Marc Benioff

24/7 Wall St.: Best CEOs of 2012

Company: Salesforce.com Inc. (NYSE: CRM)
Share price YTD: +65%

Benioff co-founded Saleforce.com in 1999. Despite growing competition from larger companies such as Microsoft Corp. (NASDAQ: MSFT) and Oracle Corp. (NASDAQ: ORCL), Salesforce.com has maintained a torrid growth pace. Last quarter, revenue rose 35% to $788 million. Revenue for the first nine months rose 36%. Management forecasts that revenues for the entire fiscal year will be higher by 34% than they were last year. And this growth rate likely will not slacken. Salesforce.com expects to surpass a $4 billion annual revenue run rate during the 2014 fiscal year. Salesforce.com was one of the earliest companies into the cloud computing market — what has become one of the most important factors in the migration of information from data centers owned by corporations to those operated by outside companies. As Morningstar recently pointed out, “Customers have been able to avoid heavy capital investments they would have used to deploy on-premise software.” Forbes named Salesforce.com the “Most Innovative Company in the World” for 2012.

(AP Photo/ Ben Margot)

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Best CEOs of 201... Best CEO lists can be based on dozens of factors. For public companies, the best metric is usually share price. It is hard for chief executives to be considered very good if the shares of their company do not outperform the broader market.

However, current success does not mean future success is certain, and the best CEOs must also make sure their companies continue to thrive. To succeed, a CEO might have a strategic vision, a meticulous plan or the ability to hire and keep excellent management. Good performance means more to shareholders, if a stock price continues to improve over the long term. Near the top of the list of CEOs who have accomplished this kind of multiyear success are Warren Buffett and Steve Jobs.

24/7 Wall St. reviewed the 2012 track records of dozens of large company CEOs. We looked at share price, execution, revenue and EPS growth, as well as evidence of substantial long-term plans. Some of the CEOs who made the list because they excelled or stood out in some or all of these measures had one particularly good year. Dan Hess of Sprint Nextel Corp. (NYSE: S) is an example. His ability to package his company and find a buyer were considered nearly impossible because of larger competitors AT&T Inc. (NYSE: T) and Verizon Wireless. Nevertheless, Hess managed to make a deal with Softbank, which paid a large premium to take a 70% interest in the Sprint.

Other CEOs have posted many years of strong earnings and sales growth. In most cases, to do so they have changed their products to draw in new customers or create better operating efficiencies. Howard Schultz of Starbucks Corp. (NASDAQ: SBUX) is among these CEOs. Starbucks has not only expanded its store base, but it has done so to some extent because of a series of product innovations and additions.

To identify the best CEOs of 2012, 24/7 Wall St. screened for best performing stocks in the S&P 500 using Cap IQ. The market value of the company had to be greater than $3 billion. We also examined EPS and earnings growth for the most recent quarter and recent year. To ensure that we only measured the impact of the current CEO and not a predecessor, we only considered executives who had been in the position for at least two years. Finally, we only considered CEOs who had done something particularly meaningful that had, or likely would have, a long-term effect on the companies they run.

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Daniel Hesse Company: Sprint-Nextel Corp. (NYSE: S)
Share price YTD: +137%

Hesse, who has run Sprint since late 2007, finally saved the company after a long trail of failed attempts. He did not accomplish the task by improving operations. Rather, Hesse found an investor willing to buy a majority interest in the company — not an easy task given how badly positioned the third-place cellular company in the United States has been. Sprint’s third-quarter results are ample evidence of the difficulty the corporation would have as an independent operation and without outside financial support. While revenue rose 5% to $8.8 billion, Sprint lost $767 million. On October 15, it was announced that SoftBank would invest $20.1 billion in Sprint for an approximately 70% stake. SoftBank CEO Masayoshi Son is expected to invest aggressively in Sprint’s expansion.

(AP Photo/ Harry Hamburg)

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John Donahoe Company: eBay Inc. (NASDAQ: EBAY)
Share price YTD: +61%

Donahoe became CEO of eBay in early 2008. Wall St. questioned whether eBay’s core auction business could survive competition from online giant Amazon.com Inc. (NASDAQ: AMZN) and an army of smaller online auction firms. Most investors admired eBay’s PayPal online payment system, while the legacy auction business hampered overall corporate earnings growth. That has changed. In the third quarter, the results of the renewed drive into the auction business showed. Marketplace revenue rose 9% to $1.8 billion of eBay’s total revenue of $3.4 billion. The company also has had success in the critical mobile market, which has taken on additional importance as more and more e-commerce is done on smartphones. In the most recent quarter, 800,000 of the company’s new users came from mobile as, according to the company, downloads of eBay’s suite of mobile apps have surpassed 100 million globally.

(AP Photo/ Bob Edme)

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David Nelms Company: Discover Financial Services (NYSE: DFS)
Share price YTD: +63%

Discover’s greatest challenge is that it is second in its industry to American Express Co. (NYSE: AXP) and competes indirectly with bank cards connected to Visa Inc. (NYSE: V) and MasterCard Inc. (NYSE: MA). Nelms took over as CEO in 2004. One of the most critical strategic moves he made is the takeover of smaller rival Diners Club in early 2008. The consolidation helped keep Discover competitive because it expanded the company’s market share overseas. More recently, but just as important, is the extent to which Discover has evolved into a lending company, with sizable student and home loan businesses. “Discover Home Loan” was launched in June. Nelms also has buttressed international operations with a deal to move the company more aggressively into China and Russia.

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Christopher Conn... Company: Sherwin-Williams Co. (NYSE: SHW)
Share price YTD: +63%

Connor took over as head of 146-year-old Sherwin-Williams in 1999. Some of the improvement in the company’s performance in the past year could be attributed to luck. The housing market has improved substantially, and Sherwin-Williams has 30% of the domestic paint market. The company has used the leverage that its own store network gives it to great advantage. In the most recent quarter, same-store sales rose 8.9%. More impressively, earnings per share (EPS) rose 31.0% to a record $2.24. Connor’s most important decision this year was to increase the share of the company’s international operations so that it is not as reliant on the U.S. market. In November, the company announced it would buy Consorcio Comex, based in Mexico, for $2.34 billion. Its business operations in Mexico mirror those of Sherwin-Williams in the U.S. Last year, Comex had revenue of $1.4 billion. Wall St. applauded the decision, driving its share price to a 52-week high within a week of the buyout announcement on November 12.

(Getty Images/ Alex Wong)

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Marc Benioff Company: Salesforce.com Inc. (NYSE: CRM)
Share price YTD: +65%

Benioff co-founded Saleforce.com in 1999. Despite growing competition from larger companies such as Microsoft Corp. (NASDAQ: MSFT) and Oracle Corp. (NASDAQ: ORCL), Salesforce.com has maintained a torrid growth pace. Last quarter, revenue rose 35% to $788 million. Revenue for the first nine months rose 36%. Management forecasts that revenues for the entire fiscal year will be higher by 34% than they were last year. And this growth rate likely will not slacken. Salesforce.com expects to surpass a $4 billion annual revenue run rate during the 2014 fiscal year. Salesforce.com was one of the earliest companies into the cloud computing market — what has become one of the most important factors in the migration of information from data centers owned by corporations to those operated by outside companies. As Morningstar recently pointed out, “Customers have been able to avoid heavy capital investments they would have used to deploy on-premise software.” Forbes named Salesforce.com the “Most Innovative Company in the World” for 2012.

(AP Photo/ Ben Margot)

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Brian Roberts Company: Comcast Corp. (NASDAQ: CMCSA)
Share price YTD: +58%

Roberts, who has been chief executive since 2003, is credited with two major achievements that were critical to the ongoing success of Comcast, the largest cable company in America. First, Comcast continued to hold off competition from telecom and satellite TV companies intent on taking market share in the television and broadband markets. Second, Roberts also bolstered the financial performance of NBCUniversal, in which Comcast owns the majority position. Revenue at the company rose 15% during the most recent quarter to $16.5 billion. EPS rose 39% to $0.46, when special items were excluded. Cable revenue was up 7% despite the competitive market, aided by a 9% improvement in the high-speed Internet business. The Olympics helped NBCUniversal’s revenue, which rose by 31% in the latest quarter to $6.8 billion. While it might be tempting to argue that Comcast’s fortunes were based largely on the Olympics, the company also boasts a 24% improvement in revenue from its film entertainment business and a 9% increase in revenue from its high-speed Internet products. Those improvements are based on more than just luck.

(AP Photo/ Manuel Balce Ceneta)

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Howard Schultz Company: Starbucks Corp. (NASDAQ: SBUX)
Share price YTD: +18%

Starbucks early December announcement that it will open 3,000+ net new stores in the Americas region by 2017 and increase its penetration in China is the culmination of the comeback of Starbucks that began in 2008 when founder Schultz returned as CEO. Schultz cut 12,000 jobs and 600 stores as Starbucks entered the recession. Overexpansion and new competition, which included McDonald’s Corp. (NYSE: MCD), made some investors believe Starbucks was in a permanent retreat. More recently, however, in a little over the past year, the company has launched Refresher energy drinks, K-Cup packs, and the Verismo System — a single-serve brewing machine. Starbucks earnings show that most of these initiatives and the company’s base business are doing extremely well. For the fiscal year that ended on September 30, revenue increased 14% to hit a record $13.3 billion. EPS increased 10% to $1.79, compared to the prior year EPS of $1.62. Starbucks also opened 1,063 net new stores worldwide.

(AP Photo/ Elaine Thompson)

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Jeff Weiner Company: LinkedIn Corp. (NYSE: LNKD)
Share price YTD: +72%

It could easily be said that LinkedIn is the most successful of all the Web 2.0 initial public offerings. That universe includes Groupon Inc. (NASDAQ: GRPN), Zynga Inc. (NASDAQ: ZNGA), Facebook Inc. (NASDAQ: FB) and a number of other smaller companies. While the shares of many Web 2.0 stocks have dropped since they went public, LinkedIn shares trade at $114, trouncing its IPO price of $45. Weiner joined LinkedIn as interim president in 2008 and was made CEO in June 2009. More recently, at the end of the third quarter, the company had 187 million members worldwide. LinkedIn has done a strong job in monetizing its user base. Third-quarter revenue rose 81% to $252 million. EPS was $0.02, up from a loss of $0.02 in the same quarter a year ago. The primary reason Wall St. is enamored with LinkedIn is that it has more than the single revenue stream, such as many Web 2.0 companies do. LinkedIn has three money-making products: the recruiter-centric Talent Solutions, which accounted for 55% of revenue in the most recent quarter; the advertising platform Marketing Solutions, which accounted for 25% of revenue; and Premium Subscriptions from those with LinkedIn profiles. Wall St. might argue that the business model has made Weiner’s life as CEO easy. The remarkably poor management at companies such as Groupon and Zynga proves that is not the case. Even with a strong model, execution counts.

(AP Photo/ Pablo Martinez Monsivais)

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