Joe B. Foster, the new chief — at least for now — of BakerHughes Inc., is promising improved performance to shareholders inthe wake laggard stock performance and the disclosure of accountingirregularities that have launched a slew of investor lawsuits.

“Baker Hughes is a premier oilfield services firm. It hasoutstanding product lines, services, people and technology. Whileour customers have been pleased with our performance, we have notbeen satisfied with our performance in the stock market. We want toimprove value for the shareholders of Baker Hughes.” He said Bakeris not a candidate for sale or merger.

Foster, a veteran leader of the oil and gas industry, departedthe CEO position of Houston-based Newfield Exploration Co. twoweeks ahead of a scheduled retirement to take the helm of thetroubled Baker until a permanent CEO can be found. The Baker boardof directors voted to fire CEO Max L. Lukens, who has been with thecompany nearly 20 years, including three as chairman and CEO. Hisfiring was cheered in the stock market Monday by an 18.3% jump inthe price of Baker shares. The stock closed Tuesday at $24.13, down$0.56.

Analysts responded to Lukens’ firing by raising their ratings onthe company. In a research note, one analyst said firing Lukens “isthe first and the biggest step the company needed to take to getthe market to recognize the value in its shares.”

Dain Rauscher Wessels analyst Jim Wicklund was kinder in hisassessment of Lukens but conceded it was time for him to go in theview of the Baker board. “Max Lukens is one of the finest peopleI’ve ever met, but after three years at the helm of this company,the stock continued to under-perform, and problems… continued tocrop up. There was also the question of realization of value in theWestern Atlas acquisition. It was a combination of three years ofthe stock under-performing, the question of wringing adequate valueout of the Western Atlas acquisition and having problems, such asthis accounting problem, crop up on his watch.”

Looking forward, Wicklund said he expects Foster to work toferret out any other irregularities in the company’s business, buthe does not expect him to attempt to steer the company for the longterm, leaving that task to his permanent successor.

Besides a foundering stock price, Baker has been beset byaccounting irregularities in its Inteq Group that are expected tocause the company to take a $40 million to $50 million charge. Thetrouble will lead to the restatement of earnings for prior periods,the company has said. That’s the equivalent of yelling fire in acrowded movie house, said Wicklund, who gives little weight to theshareholder suits. “We don’t think that the claims have any realmerit.” Lukens is named as a defendant in class actions filedagainst the company and one other executive. Defendants are accusedof making false statements regarding the company’s finances.Shareholders have until today to seek lead plantiff status in suitsagainst Baker.

The search committee charged with finding a new Baker CEO isbeing led by Victor G. Beghini, a Baker director since 1992.Members of the committee include Kinder Morgan Chief Richard Kinderand Dynegy CEO Chuck Watson. “You have to believe that with a veryactivist board and especially the people on the executive searchcommittee… the chance of bringing in someone with provencapability is fairly high,” said Wicklund.

Whoever takes the helm will have to contend with flagging moraleif messages posted to a Yahoo! message board dedicated to thecompany are any indication. “Anybody who feels they can get aposition within another company is either actively looking or hasalready gone,” wrote one anonymous poster who claims to be anemployee. Another said of morale, “It is so low that it will take alot more than Lukens leaving to get any improvement.”

Over at Newfield, David A. Trice CEO, Newfield president andchief operating officer since May, replaces Foster as CEO. Fosterwill remain Newfield’s chairman and be involved with the company ina non-executive role. Foster has been on the Baker board ofdirectors since 1990.

Foster founded Newfield in 1989 after serving as executive vicepresident of Tenneco Inc. and Chairman of Tenneco Oil. Foster isimmediate past chairman of the National Petroleum Council.

Joe Fisher, Houston

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