Fund manager dubious about Steve Vamos’ CV
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As this morning’s bombshell news about Rod Drury stepping down as Xero chief executive broke, Punakaiki Fund manager Lance Wiggs was one of many who had to hit LinkedIn to answer the question “Who is Steve Vamos?”
The Australian who will take over from Mr Drury on April 1 is a former country manager for Microsoft in Australia and is a director of Telstra and Fletcher Building.
“It’s really hard to see from his CV what he brings to Xero, to be honest,” Mr Wiggs says.
“Microsoft Australia is essentially a sales shop for Microsoft USA. Telstra is a very large, slow-moving telco. So it’s quite a different set of challenges from Xero, which is a high growth company going global. It’s very hard to see, from his CV, what the fit there is.”
And the less said about Fletcher Building the better.
“On the other side of it, you could say this is the next level up of executive who’s going to take this great company and increasingly professionalise it,” Mr Wiggs adds.
“That could be the thesis of the board: This is someone who can take it to the next level; professionalise it, expand and be a safe and steady set of hands as it goes from a $A4 billion valuation to over $A10 billion.”
The transition has a sudden feel to it, Mr Wiggs says.
Xero would not want to publicly raise the possibility that Mr Drury might depart, the fund manager says.
But, by the same token, a more organised transition would have seen Mr Vamos introduced to investors during his period consulting to Xero and his profile raised within the company and with shareholders.
Instead, “The person taking over is not someone we’ve ever really heard of. He hasn’t been up there as one of the leaders of Xero. He hasn’t been fronting up to investors. It does feel like a bit of a surprise,” Mr Wiggs says.
Shares hit – but will probably recover
Talking to NBR View before the ASX opened, Mr Wiggs predicted Xero shares could take a hit.
After all, a number of analysts have warned about “key man risk” or the fact that for many investors, Rod Drury is Xero and Xero is Rod Drury.
The stock [ASX:XRO] did duly fall. It was down 4.5% soon after opening.
However, Mr Wiggs’ view is Mr Drury will leave behind a “growth machine,” with strong fundamentals and sales that will continue to expand in the years ahead. Investors will come back, he says.
Will Rod hang around?
Mr Drury will sit on Xero’s board as a non-executive director after April 1 and “contribute to strategy,” according to a statement by Xero.
“Who knows how that actually works,” Mr Wiggs says.
There is potential for it to work well.
“Rod is a product guy, an innovator. He breaks things. He explores new ideas. He’s absolutely amazing as someone who challenges the status quo. He will still do that from the board. He will still throw rocks at products, he’ll still look at things and he’ll still push the envelope. And that’s what he is great at,” Mr Wiggs says.
But you also get the feeling the Punakaiki man expects Mr Drury’s attention to turn elsewhere.
“Maybe he’s not doing that fulltime anymore. Maybe he needs more time to think about other things,” Mr Wiggs says (today, NBR asked Mr Drury about the recent breakup of his marriage, which has not been previously reported; he declined comment).
What other things?
“I’ve always wondered: what would Rod do if he sat there with a treasure trove of money and time on his hands,” Mr Wiggs says. (Mr Drury recently sold $94.5 million worth of Xero shares, taking his stake down to 12.8%).
Mr Drury founded Xero 11 years ago after founding then exiting two startups: Glazier Systems (now known as Intergen) and AfterMail, earning a tidy profit but still in the low millions.
Not he can do something more ambitious.
“Will he start a new company? Will he invest in other companies? Who knows, it’s just going to be exciting. It’s going to be fun," Mr Wiggs says.
End of a chapter
Overall, his feelings are mixed.
“It’s definitely a new chapter. I feel sad for Xero, I feel sad for Rod; I feel happy for Rod,” Mr Wiggs says.
“The reason I feel sorry for Xero is that Rod is the founder, the lifeblood of Xero; the force of nature that has dragged this company from an idea through to its initial IPO in New Zealand to raising a whole lot of money from investors across the world to now when it’s worth over $A4 billion. It’s an astonishing story; 2000 employees and 1.1 million customers.
“It’s sad that Rod is stepping aside I think at this stage of the journey and I do feel for people at Xero and Rod himself.”
Mr Drury nudged Labour and National to support the new position of a chief technology officer for New Zealand.
Labour duly tried to hire a chief technology officer in the New Year only to find none of the 60 applicants were up to snuff.
Should Mr Drury himself step up, now that he's about to be free or largely free of his responsibilities at Xero?
“He would certainly be a cat among the pigeons there but I’m not sure Rod and government would be that compatible," Mr Wiggs says.
"But if the government wants someone who can really make change happen, then Rod would be the person.”
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