CHICAGO — CDK Global Inc. isn't the kind of company that attracts much attention in Silicon Valley. In fact, the maker of dealership software is largely unknown in its suburban Chicago hometown. So why would the former CEO of one of the Valley's original icons, Intel, sign on there?
"I've always been a car guy," said Brian Krzanich, a 58-year-old chemical engineer who spent most of his career keeping factories humming for the world's largest computer-chip maker before landing Intel's top job in 2013. "I love mechanical things, older cars especially."
His garage features a Porsche 356, the predecessor to the classic 911. He's got a 50th anniversary Shelby Cobra and is awaiting delivery of a Ford GT in January. "To do this [job], you have to spend time with the dealers. Dealers can tell right away if you're a car person or not."
Second question: So why would a software company recruit a hardware guy as CEO?
"In today's world, you can't ship hardware without software," Krzanich said. "A lot of our work at Intel was on the automotive side: in the head unit, engine and brake controllers."
CDK doesn't need an overhaul, but it definitely could use a tuneup. CDK, which was spun out of payroll software company ADP in 2014, lowered its profit forecast a month ago for the current fiscal year, mostly due to a recent acquisition. It also has to reckon with a slump in auto advertising, which accounts for 13 percent of its $2.27 billion annual revenue, and a plateau in the auto sales cycle. There's continued consolidation, moreover, among smaller dealers who make up a third of its business. And CDK faces an antitrust lawsuit, which a federal judge in Chicago recently declined to dismiss.
Little wonder that CDK's share price has dropped 34 percent since mid-January, when it hit a multiyear high of $76.04.
"The market is going to take a wait-and-see approach to whether or not the company can re-accelerate growth," Wells Fargo analyst Tim Willi wrote when he downgraded the stock to "market perform" Nov. 8, the day after CDK revised its outlook and, coincidentally, announced Krzanich would take over as chief executive from Brian MacDonald, who had been in the role since 2016. "A new CEO, while bringing a strong track record, presents a scenario where the market may expect a shift in strategy and additional movement on the management team, creating uncertainty."
Krzanich, who resigned from Intel in June for having a relationship with an employee, in violation of company policy, says he was looking at traditional tech jobs, from startups to larger companies, in sectors as varied as artificial intelligence and rocketry, when he got a call from a CDK board member he knew: Stephen Miles, a former headhunter at Heidrick & Struggles who runs Miles Group, a boutique executive-coaching firm.
"When I started thinking about what's next, I assumed it would be in the Bay Area or Western U.S.," Krzanich acknowledged.
But CDK "was the right combination, the right size — big, but not too big," said Krzanich, who will commute from Silicon Valley to Chicago while his daughter finishes high school. "This has a great core business with a lot more potential."