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Enron Corp CEO Jeffrey Skilling resigns

Enron Corp chief executive officer and president Jeffrey K Skilling resigned on Tuesday, following months of weakness in the energy giant's stock price and several high-profile stumbles.

Enron chairman Kenneth Lay will resume duties as president and CEO at the wholesale energy marketer and trader, positions he held for 15 years until Skilling took over in February, the company said.

Lay said that he has extended his employment agreement with Enron through 2005, and told analysts on a conference call that he would use that time to prepare a successor.

"I am resigning for personal reasons. I want to thank Ken Lay for his understanding of this purely personal decision, and I want to thank the board and all of my colleagues at Enron," Skilling said. He declined to elaborate on those reasons when asked during the conference call.

Skilling was instrumental in creating Enron's core business in natural gas marketing and trading, helping create the industry's first forward sales contracts and markets when he joined Enron in 1990. He worked with Enron for five years before that as a management consultant with McKinsey and Co.

But Skilling's tenure in the No. 2 position has been marred by the underperformance of the company's much-ballyhooed broadband business, a massive and costly payment fight with the Indian government over Enron's $3 billion Dabhol power plant project and the breakup of a marquee video on-demand broadband Internet deal with Blockbuster Inc. earlier this year.

California politicians took special delight in vilifying Enron and blasting its close ties to President George W. Bush as they blamed the Houston company for much of the state's power crisis. That culminated with a protester throwing a pie in Skilling's face as he gave a speech in San Francisco.

Persistent stock weakness

All that has weighed heavily on Enron's stock price since mid-March, when it began an extended period of weakness. In the past year, Enron's stock has fallen from its all-time high of $90.56 reached on Aug. 23, 2000, to less than half that. Over recent weeks it has hovered near its 52-week low of $42. It closed at $42.15 on the New York Stock Exchange Tuesday.

"Now's the time for me to leave the company and I think now's the time because we got a lot of those things behind us. I worked with Ken and other people at Enron the best I can to get them behind us," Skilling said.

Since Skilling took the CEO reigns, Enron's market capitalization has dropped roughly $25 billion.

Nonetheless, he delivered two quarters of earnings that surpassed forecasts, continuing several years of above-expectation performance by Enron. Lay said Skilling's departure would have no bearing on 2001 earnings forecasts.

One analyst said that Enron's forays outside of its of its core energy trading and marketing business may not have played well with investors.

"The rush into broadband is largely seen as a losing venture as of now and they put a lot of capital into it," Commerzbank analyst Andre Meade said. "I don't think a lot of investors totally signed on from the transition to a gas and power marketer to an all-commodities market-maker.

"That's where it looks like Skilling was taking the firm."

Skilling defended those businesses as initially successful, and bellwethers of Enron's capabilities to move outside of its traditional realm of competency.

"I think we are getting real good traction in those products. Across the whole wholesale business, I think its steady as she goes. We've got a lot of success," Skilling said.

He said second-quarter volumes doubled in all of Enron's non-energy commodity ventures and that they were all, with the exception of broadband, profitable.

"I was personally surprised with the speed at which that business fell apart. It is a meltdown right now in the telecom business," he said. "And we have been working very hard for the past four months to get our cost structures down, consistent with what the revenue opportunities are. And we've done that."

Skilling cut Enron's budget for the broadband venture by $500 million, down to $250 million. He predicted success for the business in two or three years.

Lay said that he and Skilling had created Enron's strategy together, and he would continue pushing forward with their plans.

"I see absolutely no change in Enron's business direction," Lay said. "He and I have set this course jointly over the last 11 years."

Skilling declined to explain his personal reasons for leaving, but both he and Lay stressed that the departure was voluntary. Lay told analysts that Skilling would not receive a severance package for that very reason.

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