Frustrated by a continued weak stock price performance and growing concerns with its management, Baker Hughes Inc. directors have appointed an interim chairman, president and chief executive officer and begun a search for a permanent leader. Joe B. Foster, retiring chairman of Newfield Exploration Co., and a BHI board member, became temporary successor to Max L. Lukens, who resigned as head of the Houston oilfield service company. A search committee for a new CEO is being led by recently retired Marathon Oil Co. president Victor G. Beghini, also a BHI board member. Directors also installed Andrew J. Szecila, a senior vice president, as head of BHI's oilfield operations. Thomas R. Bates Jr., who was responsible for the Western Geophysical, Baker Atlas and Inteq divisions, has resigned. The Inteq division recently reported accounting problems that may result in an unfavorable restatement of past Baker Hughes earnings. "There will be no lack of leadership at Baker Hughes during the interim," Foster pledged. "...At current levels of oil and gas prices, Baker Hughes' markets should improve during the course of the year. We will not lose focus on our markets or our customers during this transition period." Wall Street quickly endorsed the changes, pushing up Baker Hughes common stock. Aalysts were hesitant to place the entire blame for Baker Hughes' troubles on Lukens. But they also applauded the board's decision to quickly seek a new leader for the company. "The only surprise was that it came as quickly as it did. But it has been building," said Geoff Kieburtz of Salomon Smith Barney Inc. in New York. "One thing is clear," said Michael LaMotte of Banc of America Securities in Dallas. "During the time of Max's tenure as CEO, and frankly during the preceding period, Baker Hughes, on most financial matrices, underperformed its peer group and, some years, did so dramatically. "The problems of return on capital and return to shareholders preceded him. But during his tenure, he clearly did not move fast enough or far enough to improve those returns. That's what prompted the change." Wesley N. Maat, of Deutsche Bank Securities Inc. in New York, saw concern over Lukens' effectiveness as only one reason for the recent pall over Baker Hughes. "There also was concern that charges from accounting problems, which were estimated at $40- to $50 million, could be significantly greater," he said. Foster, who has been a Baker Hughes director since 1990, said the company's primary goal remains to improve its stock's performance. "Our job at the board level, and at every level of Baker Hughes, is to add value on a per-share basis," he said. Maat immediately upgraded the stock from Perform to Strong Buy, with a $30 target price by year-end and $45 by the end of 2001. -Nick Snow
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