EMS Chairman Explains Resignation of CEO Domorski

[Satellite News 11-11-09] EMS Technologies CEO and board member Paul Domorski has resigned from the company, effective immediately, the company announced Nov. 11. 
    Domorski produced earnings growth for EMS throughout his tenure as CEO, but EMS Chairman John Mowell told Satellite News that the EMS board wanted a CEO who would focus on technical rather than business leadership, and the competitive environment of EMS’ target markets motivated the company to seek a new direction for its executive leadership. "This company is becoming more and more intensively involved in technology development, needing higher abilities in the engineering disciplines and, certainly, in the leadership of the company. This was an area where Paul [Domorski] was a little bit shy in," said Mowell.
    EMS  has named COO Neilson Mackay to replace Domorski as CEO and board member, a move that had been in the works for some time, Mowell said. "We’ve been grooming [Mackay] for the job. We were looking for someone with an excellent background in engineering and electrical engineering. Mackay is a leader who knows this business inside-out,” said Mowell.
    Industry analyst and MSUA President Tim Farrar told Satellite News that the change in the EMS leadership also could change the course of the company’s business direction. "EMS clearly had a lot of its attention focused on its Sky Connect airline broadband partnership with Aircell and recently, we have seen a sharp decline in that sector," said Farrar.
    Mowell denied that its decision to replace Domorski was motivated by sharp declines in the commercial airline sector. "We are still very optimistic about that sector of the business. We see a very good future for it. We have products that will go on 50,000 aircraft and we positive about that outlook," he said.
    Domorski had been very active in promoting the growth potential of the company’s Sky Connect broadband connectivity solutions for commercial airlines and supplying Aircell with broadband technology. In a July interview with Satellite News, Domorski said that airline broadband market research showed favorable numbers for EMS and the economic crisis would force commercial airlines to embrace connectivity services.
    "Its absolutely fascinating," Domorski said at the time. "I could not predict, even six months ago, that these services would be embraced at this speed or in this quantity. In that short amount of time, this market has exploded. … Delta Airlines has 160 planes active with the service. American Airlines uses the service on 40 planes and has committed to connecting its fleet of 300 by the end of 2009. AirTran has 136 planes connected with Sky Connect, and has committed to having their entire fleet ready with the service. In the European market, Ryan Air has committed to connect 170 planes, with 30 currently in service. The service is also showing strong uptake in the Asia Pacific market. We have about 100 planes active with the service in Asia, and we expect that figure to grow significantly, driven by the demand from business travelers who have to fly long distances on those flights. Qantas Airlines in Australia  is looking at a whole roll-out of services. They haven’t committed to a specific number, but its going to be a big order," he said.
    However, EMS and other airline connectivity developers suffered this year, as weak air travel led to production cuts for planes and business jets. Rockwell Collins, one of EMS’ competitors in the sector, reported a 26 percent earnings drop in its 2009 fourth quarter financial results driven by commercial airline technology sales declines.
On the same day EMS announced Domorski’s resignation, the company announced it hired Cheryl Galloway, a business aviation sales professional, as a senior account manager for its EMS Sky Connect division, focusing on introducing and driving sales for the EMS division’s Forté in-flight office capability products and solutions to original equipment manufacturers.
    Farrar said EMS’ leadership change may result in new market developments and possibly acquisitions. "The question now becomes whether or not larger entities will use the opportunity of EMS’ leadership change to make a bid for the company or its stronger businesses," he said.
    Mowell said that despite shifting executives during a rough economic environment in the market, EMS continues to make money and stands by its positive outlook. "Everyone got excited about our last quarter’s earnings. We increased our earnings, but the industry didn’t like how we made those earnings. As chairman, I’m more concerned about real value for our shareholders, not market gaps. To stay competitive, we have to focus on engineering. It’s just about a different mindset that we need in the chair. We’re seeing the environment change, and to continue our 15 percent to 20 percent growth rate, we just feel the company needs a different direction."