Motley Fool Money - The Long Goodbye

Episode Date: March 25, 2024

Boeing’s CEO is moving on, just not quite yet. (00:21) Jason Moser and Deidre Woollard discuss: - The ins and outs of Boeing’s CEO search. - Why Masimo may spin out its consumer division. - If Elliott Management can make Match soar. (16:21) IWG CEO Mark Dixon explores the opportunity his company sees in the global shift toward hybrid work. Companies discussed: IWG, BA, MASI, MTCH, PYPL, ETSY Claim your Epic discount: www.fool.com/epic Host: Deidre Woollard Guests: Jason Moser, Mark Dixon Producer: Ricky Mulvey Engineers: Chace Pryzlepa, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Boeing is making leadership moves and Massimo fancies a spinoff. Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Deidre Willard here with Motley Fool analyst, Jason Moser. Jason, how's your Monday going so far? So far, so good. Just recovering from a little yard work Sunday, right? That's the downside of spring is, you know, you've got to get back to that yard work grind.

But that's okay. I'm getting older and it's my source of meaningful exercise. awesome well someone who may be having a an eventful monday is boeing CEO dave calhoun he announced he's going to be stepping down at the end of 2024 it has been a turbulent four years for him in the top spot to say the least got some other changes too their independent board chair like calner he's stepping down in may their commercial airlines president is retiring a lot of change not a big surprise it seems like change is needed but the question i was curious about is Calhoun, he announced now, but he's not leaving until the end of the year. Why do you think

they did that? Well, first, I just wanted to say, I see what you did there with the turbulent, well played. So I don't know that there's any real rush to get him out the door. I mean, it's not really that far ahead. But I mean, I also think he probably will leave before that. But it at least gives them the opportunity to the board, an opportunity to deliberate and give some real thought as to who they want taking over the position here, because this really matters. I mean, this is a very, very important selection here. Not surprising to see Mr. Calhoun step down. I mean, this communicates that there's action being taken, that the status quo is unacceptable. I mean, clearly from passengers to Boeing's customers, right?

I mean, everybody is unhappy with what's been going on here. But this ultimately, I think, gives the board a chance to find someone new. And with a company that just continues to bleed market share to its competitor and Airbus, I mean, there's no real end in sight to that, too, right? So I think it's something that there's no reason to rush this because of the importance of who ultimately fills this role. Yeah, my old PR person's been on it was that when you announce something like this, you've already signaled, okay, we know there's a problem, we're doing something, but you don't have to necessarily take the next step.

It gives them, it gives them like a little pause or something like that to kind of maybe, I mean, you'd think that Calhoun is maybe taking an active role behind the scenes now without having to worry that everything he does impacts how the board thinks about his stay or something like that since he's already announced he's going. Yeah, his days are numbered. So, I mean, he can do his best to help with the transition to new leadership, and we'll see how that goes. But again, I mean, the only real surprise to me is really honest.

I kind of felt this should have happened earlier. It feels like this should have happened sooner, but better late than never. Well, and also, it's a bit of a changing of the guard with the new independent board chair stepping in. You've got Steve Mellencopf. He's a former CEO of Qualcomm. Has the engineer's mindset feels like a good thing. I'm wondering if you're at, if you're looking, if you're at Boeing and you're looking for this new CEO,

you've got the president of commercial airlines that just stepped into her new role. She's a third generation of Boeing employee. I'm wondering for the CEO role, do you think that they're, I'm assuming they're looking both inside and out, but do you feel like it's more beneficial to have someone from outside the organization? just because of potentially the transition needed. Yeah, I mean, this is something I actually do feel strongly about this. This needs to be an external hire. I understand Ms. Pope, I mean, she has a long history with the company.

She's been with Boeing, I think, since 1994. It's not to say that she couldn't be successful on that role. She certainly could be. But by the same token, I mean, there are plenty of examples out there in recent history that show companies in this type. of the position really can't benefit from bringing in that external hire, those fresh set of eyes. It reminds me, the one that comes to mind is Wells Fargo. I mean, obviously, just a ton of culture issues that were going on with the company over the

past several years, right? They actually hired internally, and things actually got worse. So then they looked to Charlie Sharp. Charlie Sharp came in from Bank of New York Mellon, And I think he just had sort of that new perspective, those fresh eyes. And I think in this case, this really does need to be an external hire because there's so many questions as to how this company got to where it is. This isn't something that just happened overnight, right? This is something that's a result of something that's been going on for a long time. So from that perspective, I really do feel like an external hire is the only answer here.

Looking to Ford, Alamalli, I think another good example there. a little bit further back in time there, but still bringing in someone with just a new way of looking at things, they can be a real benefit. They're not only from a business model perspective, but again, from the culture perspective, right? A lot of companies have really gone through the ringer here over the last several years. For obvious reasons, things are getting back to normal, and there needs to be sort of this resetting of what this company means, what their mission is, what they're trying to be.

to do and how they intend to get there. It just, it seems that where this company is today is a product of what's been going on over the last several years, not just Mr. Calhoun's tenure either. I mean, I think these types of problems, they fester for a while, right? So external is certainly the way to go, I think. Yeah, it reminds me when I was talking to Harvard professor Amy Edmondson about her book on failure. We talked a little bit about Boeing, and she was talking about, you know, the previous incidences with the max and sort of this, a culture of being able to report when things are going wrong or to be able to speak up is so important. And so, you know, I wonder if it needs to be a

cultural shift. Do you think that there needs, the person who comes in needs to be inside the industry? I mean, because, I mean, it's such a tough industry. And yet with you've got this independent board chair, CEO of Qualcomm, former CEO of Qualcomm, you could maybe bring in some tech talent, too. I'm wondering, I'm wondering what you think about that. Well, I mean, it's hard to say. I mean, this is obviously a very specialized skill set in given given what Boeing does. So, I mean, there needs to be that background, whether it's in aerospace engineering, what have you. I mean, there are a lot of ideas out there as far as names that could be on the short list here. And it seems like most, if not all of them have that type of backgrounds. I think in this case, that makes more.

sense, yeah. Well, I want to move on and talk about some other news. Massimo did one of my favorite PR techniques, the Friday afternoon press release, always, always an interesting one. They announced their planning to spin off their consumer division. Of course, that includes their Sound United acquisition, as well as the Stork Baby Monitor, the Freedom Smart Watch. You know, I found this interesting because I was looking at Massimo's investor relations page, and they were at a conference in early March at the Raymond James conference, talking about how much sense it made to have the businesses together under one roof, how one fed the other. Well, they don't seem to think that anymore. Well, well, well, how the turntables have. Yeah, I'm glad we're talking about this.

Just because Massimo is a company I followed for a long time, it's one I actually own shares in personally, and I've recommended it in one of our services. It sounds like this is something that's going to happen. They have a plan. The board will assess it. But yeah, this all goes back to that Sound United acquisition that you mentioned. And it's, you know, that deal is relatively recent. And I think it was around a billion dollars that Massimo paid for Sound United. And immediately, I mean, that headline, it just seemed to be a very curious move at that time, given what Massimo does. I mean, Massimo, for those who don't know, I mean, this is a company that's really, made its hay with its technology in pulse oxymetry, measuring the oxygen levels in the blood,

which is really, you know, a point of necessity for hospitals and doctors' offices. So, Massimo, through the years, has done a really good job of developing this technology and then developing products and services from that technology, leveraging that technology. And the Sound United deal came out of nowhere. It just was kind of like, huh? When you start to look at what they were, I mean, it was all based on these high-quality speaker companies, right? Which, okay, I mean, I understand the role that sound plays in Massimo's technology, but never really seemed to add up. And I think the investor skepticism has always been there. It's been there since. When you look at Massimo's business today, still a full two-thirds

of revenue comes from its health care segment, right? The original Massimo business, And a third of revenue now comes from the consumer side of the business, which is really what that Sound United acquisition is tied to. But the revenue from the healthcare segment is far higher margin. I mean, this is a healthcare business. And I think that what this gives Massimo a chance to do is to maybe reinstill some investor confidence in the healthcare business, because there are still a lot of questions out there in regard to the consumer side of the business, the sound union.

acquisition and ultimately what that you could bring to the table. But the healthcare side of Massabo's business is fully proven and very successful, and it's been that way for a long time. So I think this could give investors the opportunity. This could reinstill that confidence in the healthcare business and give the consumer side of the business a chance to succeed on its own, and now it'll have to succeed on its own merit there. But just from a shareholder's perspective here, this this is a business.

This really does make a lot of sense to me. I think it really is steering investor focus back towards what Massimo does so well, and that is it's healthcare technology. Yeah, and one thing that's interesting with that, too, is the healthcare business is really a razor and blades model in terms of what they sell, whereas the consumer side is, you know, it's not that. But I found it was interesting, though, that their chairman, CEO, Joe Keani, he's going to be chairman of the new company as well. And some of the other analysts, to talk about, like, well, maybe it would be better if it was a complete separate break, but it's clear he does not want to let go of that.

Yeah. Sounds like you want to stay with the core Massimo business and have less interest in this in the spin-op. Is that right? That's a fair statement. Yeah, I think. And so Mr. Keani, he's the founder of Massimo, and really, this was kind of a garage startup. I mean, he's just done an amazing job with this business. And I get, and I appreciate his enthusiasm towards the consumer side. And I mean, he was the one that really came up with the Sound United deal. Just to give you an idea of what the things that they're pursuing in there, I mean, it's everything from these new, newfangled baby monitors to things like hearing aids, which, I mean, that alone, they see a $35 billion

total addressable market. And I think as hearing aid devices become more readily available to consumers without necessarily having to get prescriptions and pay those just exorbitant prices, There absolutely is an opportunity here for that consumer side of the business. But yeah, I think I'd rather see the consumer side of the business try to go on its own in order to be successful, because my interest in Massimo has always been based on the healthcare side of the business. And you mentioned it, the Razor and Blade model there. I mean, they get those machines into doctors' offices and hospitals, and then they do really well

in selling those consumables that really are required to make those machines work. and that's really high margin revenue there. So there are just a lot of good qualities about that business that I remain very attracted to it, whereas the consumer side is just still an unproven entity. And I'm not necessarily convinced that that market opportunity is as attractive as maybe they thought when they made the acquisition. Well, one more piece of news I want to get to is Elliott Management. Anytime Elliott Management takes a stake in a company, we always have to pay attention.

They've had a stake in Match Group for a while. They've struck a deal. They're going to add two new directors to the board, including one of my favorites, former Zillow CEO, Spencer Razcoff. You've got Laura Jones, CMO at Instacart, another heavy hitter. You know, they want to stabilize leadership, jumpstart the growth for Tinder and Hinge. Makes a lot of sense. Elliott is really interesting because they have a great track record.

And they've recently taken a seat at Etsy. They're battling for Crown Castle, which is another, whole other story. What's your take on Elliott? It tends to almost be, I start to get a little excited now when I hear Elliott is looking at a company that I'm also looking at. I think a lot of investors do. I think that's a fair knee-jerk reaction. I mean, we have to sort of take a step back and then say, okay, well, let's see if this

actually results anything because there's no guarantee that it will. But, I mean, this is what Elliott does, right? I mean, they hold somewhere in their neighborhood of $65 billion in assets. And a lot of what they do is finding these companies that have well-established positions in their markets as leaders in those markets, but maybe they're going through some difficult times. And I think it's fair to say that Match falls in that category, Etsy as well. If you recall, they held a position, a smaller position, but a position nonetheless in PayPal

fairly recently that they have since dissolved. I guess they just felt like maybe with new leadership, either new leadership had a good vision of where they wanted to take the business, or they just felt like really the juice wasn't worth the squeeze, so to speak. And that probably is the tougher part of that line of work is determining when you got to bail on certain ideas. But they do, like you said, they have a lot of experience in this line of work. And while it doesn't always work out, it works out very often for Elliot.

They have a lot of expertise and a lot of spaces. So this could be something that works out very well for Magic Group. Yeah, I feel like Elliott is sort of like house flippers. They come in, they bring in their experts, they do some renovation, and then they leave. That's good. Yeah, listen, hey, I mean, they're investors, right? At the end of the day, they're just trying to make a buck. Aren't we all?

Thanks for the time today, Jason. Thank you. Talk about a lot of stocks on the show, but it's just a peek at the Motley Fool's investing universe. This year, we're rolling out a new offering. It's called Epic Bundle. The service includes seven stock recommendations every month, model portfolios, and stock rankings, all based on your investor type.

We're offering Epic Bundle to Motley Fool Money listeners at a reduced rate, as a thanks for listening to the show. So for more information, head to Fool.com slash Epic. We'll also include a link in the show notes for you. Over the last several years, hybrid work has boomed. I talked to Mark Dixon, CEO of IWG, about his story. company's position as the top provider of flexible workspaces. I want to talk about your most recent earnings call because you talked a lot about the need for coverage in offering flexible workspaces.

So you're the market leader now in flexible workspace. How are you meeting this massive demand? There's a dramatic change occurring in the way people want to work and the way companies want to support their people. And really, it's all about reducing. commuting. People don't want to travel distances, whether that's in a car train or any other mode of transport, long distances, to just use a computer in another place. Lots of people don't want to work from home. They want to work with other people in an office. They just want that office to be conveniently situated for what they have to do on that day or need to where they live. So, you know, this is a fundamental and far-reaching change that is transforming the sort of real estate industry,

commercial real estate industry, which is unsuited to this new way of working, which is facilitated by technologies, team Zoom, and better internet and more places and so on so forth. So that's what's driving demand. So a lot of companies, you know, the majority, of global companies are thinking about this or doing this because it allows them to cut about half their costs and it's what people want. I mean, it's one of those things that for a CFO, he makes a popular cut. I mean, these things are quite rare. So they like it.

And employees, team members love it as well. So we are seeing dramatic growth. and we're growing unprecedented numbers of new centres. We're adding to the network in many countries. We're operating about 120 countries. This is a phenomenon that's happening pretty much everywhere in the world. And so we're working with partners to grow the network. And we signed up last year in those results.

You were talking about 860 new buildings in a single year. We used to open 200, now with 860, it's a complete change. And we expect to do a minimum of that or maybe even more this year. Well, I think what's really interesting, and you talked about it in your earnings presentation, is that 88% of companies are thinking of going fully flexible. And it's sort of this mix that you just talked about, because there's the HQ that people go to far less often. There's working at home, which people want to do, but not all the time.

and then there's that flex-based area. So if everyone's going hybrid, is this a permanent shift, or do you think you'll see more flex-based growing over time? It's a permanent shift to flexible space. Look, it's platform working. It's the sort of thing, if you just have in your mind Uber, I mean, you can own a car, but some people just use Uber every day or twice a week

or whenever they need it, especially if they live in a city. because the cost of parking a car and looking off for a car. So it's sort of an infrastructure, which is the Uber infrastructure, that's there and use it when you need it. Imagine that, imagine that, and then imagine platform working, which is a fixed infrastructure that's out there all over the country, all over the world, that you use where it's convenient to you. It could be close to home one day,

and then you have a meeting in Atlanta or London, the next day and the following day you want to be somewhere else, you can simply get on your app, add a workspace, use it. Or it might be your local office down the road from where you live, cycle there, meet other folks, have a good social life, and sort of work much better than working from home. Lots of social interaction is what workers want. So this new way of platform working, will become the norm for about 30% of white collar workers. And that's a population of about 400 million people. It's going to be a huge industry.

The total addressable market or TAM is expected to be 2 to 3 trillion. So this is a big segment of what will be the future of real estate. And it's transformational in many ways. way beyond just commercial real estate and office. It's where people eat, where they have their lunch and how cities are built. All of that's going to change. All technology facilitated. And, you know, my belief is that technology changes everything eventually. So, and this is just, you know, the next thing. So building off that Uber idea, because you had, you've sat sort of two separate pathways there, which is one, I'm an individual.

and I'm going all these different places. And the second is more like my company is offering me this space. So in terms of your business, it's mostly companies at this point, right? But do you see opportunities for individuals? Yeah, we're about 30%, 35% are individuals. But just to be clear, you know, these individuals, I mean, it's a very significant group. and this group is made up of business people that are business people of one, consultants, financial tax experts, many, many people, lawyers and so on,

who want to have a great office near to where they live or near to where their clients are, those are companies have won. We then have the rest of the businesses, enterprise, corporates, and sort of startups and medium-sized businesses, companies. But all of those are buying a program for their people. So, you know, these programs could be for 100,000 people. They're not, it's not, but they sort of have everyone switched on. Uber do the same thing. You can have a company account with Uber where you can charge to your company and we do the same thing. So, and that is, that's a big part of the business. It's a bit of

everything here. And by the way, we have 10 different brands. So we've got brands specifically for startups and brands that are much more for corporate. So we're trying to pick off and supply to our customers what they want and where they want it. It seems to me a lot like you sort of have delivered on the promise that we work sort of had and wasn't able to deliver on. I'm wondering as you watch that company shrink, are you still seeing opportunities? to take both space and customers from them? I know you took some of their space in the past. Yeah, we've done, I don't know how many so far,

but probably around 45, 50 buildings. And, you know, we wish them the best. You know, it's going to be a huge market. They're in the market as well. But, you know, we are basically, our coverage is about 10 times their size. And they're in a slightly different business segment to us. They tend to have larger spaces, larger units of space and things like that.

But, yeah, look, we'll see. They're still in their restructuring period at the moment, Chapter 11. We'll see how it emerges and so on. But, you know, it's a massive marketplace. It's not a them or us. So it's a competitive market. There's lots of people doing it. We just happen to have the biggest coverage.

I want to get a little bit into your metric. because you've been reporting Rev PAR, Revenue Per Available Room. This is a metric I usually see when I'm looking at hotels. Really fascinated to see you reporting that. What prompted that shift? Clarity prompted that shift. So one of the most important things for us as a public company, high growth, global, is how can we better communicate with our investors, our public company,

investors and analysts and so on. And what we found is that we were getting sort of caught on single metrics. So, you know, the thing that makes up REFPA is actually a whole number of metrics that we used to give individually and you'd end up having a discussion about something like occupancy. RefPAR is occupancy price and services that, you know, we have, these are three important metrics. It combines them into a simple, straightforward metric that you can sort of hang your hat on. We can give guidance on and it helps people calculate, external people, calculate what our revenues are going to be in company-owned centres and in managed estate, which is growing very quickly. And it's been popular. So we, all of these changes, and we made other changes going into three,

divisions and so on, we talk a lot to investors, not on investor meetings, but outside of the meetings, to ask them what could we do to better explain our story? It's a great story, but you can get lost in the detail very easily. So the outcome of that is what you see today. Three divisions, very clear, very clear metrics, rep up. Okay. And, you know, Then we talk about the costs, the overheads, and it's all percentage margins in the end. Very easy to follow. You know where we are, you know where we're going to be, or you can better estimate. And it's been very popular with investors.

They like it. As always, people on the program may have interested in the stocks they talk about. And the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. I'm Dieter Wollard. Thanks for listening. We'll see you tomorrow.