3 Tech Stocks That Could Use a New CEO Immediately

Meta Platforms (NASDAQ:META) stock is down more than 63% year-to-date. If Mark Zuckerberg didn’t control a majority of the company’s votes, there’s a good chance the social media platform would be looking for a new CEO.

Alas, Zuckerberg is in complete control. He isn’t going anywhere.

I don’t think you should fire a CEO in a year where the S&P 500 (SPX) information technology sector is down 24.0% through Dec. 5.

However, it could well be a discussion for boards of companies where their stocks are down over the past five years, relative to the Nasdaq 100 (NDX) or some other index, and the same CEO has been running the company for the entire five years.

A quick screen of tech stocks with a market capitalization of $10 billion or greater shows approximately 67 companies that fit the bill from the Nasdaq and 53 from the NYSE. Of those, 64 are down more than 24.0% YTD.

I’m looking for three companies that would likely benefit from a new CEO, from these 64 names. All three companies have lost ground in 2022, are down over the past five years relative to the Nasdaq 100, and they’ve had the same CEO for the entire ride lower.

Replacing these three tech CEOs could benefit their companies.

Skyworks Solutions (NASDAQ:SWKS)

Although the California-based semiconductor company’s history dates back to 1962, the June 2002 merger between Alpha Industries and the wireless business of Conexant Systems officially created Skyworks Solutions.

Two decades later, the company continues to be a leader in communication technologies such as 5G, Wi-Fi, GPS, Bluetooth, and many others.

The company’s CEO is Liam K. Griffin. He has been CEO since May 2016, adding the title of Chairman in May 2021. Year-to-date, Skyworks stock has lost more than 41% of its value. Over the past five years, its shares are down approximately 3% compared to an 86% gain for the Nasdaq 100.

That’s not to say the company hasn’t had its moments of greatness. From its March 2020 low of $67.90 to its March 2021 high of $204.00, its stock gained 200% over 52 weeks. However, for whatever reason, investors haven’t been able to maintain their enthusiasm for the stock, and that responsibility falls on the CEO.

Over the past three fiscal years, Griffin’s total compensation was $51.7 million, according to page 44 of its 2021 proxy. Add in the amount for vested option awards and stock awards, and you get $73.7 million or $24.6 million per year.

Not surprisingly, Griffin made the As You Sow list in 2021 for the most overpaid CEOs. He was ranked 20th out of 100, with a pay ratio of 1,271x the median worker’s pay.

In its Q4 2022 press release in early November, the company boasted that it delivered record revenue and earnings in 2022. That might be the case for the company itself, but there is a disconnect with investors, which suggests that the board might want to take corrective action, like a sports coach who’s lost the room with their players.

Ansys (NASDAQ:ANSS)

Ansys touts itself as the “largest engineering simulation company in the world.” The company’s software helps designers simulate how their products will perform in the real world. Ansys spends approximately 24% of its quarterly revenue on research and development.  

The company’s August 2022 presentation highlighted that the core simulation total addressable market in which it competes had a compound annual growth rate of 7%. In 2021, this TAM was $8 billion. It expects that to grow by 8-10% annually through 2025.

Ansys reported its Q3 2022 results in early November. Revenues were 6% higher on a non-GAAP basis, to $473.7 million, while its non-GAAP net income was 11% higher, to $154.7 million. Excluding currency, it expects revenues to grow 11.1% to 13.0% in 2022, with earnings per share of at least $7.48 on a non-GAAP basis.

That’s good, if not great, revenue and earnings growth.

Ansys stock is down nearly 37% YTD and 15.2% relative to the Nasdaq 100 over the past five years. As a result, there is an opportunity cost of continuing to hold this company’s stock rather than the index.

Dr. Ajei Gopal has been CEO of the company since Jan. 1, 2017. Before that, he was President and COO. Gopal’s been a director for over a decade since his appointment in Feb. 2011.

Ansys stock is up 350% since Gopal was appointed a director, approximately 41 percentage points less than the Nasdaq 100.

While the CEO hasn’t necessarily done a lousy job, he’s had a decade to deliver market-beating results and failed, despite being well-compensated for his efforts. At age 60, it could be time to give someone younger a shot.

Fidelity National Information Services (NYSE:FIS)

This last suggestion is more of a warning for anyone considering Fidelity National Information Services stock. I’ll explain why.

Gary Norcross made Fortune’s 2022 list of the 10 most overpaid CEOs in the Fortune 500. Norcross came in the seventh spot with a three-year average compensation of $58.8 million combined with a three-year annualized total return of -2.7%, 10 percentage points less than the industry median.

While the financial technology company’s stock is down 36% YTD, it’s gained nearly 18% over the past month as investors bet the beaten-down fintech stock had bottomed.

Raymond James analyst John Davis wrote in a Nov. 30 note to clients that he felt the stock, conservatively, was worth $115 based on a sum-of-the-parts analysis of the company.

“‘At the end of the day, we believe there are multiple ways to win from here,’ Davis continued, writing that the stock was trading at under 10 times estimated earnings per share for 2023. In his view, either the company’s management executes strongly or the company could get broken up,” MarketWatch reported on Dec. 2.

It’s also possible investors are happy Fidelity National’s CEO is stepping down at the end of this year after 34 years with the company. On Oct. 18, the company announced that Norcross would become Executive Chairman, handing the CEO reins to current President Stephanie Ferris on Jan. 1, 2023.

Norcross became CEO on Jan. 1, 2015. The board added the Chairman’s title in 2018. FIS stock has gained just 17% in the eight years he’s been CEO.

The incoming CEO has promised to find $500 million in annual savings in the next few quarters, including possible job cuts. However, the fact the board promoted Ferris, Fidelity National’s current President, as CEO rather than hire an external candidate with zero ties to Norcross or the current board, suggests shareholders could be in for more disappointment in the years ahead.

Ferris’s 28 years of fintech experience surely counts for something. That said, shareholders could have deserved a more significant shakeup here. But instead, the board opted for the status quo.

Ultimately, Norcross could have retired, named Ferris interim CEO, and begun a thorough search externally and internally for the next CEO. That didn’t happen, and FIS shareholders might well pay the price.