Agilysys Eliminates a Layer of Management, Names New CEO

October 28, 2008 Alex Woodie

System i reseller and software developer Agilysys took drastic action to cut costs amid a worsening economic climate last week when it fired three senior managers with 90 years of collective experience and hired a new CEO and president to replace the previous chief, who stepped down.

The swirl of activity started when the public company’s board of directors voted Martin Ellis, previously its CFO and executive VP, to be Agilysys’ new president and CEO. Ellis replaces Arthur Rhein, who retired last week as president, CEO, and chairman of the board. Director Keith Kolerus was named non-executive chairman of the board.

Accompanying Rhein out the door in the corporate shakeup were executive vice presidents Robert Bailey and Peter Coleman and Jeff Levine, a senior vice president of IT and operations. In a press release, Agilysys says their corporate positions “will not be filled as part of the company’s plan to more fully integrate their responsibilities into business unit management and consolidate its Florida corporate headquarters into its Solon [Ohio] offices.”

Ellis named new senior vice presidents to lead the three Agilysys divisions previously led by Bailey (31 years with Agilysys), Coleman (36 years), and Levine (23 years). Tina Stehle, age 51, formerly of Inter-American Data, was promoted to general manager of the Hospitality Solutions Group (HSG) based in Alpharetta, Georgia. Paul Civils, age 58, was promoted to general manager for the Retail Solutions Group (RSG) based in Greenville, South Carolina. And Tony Mellina, age 52, was named general manager of the Technology Solutions Group (TSG) in Edison, New Jersey. All were previously vice presidents or senior vice presidents before the promotion.

“As a result of our emphasis on reshaping and streamlining this company, it has become clear that we no longer can afford the corporate overhead that was anticipated to support our previous growth target,” Ellis said. “As a result, we are restructuring corporate SG&A to improve operating performance, deliver sustainable earnings growth, and position the company for the future.”

Jettisoning the former heads of Agilysys’ divisions will have an immediate impact on the company’s profitability. Coleman and Bailey each made about $1.2 million last year (Ellis made $1.3 million) while Rhein (age 57) made about $3 million. The company has already saved $17 million this year through previous cost-cutting measures, and it expects the elimination of a layer of management and the consolidation of company headquarters away from South Florida and to the Ohio office to save even more.

Agilysys is in a state of flux at the moment. Earlier this year, the company hired JPMorgan Chase (which was then still an investment bank) to explore the possibility of a sale of the company. Since then, the company’s stock has plummeted from around $12 per share to just under $4, taking its market capitalization to about $100 million.

Two weeks ago, the company, which makes the software powering 17 of the 20 largest casinos in Las Vegas and 19 of the world’s 20 largest hotels, lowered its revenue forecast for the remainder of the year. The company is expected to post a loss of about $.06 per share when it reports its quarterly earnings next week, but it still expects to be profitable in 2009.