What the hell is going on at Synchronoss? Part 2

Synchronoss, a specialist in digital products for the operator channel, has brought attention to itself for all the wrong reasons once more.

Glenn Lurie, whose appointment as Synchronoss CEO three years ago occurred in such remarkable circumstances that we felt compelled to ask: ‘What the hell is going on at Synchronoss?’ has now resigned. That, in itself, is not especially remarkable since the company has clearly been having a tough year and the buck stops at the top.

Back in May, when Synchronoss announced its Q1 numbers, there was the customary talk of COVID-19 ‘headwinds’ (American corporate speak for adverse conditions). As a result the company decided to save some money by getting rid of people, the most senior of which was Chief Product Officer Mary Clark. So the precedent was set for executive casualties, but by the time Q2 season came along, the ship appeared to have been steadied.

“Synchronoss continued to overcome the many challenges posed by the global pandemic and delivered a solid second quarter,” said Lurie at the time. “The strength of our customer relationships is highlighted by new wins with some of our largest customers, including the 5-year renewal of our personal cloud contract with Verizon, our largest customer.”

Now, just a month or so after that bullish statement, Synchronoss has chosen this to turf out one of the few CEOs it has managed to hang on to for more than a few months. Lurie’s unexpected resignation would normally lead the kind of people who make a living out of speculating about this sort of thing to conclude something was rotten in the state of Synchronoss and the company has picked a funny way of trying to calm those fears.

Check out the statement concerning Lurie published by the company. “[Jeff Miller] succeeds Glenn Lurie who has resigned as the company’s President and Chief Executive Officer, and as a member of its board of Directors, following the board of Directors’ review of allegations of personal misconduct by Mr. Lurie in violation of the company’s policies. His resignation is not related to the company’s strategy, financial or business performance. Given the expectation that all employees will respect Synchronoss’ values and adhere to the company’s code of conduct, the board has accepted Mr. Lurie’s resignation.”

Nothing further has been said about these allegations, nor even what the conclusion of the review of them was. Hopefully more details will emerge before long but until they do, the above statement reveals a serious lack of due process. Someone accused their CEO of something so they got him to resign.

Again without knowing the severity of the alleged acts, this also implies a significant breakdown of relations between Lurie and the board. We assume they’ve paid him off handsomely to keep quiet, but if not then we’d love to hear his side of the story. You know where we are Glenn.

Stephen Waldis, Chairman and founder of Synchronoss, who was at the centre of all the shenanigans that preceded Lurie’s tenure, didn’t have a single word to say about his departure. “Synchronoss continues to develop innovative technology and solutions for some of the world’s leading technology and telecommunications companies,” said Waldis.

“The board and I look forward to working with Jeff, our Chief Financial Officer David Clark and the broader Synchronoss management team to drive forward the ongoing transformation of Synchronoss, building on the strength of our customer relationships, and delivering long-term value to our shareholders. We anticipate a smooth leadership transition as we commence a robust search process for the Company’s next CEO.”

Other than a similarly generic canned quote from Miller, who has only been with the company for a couple of years, the only remaining information offered in the announcement was that Synchronoss is maintaining its 2020 guidance on EBITDA of $20 million to $25 million. The overall impression left is of a company desperate to calm investor nerves after the sudden departure of its CEO.

While that concern may be understandable, it was artlessly delivered in one of the more sloppy and amateurish press releases we’ve read for some time, and that’s saying something. There is a rich tradition of tech companies, including HP and Intel, using allegations of misconduct to get rid of CEOs that have fallen out of favour with the board, but that doesn’t make it a good one.

If Lurie was found guilty of gross misconduct then why not just sack him? If he wasn’t then why didn’t the board support him? Or if it was just sick of the sight of him then why did it need to tarnish his name so publicly? The Synchronoss Q3 announcement in November should be interesting and today’s fall of 10% on its share price suggests its clumsy attempts to reassure investors were unsuccessful.

UPDATE 09:30 23/9/20: In it’s SEC filing covering the CEO change, Synchronoss wrote ‘Mr. Lurie will receive no severance benefits in connection with his resignation from the Company.’ It is very rare for any departing exec, let alone the CEO, to receive no severance benefits, so it looks like Lurie was effectively sacked, despite what the press release says.

One of the main reasons golden parachutes are so popular is to buy the departing exec’s discretion regarding the inner workings of the company. One conclusion that could be taken from the absence of one in this case is that the allegations against Lurie are so substantial that the company is betting he won’t want to make any public statements whatsoever. This theory is given further weight by the deletion of Lurie’s Twitter account, although his LinkedIn and Instagram ones were still standing at time of writing.

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