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I have to add my thoughts about Citigroup (C). The company just announced plans to cut 17,000 jobs which is about 5% of the workforce. The Street, however, is unimpressed and the stock is down today.

Much of the blame is being aimed at CEO Chuck Prince, but I’m going to make a slight defense of Prince. Or rather, the problems at Citi aren’t his entirely his fault. The most important problem is that the company, as it’s currently comprised, doesn’t make any sense.

Shareholders are in denial and they’re blaming Prince for the effects of Citi’s problems, not the root. Here’s the deal: Sandy Weill built today’s Citigroup through very aggressive acquisitions. The idea was to throw a bunch of mediocre businesses together and that would (hopefully) make one really good company. Well, it doesn’t.

Today, the company has nearly $2 trillion in assets and what do they have to show for it? A P/E ratio of 12. It’s the Austria-Hungry of stocks.

I’ll give you a good example. Look at the major brokerage stocks. Merrill, Goldman, Morgan, Lehman, have all seen their stocks soar. But Citi’s stock has done nothing. Does anyone think that an independent Salomon Smith Barney wouldn’t have rallied? Maybe it wouldn’t have, but it would have taken some effort. Now, we’ll never know.

Prince may be out the door soon. Next up will probably be Sallie Krawcheck (oh, how the media will love that!). But I think the CEO turnstile will continue to spin until someone finally decides to un group Citi.

Posted by edelfenbein at April 11, 2007 1:15 PM