SAN FRANCISCO Last year was a tough year for anyone with a capital markets presence, but for Robertson Stephens, which focuses heavily on the technology sector, it was particularly hard.
According to Thomson Financial Securities Data, the FleetBoston Financial Corp. investment banking unit lead-managed eight equity and equity-related issues, worth $1.4 billion last year, a veritable drought when compared with the 56 deals worth $7.9 billion it underwrote the previous year, when deal volume was already under pressure as the bear market took hold.
Last week FleetBoston unveiled a $507 million loss for the fourth quarter, which was fueled by exposure to Argentina, venture capital writedowns, as well as losses in Robertson Stephens.
On the earnings conference call, the companys chief financial officer, Eugene McQuade, said it would undertake a companywide review. That announcement prompted some observers to speculate FleetBoston may be considering divesting some of its least profitable units, among them Robertson Stephens, which lost $61 million last year, compared with a $218 million profit the previous year.
Mr. McQuade has attempted to stanch rumors that the Boston company is sharpening the axe for any unit. He said that a review could just as easily result in certain business lines being expanded.
And according to John Conlin, the chief executive officer of the San Francisco-based Robertson Stephens, it is still very much a part of the FleetBoston model. In fact, he describes the units relationship with the parent company as good, and its gotten better.
There is evidence of cooperation between FleetBoston and Robertson Stephens in areas like convertible bonds, for which the parent can provide a source of capital, and winning deals with media companies, where FleetBoston often has lending ties, Mr. Conlin said.
FleetBostons newly minted CEO, Charles Gifford, has even gone on the road to support Robertson Stephens, according to Mr. Conlin. Chad has personally called on some biotechnology companies.
But a market downturn has forced Robertson Stephens, like many of its peers on Wall Street, to massively restructure itself to compete. Last year it laid off 600 workers, or 37% of its workforce. It now employs 950 worldwide.
And at the start of this year Robertson Stephens quietly reshuffled its top management to give more responsibility to senior executives and boost morale.
Mr. Conlin, who took the reins in April, after the sudden departure of Robert Emery, has been charged with some of the heavy lifting.
The firm is sized to be profitable in the current market, said Mr. Conlin, who had to deal with several other executive departures that occurred before and after his appointment as CEO. Were not focused on cutting costs now, were focused on running a profitable business.
Todd Carter, Robertson Stephens director of investment banking and one of its veterans, succeeded Mr. Conlin as the president. Mr. Carter also heads the mergers and acquisitions department.
Mr. Carter has been succeeded as the head of corporate finance by two bankers Clark Callander, who also remained the global director of private capital markets, and Brian Bean, who also remained the global head of technology banking.
At the same time, one of the firms founders and senior bankers, Kenneth Fitzsimmons, the director of equities, has stepped back from the day-to-day operations and is now a senior strategic adviser. Mitch Whiteford, previously the director of capital markets, is now also the director of equities.
One manager is planning to leave the firm for good. Barry Tarasoff, the director of research, will leave the firm sometime in the next few months. He has been succeeded by the former head of institutional sales, John Powers.
The team in place is largely composed of veterans of the firm, according to Mr. Conlin, who joined Robertson in May 1999 from Credit Suisse First Boston Corp. If you look at this group of managers, theyre all longtime Robertson employees. I am the person whos been at the firm the shortest.
The reshuffling last month was meant to send a signal to employees that they will be rewarded for their efforts as evidenced by the heftier job titles some now wear and also to show that the managers are also the people bringing in deals, Mr. Conlin said.
When youre at a firm like ours with a specialty, you really have to make sure the leaders of the firm are the people out representing, he said.
It has been a tough road, but Andrew Collins, an analyst at U.S. Bancorp Piper Jaffray, said FleetBoston has lowered its profit expectations from its capital markets business by so much that any uptick in market activity should boost earnings.
Looking at the companys guidance for 2002 earnings, he expects capital markets profits to make up just 3% of earnings. In contrast, in 2000 profits from those businesses, which include its principal investing activities, but not the retail brokerage Quick & Reilly, made up 18% of the companys earnings, he said.
The cuts theyve made over the past year [to Robertson Stephens] have made a much leaner organization that should generate higher profitability if things come back, Mr. Collins said.
