In yet another setback to his ambitious expansion strategy, Ideon Group Inc. chairman Paul G. Kahn has abandoned the company's cobranded credit card and fired a top executive amid a 75-job downsizing.
Ideon ended its half-year-old servicing arrangement last week with the slow-growing PGA Tour Partners MasterCard, issued by a unit of Orlando-based SunTrust Banks Inc. Sixty of the 75 firings were related to the Professional Golfers Association program, the company said.
One of those dismissed was John R. Birk, president and chief operating officer since last December. Mr. Birk was formerly president and chief executive officer of Wright Express, an Ideon acquisition that provides credit cards and related information services to commercial transportation fleets.
Mr. Kahn will assume Mr. Birk's responsibilies, as Ideon has no plans to hire a replacement.
In a statement, Mr. Kahn said, "While it's very painful to make additional cuts and to lose first-class talent like John Birk, it's imperative that we have a cost and management structure that is in line with our business plans and revenues."
Mr. Kahn, the past president of AT&T Universal Card Services who joined Ideon in 1993 with a mandate to diversify its marketing expertise and relationships, was not available for further comment.
Mr. Kahn failed to deliver on the vision and endured criticism from analysts. He also was distracted by a costly legal fight with SafeCard founder Peter Halmos, who has filed several suits to recover alleged damages. Marc F. Joseph, senior vice president of law, was among those who left Ideon; his responsibilities were assumed by vice chairman Francis J. Marino.
The PGA MasterCard was a disappointment despite a revamping of its marketing program at the end of July. SunTrust BankCard chief executive William J. Moore, who in the past had vigorously defended the card, would not comment on whether it would continue.
"Our primary focus right now is on restoring (Ideon) to profitability," Holly Anderson, senior vice president of corporate communications, said Thursday - her last day at the Jacksonville, Fla., company.
"At this juncture, continuing the credit card servicing concept just isn't economically viable," she said. "We still are working on marketing with SunTrust and will continue to explore opportunities to act as an intermediary and try to advise banks."
"Our primary focus now is getting our three core businesses back to profitability," Ms. Anderson said. They are Wright Express; SafeCard Services Inc., the card registration unit; and Ideon Card Services Corp., a provider of credit card marketing and services.
"It's a step in the right direction, as is the additional downsizing," said David Katz, chief investment officer of Mattrix Asset Advisors in New York and an Ideon shareholder since May.
"More likely than not, SafeCard doesn't need two or three top-quality executives like Kahn and Birk," he added. "We're modestly disappointed that Birk is going. He's a good financial guy and cost-cutter with his eye on the ball, and that's something Kahn has lacked."
When he joined the company, then called SafeCard, Mr. Kahn began broadening it almost immediately under the Ideon holding-company umbrella.
One venture was the Family Protection Network, a child registry service that was discontinued in July, when Mr. Kahn cut 27% of Ideon's work force, or 375 people, resulting in a $34.2 million writedown.
The latest downsizing will result in an additional writedown of $5.8 million.
"At this point, the board is still supporting him," said Mr. Katz. "He's been successful in the past ... For the moment, we'll give him the benefit of the doubt."
Those who know Mr. Kahn aren't writing him off. "He is entrepreneurial and a risk-taker but he's also realistic," said Anita Boomstein, a lawyer at Hughes, Hubbard & Reed in New York, who worked on the AT&T card.
"Paul is flamboyant and well-known, and because of that he's under the microscope," she said. "If this happened at Chase or Banc One nobody would think twice about it."
Mr. Katz envisioned three possible scenarios: "Either Kahn gets his act together and the company gets back on track, or the board relents and they bring in someone else, or a larger player buys it."