Turning Up the Heat at Cisco

BUSINESS WEEK RECENTLY asked, “Can Mike Volpi make Cisco sizzle again?” Last year Cisco CEO John Chambers promoted Volpi, MBA ’94, to chief strategist, with the job of improving revenues—despite the tougher marketplace for Cisco’s high-tech products and the downturn in venture capital spending on the types of startups that Volpi likes to buy for the company.

With all Volpi’s acquisitions, Cisco hallways resemble “a little U.N.,” the magazine said, adding that the company was “a perfect environment for Volpi’s multicultural upbringing” in Italy and Japan. Paraphrasing Volpi’s father, the head of a Japanese subsidiary of a Swiss bank, the magazine said Mike “learned flexibility from the Italians, subtlety from the Japanese, and pragmatism and fairness from American business culture.”

Get This Man to California

SOARING POWER PRICES don’t bode ill for everyone. David Peterson, SEP ’92, wound up on the cover of Corporate Report, Minnesota’s business magazine, for running the state’s best- performing publicly held company in 2000. Peterson is CEO of Minneapolis-based NRG Energy, a spin-off created a dozen years ago by Northern States Power Co. to take advantage of electricity deregulation.

His first strategy—to build and operate coal-fueled electricity-generation plants—didn’t fly. His second—acquiring old power plants around the world and cleaning them up—positioned NRG to go public in May 2000 and profit handsomely during the following summer from heat waves in the West and Northeast and the power outages of other producers. Peterson has acquired plants in Latin America, Europe, and Asia, making NRG the seventh-largest independent power producer in the world.

One Charge Too Many?

THEY ARE CALLED one-time charges, but many companies seem addicted to repeat write-offs, which eat into investor earnings. When Forbes looked for someone to analyze the phenomenon, they turned to Michelle Clayman, MBA ’79, chief investment officer at the New York investment management firm New Amsterdam Partners.

Clayman screened for firms that took one-time charges or extraordinary ones in at least three of five years between 1995 and 1999. Thirty-one companies made her latest list, and nearly 70 percent of them underperformed the S&P during the five-year window.

“If you are running your business well, in most cases you wouldn’t need to take three charges in five years,” Clayman told Forbes. But she also pointed out that charges aren’t all equally bad. Retailer Target took four for early retirement of debt that the company was financing at a lower rate, while Kmart took three for closing ailing stores, inventory write-downs, and “redefining” its Internet business. Kmart stock has languished, while Target’s stock trounced the S&P’s 161 percent growth by jumping 512 percent.

Soft Money in Software Valley

IN THEIR EFFORT TO REFORM campaign financing, U.S. Senators John McCain and Russell Feingold both have pointed to Silicon Valley as one of the fastest-growing sources of “soft money,” the unregulated and largest source of funds for the two major political parties. High tech had lagged behind other industries in making political contributions, but the San Jose Mercury News estimated that San Francisco Bay Area high-tech interests made at least $13 million in soft-money contributions during the 1999-2000 campaign.

Business School lecturer Joel Hyatt chaired the valley’s national Democratic fundraising effort, and Portola Valley investor Ken Eldred, MBA ’68, worked on the Republican’s. “We wanted the Republican Party to know they shouldn’t write Silicon Valley off as the bastion of liberalism they thought it was,” Eldred told the Mercury. Hyatt said his job was mostly convincing executives to get engaged in the process at all: “Once they said yes, there was no negotiating to get $100,000 or $250,000 checks.”

Dry-Diving for Oil

"THE HIVE" AT OIL GIANT BP is a $500,000 room where geologists, engineers, and drillers gather to view 3-D images of the ocean floor and decide in a few hours what used to take weeks—whether to drill in a particular spot, and if so, how.

BP group chief executive Sir John Browne, Sloan ’81, has made it possible for the company to build 20 hives from the savings on one deep-ocean well. His bold foray into deeper waters while other companies dallied on the ocean shelves is risky, said Forbes, but has positioned the world’s third-largest oil company as “the hottest prospect in the oil patch.” Not long after the high praise from the magazine, Sir John was appointed to the British House of Lords. Knighted by Queen Elizabeth in 1998, he now is one of the “people’s peers” added to the House as part of a constitutional reform.

Good Companies Sprout Good Execs

THE AMERICAN PRESS LOVES to make superstars of top-ranking business executives, but Jim Collins, MBA ’83, is convinced that good company cultures make good executives, rather than the other way around. Collins, a former Business School lecturer and the coauthor with GSB professor Jerry Porras of the 1994 best-selling book Built to Last, is working on a new book about companies that started out mediocre and became great, according to Fortune. “After nearly a year of winnowing, just 11 companies were left standing,” Fortune says. Who were their CEOs? Collins told the magazine that 10 were insiders, largely anonymous insiders, and most did not have grand strategies but rather made small, incremental changes. Says Collins: “In the 1500s, people ascribed all events they didn’t understand to God. . . . Now, our all-purpose explanation is leadership.”

He’s a Classic

WHEN THE Industry Standard looked around business schools for “typical” students to profile, they chose second-year student Mark Shaw to represent the GSB. A New Jersey native who says he was fascinated by grocery store products and packaging as a child, Shaw was instrumental in bringing Ben and Jerry’s Chocolate Chip Cookie Dough ice cream to the masses.

Shaw got a taste of startups last summer as “entrepreneur in residence” at Chingari in Palo Alto and told the Standard that despite the market downturn, he wants to jump back into a startup after graduation. Associate professor Ezra Zuckerman described Shaw as a “classic” GSB student because of the combination of his analytical skills and hands-on experience.

Back to the Future

DURING THE HEIGHT of the Internet boom, when some of Stanford’s business and engineering students dropped out of degree programs to start companies, recruiters from traditional firms found it hard to compete and complained that some students even stood them up for interview appointments.

Now Newsweek reports that at the GSB this spring, “nearly a third of the companies that had signed up to recruit graduating MBAs at the annual Growth Company Career Forum didn’t bother to show up.”

The magazine interviewed several members of the Class of 2002 about the changing recruiting environment and their career plans. “Once upon a time, great job offers piled up like loose change,” wrote Greg Yap in his diary, which Newsweek published on its Web site. “As soon as we got rid of some, more would come in.”

Yap, who has a background in molecular biology, has set his sights on a job in the biotech industry. The article also quoted faculty and former admissions director Marie Mookini on the changing environment, which entrepreneurship professor Irving Grousbeck described as “back to reality.”

Entrepreneurial Debuts

WHEN SHE READ about the relatively new Girls Middle School in Mountain View, Calif., Lana Guernsey, Sloan ’01, quit her corporate job and asked to teach a course in entrepreneurship. There, she arranged for seventh and eighth graders to present their business plans before a crowd of 200 people, including a panel of venture capitalists.

“A third of my class—some of whom were not native [English] speakers and some from low-income backgrounds—had come to the school as a result of scholarships,” Guernsey told the San Jose Mercury News. “Yet they presented their ideas like kids of privilege and wealth.”

Inspired by her students and the efforts of one of their late parents to sustain school diversity, Guernsey dug into her savings and solicited contributions, raising $125,000 for the school’s Henry Page memorial scholarship fund.

When Staying Together Makes Cents

DUBBED "CARVE-OUTS," the Web businesses of Fortune 500 companies increasingly are being spun out as separate businesses and may even become successful, Fortune said recently. Among those analyzing when to pick up the carving knife are Theresia Ranzetta, MBA ’94, a partner in the venture capital firm Accel, and David Sanderson, MBA ’90, of eVolution Global Partners.

“When we go into any of these investments, our goal is to create a viable stand-alone business,” Ranzetta told the magazine. “But there may be situations where it ends up becoming more valuable to remain integrated with the parent company.” Added Sanderson: “The Walmart.coms should remain a part of the Wal-Marts.” Good carve-outs are “non-core but mission-critical,” he said. He cites his firm’s investment in MarketMile, a portal of American Express and Ventro, from which midsized companies buy office supplies.

Venture Capitalists Filling Piggy Banks

VENTURE CAPITALISTS are still raising money but stock-piling rather than spending it, David Witherow, MBA ’92, president and chief executive of San Francisco–based Venture One, told Forbes in May. Witherow’s firm and PricewaterhouseCoopers joined forces on a venture industry survey, which found that slightly fewer than 700 companies received $10.1 billion in venture financing in the first quarter of the year, a 40 percent drop from the last quarter of 2000 and the largest quarter- to-quarter drop ever recorded.

Witherow said he would later release numbers showing venture capitalists were continuing to raise money but spending it more slowly, at rates considered normal before the 1999 market run-up.