Jeff Matthews
Mar 27, 20153 min
Tom Prescott announced his retirement last
night. You may not have heard of him,
but as CEO of Align Technologies (the inventors of Invisalign “invisible
braces”) Prescott helped turn a $70 million revenue company with 35% gross
margins, negative operating margins and a $127 million market value into a
near-$800 million revenue company with near-80% gross margins and 25% operating
margins.
Oh, yeah, and a $4.5 billion market value,
last we checked.
More than that, Tom Prescott helped Invisalign
develop from a niche product not much liked by the orthodontists who were
supposed to use it (it’s far more expensive to them than the old-fashioned
wires and brackets, plus, in the early days, before Prescott, the Invisalign
treatment was far more limited in what it could do, teeth-moving-around-wise) into a near-standard of care in orthodontics around the world.
And he did it the old-fashioned way: by
spending on R&D to improve the product (a quarter billion in the last six
years alone), marketing like crazy, and proselytizing every chance he had.
Along the way, Prescott had to
contend with a near-fatal copycat product (fought and won in courts of law),
short-selling attacks (fought and won the best way possible: just running the
business well) and big-company patent suits (smartly settled).
If there ever exists a CEO Hall of Fame, Tom
Prescott should get in on the first ballot.
Thus it was quite a surprise to see the
headline come across the tape after last night’s close that he would retire in
June, with an outside-the-company successor to take his place. No mention of such plans had ever passed his lips to anyone outside Align, and being the ripe young age of 59, nobody had ever bothered to ask him.
Nevertheless, as the ensuing conference call
made clear, the decision was voluntary, had been in the works for a year and a
half, and had produced a successor who looks eminently worthy of filling some
big shoes.
Now you would think the first question on the
call would be about the decision itself, with perhaps a follow-up on the
successor and whatever plans he might have for the company.
But you would be wrong.
The first question was about what it’s always
about for some of Wall Street’s Finest…near-term earnings:
“Thanks.
Good afternoon. Tom or David
[White, the CFO], could you just elaborate on sort of the preliminary 1Q
outlook in terms of revenues and EPS…?”
It was as if Leo Messi suddenly announced his
retirement from Barcelona during half-time, and the first question out of the
reporters’ mouths was about who’s going to win the match.
You could almost hear Prescott and his team restraining their incredulity, but, class acts that they are, restrain they did.
Still, if there ever exists a Hall of Fame of Silly
Analyst Questions, that one will get in on the first ballot.
Jeff
Matthews
Author
“Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks
on Investing, 2015) Available now at Amazon.com
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NotMakingThisUp, LLC
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