J. Kim Fennell, president and CEO of Pinnacle Systems for 17 months, has resigned as a result of disappointing sales of its consumer editing and image capture products. While a search begins for a replacement, the company’s board of directors tapped Charles Vaughan, a current board member and original investor in Pinnacle Systems, to serve as interim president and CEO. The board hopes to have a new executive in place by early next year.
Ajay Chopra, company co-founder and president of its Broadcast and Professional division, said the shortfall in the company’s Business and Consumer Division, which led to Fennell’s departure, has been limited to its consumer products. He said the broadcast products, including its professional nonlinear editing, video servers, Deko II graphics systems and production switchers, have performed to expectation. His division reported sales of approximately $34 million in the first quarter, down from $35 million last year.
“The board had a conversation with [Kim Fennell] and they reached the mutual decision that he had to take responsibility for the financial performance of the company,” Chopra said. “At the end of the day the CEO has to take responsibility for what’s going on at the company and he ultimately has to answer to shareholders.”
Chopra said the current management team will remain intact and the board has endorsed the company’s current broadcast industry strategy of continuing to develop IT-based networked products for news and network graphics that are tightly integrated with each other.
First quarter results for the year, which ended September 30, 2003, showed a net sales increase in the Business and Consumer Division of roughly 3% over last year (from $68.57 million to $70.92 million), but projections for the quarter was more $8 million.
“We are disappointed with our financial results for the quarter," said Fennell, in a prepared statement. “We had expected a slow summer quarter, but sales and margins were weaker than expected, most notably in our U.S. consumer products business.”
Vaughan invested $100,000 of his own money in 1986 to give Chopra and his team the $250,000 in resources they needed to get the company off the ground. He invested additional money in subsequent rounds of financing and became the first outside board member of Pinnacle Systems. Vaughn is a former CFO with General Electric and has an extensive background in “system level” business.
Chopra said Vaughan knows the company and the management team very well, and expects little overall effect on the company’s operations.
For more information visit www.pinnaclesys.com.