4 CEOs to Go in 2007

This has been a pretty crazy year. Dozens of companies have seen their chieftains resign because of accounting irregularities stemming from the inappropriate backdating of stock option grants. Won't it be great to head into the creature comforts of a new year, when CEOs get axed for failing their companies in more conventional ways?

Yes, 2007 promises to have a few notable departures at the top. Whether they're corporate-world rock stars who have been exposed as one-hit wonders, or capable helmsmen who are simply struggling in a trying environment, shareholders aren't patient when CEOs are messing up on their dime.

So let's get into four leaders who are clearly in the hot seat at the moment. We'll delve into what got them there and what they can do to save their hides before it's too late.

Kevin Rollins, Dell
Things aren't going so well at Dell Computer (Nasdaq: DELL  ) , and CEO Kevin Rollins is bearing the brunt of the blame. Yes, following Michael Dell at the helm is tough, but Dell has gone from being a market darling that routinely trounces analyst targets to one that has to come in intermittently to hose them down.

It's also not helping Rollins any that over at Hewlett-Packard (NYSE: HPQ  ) , CEO Mark Hurd is doing an amazing job in turning Dell's rival around despite the pretexting scandal that has marred HP in recent months.

Rollins has one more chance, though. The PC industry has been hungry for the latest incarnations of Office and Windows Vista to spur hardware upgrades, and that time has finally come. The corporate rollout is in the works, and that's sweet music to Dell and its bread-and-butter enterprise bent. Dell should shine brighter over the next few quarters. If it doesn't, fare thee well, Rollins.

Hugh Panero, XM
It's been a rough year for XM Satellite Radio (Nasdaq: XMSR  ) . Between a pair of board resignations and the sorry state of a first mover that is yielding market share to its faster-growing rival, the story at XM isn't resonating with investors despite a welcome bounce over the past few months.

XM has a good story to tell. It's on track to produce positive operating cash flow this quarter. It's bleeding slower than Sirius (Nasdaq: SIRI  ) . However, consumers keep leaning toward the similarly priced competitor at the retail level despite XM's wider content offerings and broader collection of partners.

What can save Panero? If the new Oprah Winfrey channel or the brilliant On marketing campaign can help it tug back at market share, the market may have no choice but to grant XM the larger market cap. Even if XM fails on that front, continued bottom-line improvement may save Panero's hide if XM is seen as the more efficient operator and more than just buyout bait for Sirius.

Paul Pressler, Gap
How quickly has Gap (NYSE: GPS  ) CEO Paul Pressler fallen? His timing was superb. He latched on to the apparel retailer in 2003, just as the company was coming off three straight years of same-store sales declines. That year found the struggling operator of Gap, Old Navy, and Banana Republic posting positive comps of 7%, but that was just a third of the improvement that was necessary to get comps back to their 1999 level.

Still, the market gave Pressler the benefit of the doubt. Turnarounds take time, and he was just starting to lay his handprints on the company. Then came 2004, when comps clocked in flat. A year later, same-store sales resumed their troubling ways by sinking 5% lower. It's only getting worse with comps off by 7% through the end of November.

How many retailers do you know that have nailed just one year of positive comps on this side of the millennium? If one argues that there's more to retail than comps, Gap also lowered its profit guidance last month. The company now expects earnings per share to fall between 15% and 19% this year.

Yes, the company is going the wrong way, and Pressler has slipped on a Banana Republic peel. Salvation? It doesn't look good here. Even a positive step in comps early in 2007 will only be seen as the result of an easy lay-up off its sandbagged past. It's going to take dramatic improvements in comps and earnings to save Pressler now.

Terry Semel, Yahoo!
It's not easy to see Semel in the hot seat. When he joined Yahoo! (Nasdaq: YHOO  ) in 2001, the company was on the brink of dot-com extinction. OK, maybe it wasn't that bad, but market tastes dictated that Internet upstarts now had to covet profits over eyeballs, and we lost a lot of promising companies that way.

Yahoo! could have gone the way of Excite, AltaVista, or Lycos. Instead, the company had the vision to latch on to paid search by acquiring Overture, and a promising model was born. So, yes, Semel saved Yahoo! then, but is he hampering Yahoo! now?

Cynics will point to how the company gets smoked by Google (Nasdaq: GOOG  ) every passing quarter. Internally, tensions are getting peanut-butter sticky, and the company resorted to an organizational overhaul earlier this month. The media has read a lot into the move that found media darling Susan Decker going from CFO to heading up the company's flagship online advertising business. The press has made her out to be Semel's eventual successor, but that's a flawed assumption. If the new Panama search upgrade does the trick to get Yahoo! back into the market share snagging game, Semel will be seen as a winner and retire on his own terms. If it fails, both will likely be out the door.

Because of this month's shakeup, Wall Street will let Semel slide for another quarter or two. After that, if Yahoo! still finds itself struggling at the quarterly podium as Google whizzes on by, another executive shakeup will be in the cards, and it's one that Semel may not survive.

Gap and Dell areInside Valuenewsletter service stock recommendations. Gap, Dell, and Yahoo! areMotley Fool Stock Advisorselections. Take the newsletter of your choice for a 30-day free trial.

Longtime Fool contributor Rick Munarriz doesn't savor being the bearer of bad news, though he recognizes that a lifespan can be short at the top if you don't deliver. He does not own shares in any of the companies in this story. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.


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