There's a story that when CBT's Bill McCabe was first learning how to promote his company among US analysts, he turned to his executive colleagues and said: "I've just realised that this is another sales job."
Now the Belfast-born economics graduate who was brought into software company CBT in 1987 to oversee the company's sales drive in Britain, is facing one of the biggest sales challenges of his life. Shares that last month were selling at $60 (£39.50) on the US Nasdaq market, are now selling for around $8.
On top of that a number of US legal firms have announced they are taking class actions, alleging that senior CBT figures talked up the company and sold millions of dollars worth of personal shares, when they knew the CBT's position was being misrepresented.
Mr McCabe (41) disposed of $24.7 million worth of CBT shares in the period to which the class actions refers, according to data published by the New York-based Securities and Exchange Commission, which oversees the Nasdaq market. In the last year he has sold CBT shares worth about $39 million.
The class actions are for the period January 20th to September 30th, 1998. Mr McCabe sold CBT shares worth $17 million on January 28th, and another $7.7 million worth of CBT stock on April 16th.
On Thursday of last week, when the company announced some senior management resignations and the return of Mr McCabe to CBT's helm, employees around the world listened in as he and his colleague, Mr Gregory Priest (34), addressed them simultaneously via public address systems.
Over-achievement and a lapse in communication with Wall Street were the reasons for the collapse, Mr McCabe said. Customers had to be reassured, and a promotions blitz on Wall Street was needed to resurrect the share price. Mr Priest told them that he and Mr McCabe were going "on the road".
From a position in which he was reducing his ties with CBT, Mr McCabe has now conceded that his efforts to put the company back on track will demand a hugh portion of his energies.
The dramatic slump in CBT's fortunes has been difficult for employees. They have not only lost large amounts of money by virtue of their shareholdings in the company. But job security has become a pressing issue in an operation that just a few weeks ago was one of the shining stars of Ireland's high-tech boom.
Given the opportunity to question Mr McCabe last week, it is understood that staff confined themselves to questions about how they should explain matters to customers and about the scheme CBT had drafted to protect itself from hostile takeovers. Not surprisingly no one asked about the issue of sales of company shares by Mr McCabe or other senior executives.
Class actions are not unusual in the US, according to sources, and are often "ambulance chasing" operations where law firms representing small investors hope defendants will settle out of court. Mr McCabe would have known such cases were likely to occur. However, he did not raise the matter and, according to a spokesman, he will not discuss the issue with the media.
When Mr McCabe briefed staff on the departure of Mr James Buckley, the group's chairman and chief executive, and Mr Richard Okumoto (45), senior vice-president of finance and chief financial officer - both had also resigned from the board - he sought to put a positive complexion on their departure. "Rich and Jim by mutual consent have agreed to stand down," he said.
Mr McCabe has acknowledged that the good communications which existed between Wall Street and the company were less in evidence in recent weeks.
He was also in no doubt that the scale of the downturn at CBT meant that decisive action was needed and - as importantly from the point of view of investor confidence - it needed to be seen to be taken. Hence the exit of Mr Buckley and Mr Okumoto.
CBT is now being managed by a committee comprising Mr McCabe, Mr Priest, and Mr John Grillos (56), a director since 1994. Mr McCabe has made no secret of his personal dislike of a committee system and is determined to do all he can to put new management in place as soon as possible.
Last week, the company announced revenue for the third quarter of approximately $35 million. The figure was released the day after the close of the quarter, because of the pressure created by the demand from analysts for information.
At $35 million, the figure was below Wall Street's and the company's expectations. The company had been expecting a figure of $50 million. Shareholders - many of them so-called momentum investors only content to retain their holding while prices were rising - saw the share price graph change from upward to downward and decided to cash in their shares, irrespective of the fundamental strength of the company.
Central to the drop in the share price was the negative view taken by analysts of the disclosure that the company was not going to make its typical greater-then-expected returns for the third quarter. The decline was compounded by dissatisfaction on the part of analysts with the response of the company to questions posed by them. Then on Monday of last week it was announced that a particularly big contract was at risk and Wall Street downgraded revenue expectations from $50 million to $41-$42 million. The stock price went into free fall and continued to fall when it emerged on Thursday of last week that revenue would be even lower.
Mr McCabe's background as a salesman is evident in his defence of the handling of sales projections for the quarter. A huge amount of business is in the last week of the quarter and he says sales staff have to believe they are going to make the numbers right up to the last moment. But he has conceded that there were communication problems once it became clear that difficulties existed. This issue is now to be examined.
According to those who know him, Mr McCabe is a "driven" businessman. "He's one of those guys who wouldn't know what to do with himself it he wasn't making deals," said one source. "He's not a man for the golf course, unless he's making deals on it."
Mr McCabe's decision of seven weeks ago to step down as chairman from CBT in favour of Mr Buckley, was to allow him pursue other business interests, such as Knowledge Well, the interactive educational products company with headquarters in California and development facilities in the Blackrock Business Park in Dublin.
Knowledge Well produces interactive educational products aimed at individuals seeking advanced degrees and professional credentials and was founded in Dublin last year. It concentrates on interactive education at third and post-graduate level, outside the information technology arena, which is CBT's focus.
Mr McCabe is chairman. Mr Priest joined the company as chief executive officer in February, having moved from CBT. At the time of the appointment, Mr McCabe praised Mr Priest for being "instrumental in the planning and execution of CBT's phenomenal growth in the United States and throughout the world. Knowledge Well offers a new and exciting opportunity for Greg".
Mr Priest said he looked forward to working with Mr McCabe again "to build a new business based on the same compelling principles as those that have guided CBT as it has grown into a powerful international influence in the IT training market."
Mr Okumoto replaced Mr Priest in CBT, just as Mr Buckley, the then CEO, had taken over as chairman of CBT upon Mr McCabe's departure from CBT in August.
That plan to expand Knowledge Well must have received a blow with the two executives now having to give so much time to "touring" the US analysts sector in order to revive the CBT share price. Mr McCabe is said to be furious at what has happened with CBT. In April 1995 when the company was floated on the Nasdaq, shares traded at $25. (The price meant his 2.2 per cent of the company was worth more than $4 million, while a trust he created was valued at £34 million.)
CBT was established, with £15,000 and IDA assistance, by schoolteacher Mr Pat McDonagh and businessman Mr Dermot Desmond in 1984. The two split after a year and Mr Desmond went on to form his own software company, Quay Financial Software. CBT was bought and then bought again until Mr McDonagh was able to buy it back for £1 million less than he'd sold it. He still has a substantial shareholding in the company and is a member of the board, but does not hold an executive position.
Mr McCabe is credited with having led the company's drive in the US and said the company was placed on the Nasdaq in order to gain credibility and not in search of capital.
The company consistently brought in above average returns and the share price rose and rose. Mr McCabe became a very rich man.
Other Irish software companies no doubt were hoping they too could follow CBT on the Nasdaq trail to success. Now they'll be watching Mr McCabe as he "tours" the US, hoping his reputation for charisma, salesmanship and drive, is sufficient to the current challenge.
