17 times in the last month.
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While we're at it, where else should we look for executive resignations? My money is on Verisign (VRSN: down $0.41 to $8.34, Research, Estimates) (thankfully, that's just a turn of a phrase, not a personal investment disclosure). Verisign's stock took a beating in the last two weeks, after it announced that its active domain roster stood at 12 million, down from 15.5 million registrations a year ago.
As if it weren't bad enough that its core business is eroding at such an astonishing clip, an audit of the company -- which was due five months ago -- still hasn't come in. The audit's focus? To make sure a "firewall" exists between the company's wholesale and retail divisions. Happily, the audit is being performed by Ernst & Young. If it were Arthur Andersen, we'd have to give up all hope.
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