Sabre CEO Resignation Surprises But Doesn't Worry Stock Analysts

Sabre president and CEO Tom Klein surprised many when he announced Monday that he plans to resign from his post and step down from the board of directors at the end of the year. Even so, a few Wall Street analysts who watch Sabre, and Klein himself, view the company as well positioned to weather the transition.

In an interview, Klein said the decision was his own: "It's something I've thought about for a while. What's the right time? I guess you're never quite positive, but at the end of the day, I felt the business is in a very good position. It's resilient. It's got good growth characteristics right now, and we're in spaces where we can win."

Cowen and Co. analyst Matthew Broome expressed surprise at the announcement. He called Klein "a very good leader" for the company and his departure "clearly a negative development." He added, "However, he leaves the company well positioned, and we expect minimal disruption to operations during the transition."

Jefferies analyst Jason Kupferberg also called Klein's resignation "surprising." Still, he added, "we believe the situation is quite manageable." As he viewed it, a six-month lead time for the transition and "a deep bench of management talent" within Sabre help. So does the fact that Sabre reiterated its 2016 and midterm guidance, Kupferberg noted.

While "surprising" as well to Evercore ISI analyst David Togut, a research note pointed out that Sabre's board was critical of Klein's 2015 performance, based on proxy materials released in April.

For 2015, Klein fell short of his cash incentive opportunity, earning $1.2 million out of a $1.4 million target, according to the April 25 proxy filing. "In 2015, our Board of Directors considered the performance of our CEO and, while acknowledging his strong operational and financial performance, found he had demonstrated shortcomings in other leadership areas," according to the filing.

Even so, the board in the same proxy statement recommended shareholders vote in favor of Klein's participation on the board, noting that his "long service at our company, travel technology industry experience and his leadership experience make him a valuable asset to our management and our Board of Directors."

This week, several analysts reiterated a "buy" on Sabre stock, though the company's share price registered a modest decline in the wake of the announcement.

Cowen's Broome expected the CEO search to extend to internal and external candidates. He wrote that six months is "ample time to find a capable successor, and ensure an orderly transition."

Klein will be involved. As a board member through the end of the year, he said, "I'll be one voice of nine on the board, and I think the board will value my input."

What will keep Klein occupied in his last months at Sabre?

"From a company perspective, there is an aspect of business as usual, but also there's some important things that we've been working on that I want to make sure are hardened and that maybe I'll have some more urgency about than I would have if I was staying beyond the end of the year." He mentioned data and analytics, user experience and design and Sabre's Asia/Pacific business, which took full ownership of Abacus last year.

According to a U.S. Securities and Exchange Commission filing, Klein's separation agreement with Sabre extends his non-compete, non-solicitation and non-disparagement obligations from 12 months to 24 months, effective Dec. 31.

Klein is barred from working for chief rivals Amadeus and Travelport during that time, of course. Yet, restrictive covenants in his agreement also extend to American Express, Etihad Airways, American Airlines, United Airlines, Delta Air Lines, Lufthansa Group, Expedia, Priceline, TripAdvisor, Google parent Alphabet, Amazon, Facebook, Concur/SAP, Oracle, Farelogix, TravelClick, Carlson Wagonlit Travel, BCD Travel, Hewlett Packard Enterprise, TravelSky, Hogg Robinson Group and Computer Sciences Corp.

"It's a big world, and I've been spending a lot of time in a small part of it," said Klein. When the time comes to get back to work, "I certainly won't jump into anything quickly."

As for next year, Klein expects to spend more time with family.

"On the personal side, I'll be 55 in the spring and my daughter is in her last year of high school starting in September," he said. "If I get to spend that back half of her last year at home with her, that's a decision I'll never regret if I'm going to take some time off between gigs. And, look, I'll work again; I'm too young to retire, but I do want to take a break. I thought it would be better to do it while my two daughters are in the house than after they leave. All those things kind of led me to thinking this was the right time."

Company materials will tell you that Klein has been with Sabre for 22 years, but "I think of it as 28 years," he said. "I started with American Airlines 28 years ago, then left after a few years and came to Sabre." He's been president of its two primary divisions, president of the entire company and, for the past three years, CEO. He's been with Sabre as a public then private company and back again.

"I've been here for a long time," Klein said.