If reports are true State Street has lost its way. If State Street (ticker: STT), CEO Ron O’Hanley truly hired Goldman Sachs to help he and the Board think through corporate strategy the company is toast. Any CEO who trusts his company to outsiders has lost his way. Did State Street truly need Goldman Sachs to advise them that the Asset Management business – particularly passive investing – is a scale game?
Also, for State Street to bifurcate capital allocation decisions between its Asset Management and Technology businesses does not make for a sound strategy. State Street’s Technology business deserves better and will never attract top talent so long as it plays second fiddle to the Asset Management business. State Street ought to sell its Technology business (CRD and other assets), outright as Technology is very much a scale game. Otherwise, STT’s Technology business runs the risk of becoming irrelevant over time. Pick one business and go “all-in”. State Street would be wise to take this free, sound advice.