With end-market exposure in areas like electronics, security, medical devices, commercial fire/safety and others, Tyco went toe-to-toe with other well-diversified behemoths like General Electric (GE) and Honeywell (HON).
Unlike GE and Honeywell, Tyco lacked integrity and reliable leadership. And that's putting it mildly. Dennis Kozlowski, former CEO of the company, who has recently been paroled after serving eight years in prison, looted the company of more than $100 million.
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It was later discovered that Kozlowski spent as much as $6,000 of the company's money on shower curtains. It didn't stop there. In 2001, Kozlowski added $2 million more dollars to corporate tab to throw his wife a birthday party. This was only part of the millions more he was granted in "corporate loans." These were of the "forgiven" variety.
With such glowing deficiencies in internal controls, Tyco's value and stature came tumbling down. After shares peaked to more than $122 in 2001, a year later the stock plummeted to $26 per share when federal grand larceny and securities fraud charges were brought upon Kozlowski. Investors didn't know what hit them. Things snowballed further until shares finally bottomed at around $9 at the height of the credit crisis in 2009.
Five years later, shares are now back above $40 after Tyco posted 43% gains in 2013. Bears continue to argue that the stock is still more than 66% away from its all-time high. Though this may be true, I believe the 5-year gains of 354% is just as remarkable. And the credit will need to go to Tyco's current management team, which has pushed all of the right buttons to restore credibility to a once-dominant brand. And it hasn't been easy.
Tyco enjoyed quite a bit of success after spinning off both its electronic and medical devices business into two independently-operated entities called Tyco Electronics and Covidien (COV), respectively. This allowed management to focus on a three-pronged industry approach. When all was said and done, the remaining portions of Tyco operated the commercial fire and safety business, flow control and the security business.