The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

April - 2012 - issue > Cover Story

Dinesh C. Paliwal: The Rainmaker

Vimali Swamy
Wednesday, April 4, 2012
Vimali Swamy
Dinesh C. Paliwal: The Rainmaker
It is often said, that change is the only constant but it is how one embraces the change that decides whether one is to stay for long or just perish. Founded in 1953 by Dr. Sidney Harman and Bernard Kardon, Harman International (NYSE: HAR) rose to become the powerhouse in the U.S. stereo industry. The company made its mark by pioneering the concept of separate components; instead of selling stereo systems as integrated units, Harman began selling separate receivers, speakers, amplifiers, and other pieces that buyers could purchase separately and wire together to tailor their own home sound system. By 1995, the company had forayed into automotive electronics business, providing luxury automakers like Mercedes, Volkswagon, Toyota, GM and more with both audio systems as well as infotainment systems combining navigation, wireless connectivity, and multimedia capabilities. The automotive division grew quickly, and by the mid-2000s was Harman’s biggest business unit, contributing over $2billion in revenues. But as they say, all great things often come to an end. 2006 onwards saw a Harman going into a downward spiral. Once the kings in the infotainment segment, the company was struggling with the competition from other players in the industry. Additionally the company was also struggling to deal with internal turmoil; the product deliveries were long over due, the operational costs had risen tremendously and the R&D pipeline had weakened tremendously. The price of shares had plummeted down considerably. By Q3/2007, the company was almost about to disappear from NYSE due to buy-out by KKR and Goldman Sachs Capital Partners.

Unable to solve the mounting problems, in 2009, Dr. Harman stepped down as the CEO and hired Dinesh C. Paliwal as the company President and CEO. Paliwal was a veteran of the corporate turn-around, who had previously proved his mettle the heavyweight Swiss-based automation provider ABB. During his tenure as President of U.S. operations for ABB, the company moved from a money-losing and siloed organization to one with double digit growth, doubled its share price in one year, and saw its bond ratings upgraded by Moody's and Standard & Poors. It was a similar magic that was expected of Paliwal at Harman.

“I was quite ecstatic to take up the role. Harman was known to be a good company with great products and business prospects and turning the company’s fortune for good was a challenge that I was aspiring to take. The first three months were quite grim, the balance sheets were bleeding red, overburdened with orders and a very weak R&D pipeline,” reminisces Paliwal.

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Reader's comments(1)
1:This article is almost complete fiction. Dr. Harman didn\'t invent separate components, he invented the Stereo receiver, which was a combination of separate components housed in one chassis--namely, the tuner, amplifier and preamplifier. In addition, the company was not on the verge of failure when he \"took over\" and he was not recruited to turn around a failing company. He was recruited by KKR prior to their proposed buyout to raid the coffers after taking the company private. Since his inauguration as chief idiot, he has cut costs, eliminated expertise, created a culture of fear and loathing and is universally hated by employees that don\'t have offices under his nose in his corporate office. Senior management is so disconnected form the reality of the organization and so arrogant, that they cannot recruit or retain talent. They\'re now only able to recruit third tier candidates for far more than the market value of their \"hires\". They\'re spending millions of dollars on advertising because the company cannot create compelling products in the consumer division, which they have buried in the high-margin OEM business to hide the continual failure of the consumer business to provide any value. Paliwal may be a competent B2B guy. He\'s no manager of people, no agent of positive change, and he\'s certainly not the leader that Dr. Harman was. Prior to the proposed sale to KKR, Harman stock was trading at $120. It\'s now stuck at $50 and no amount of incomprehensible blabbering about \"reverse innovation\" (which is code for selling cheap goods at low margin) will bring back the days when Harman was a respected maker market leading audio products.
Posted by: - 06th Apr 2012
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