Peter Karmanos Jr.

Software executive and hockey executive

• Born: March 11, 1943
• Place of Birth: Detroit, Michigan

Primary Company/Organization: Compuware

Introduction

Peter Karmanos Jr. cofounded Compuware, which he called a "blue-collar computer company," and served as its CEO until 2011. He was involved in every aspect of the business, working as a hands-on manager and building a company that consistently generated industry-leading profits through the 1990s and was able to rebuild itself in the 2000s. Karmanos also became known for his involvement in ice hockey, including ownership of the Carolina Hurricanes of the National Hockey League (NHL) and several junior franchises.

Early Life

Born March 11, 1943, to Greek immigrants, Peter Karmanos Jr. first started speaking English when he was in elementary school. His first work experience was waiting tables and operating the cash register at the family diner, and there he learned the necessity of satisfying customer expectations. He also learned to go to work and accomplish something every day. After graduation from Henry Ford High School, where he met his first wife, Barbara Ann, he attended Wayne State University. He and Barbara married in 1965.

Life's Work

In 1973, with Thomas Thewes and Allen Cutting, Karmanos founded the software company Compuware. Each partner put up $3,000 of their tax return money. Their ambition was to have between twenty and twenty-five skilled workers creating software to help programmers. From the beginning Karmanos was involved in all aspects of the software and services business.

Compuware began by offering software services for mainframe users, then moved into mainframe software development and quality assurance, and later to application life-cycle management and other tools and services for distributed systems. Compuware would build the tools that enable businesses to create better and more error free software. For nearly thirty years, annual revenue growth met or exceeded 30 percent annually under Karmanos. In 1999, the company rose to sixth in the Businessweek's list of top fifty performers. In 2000, the company had an annual income of $1.2 billion.

In 1999, Karmanos announced that he would relocate Compuware's headquarters and its then sixty-five hundred high-skill, high-paying jobs from Farmington Hills, Michigan, to downtown Detroit. The company got the land for its building from the city for a mere dollar; building on a vacant lot was cheaper than relocating to another suburb, so in 2002 the company moved downtown. Karmanos wanted to give back to the city and to demonstrate to his employees, who had been suburbanites for generations, that city life was not all bad.

Karmanos put a charter school, the University Preparatory Academy Science and Math Middle School, into his headquarters building temporarily while the permanent site was being prepared. Compuware personnel provided job-shadowing, mentoring, and educational opportunities to the students. The headquarters building stood fifteen stories high and boasted amenities suited to a five-star hotel, including a Hard Rock Café, a Ben and Jerry's ice cream shop, and an optical company as tenants. Karmanos provided his employees with a gourmet cafeteria, day care, and a modern gym, making a position in his company among the most desired jobs in Detroit.

Compuware began 2000 with high hopes for its move to e-commerce, but the effort was unsuccessful. Retraining of employees took longer than anticipated, profit margins thinned, and longtime customers, faced with major price increases from Compuware, moved to rivals who offered lower prices. Compuware's stock plummeted 40 percent in one day to $1.00, the lowest price in two years. For the quarter ending March 31, 2000, Compuware indicated software sales between $193 and $198 million, down from the $300 million analysts expected. The company had fourteen major contracts worth $140 million that should have been signed but were still pending because of missing paperwork or customers being unavailable.

Compuware remained a leader in troubleshooting software for mainframe problems, but once the vaunted risks of Y2K (the year 2000 and its anticipated software problems) passed and companies were no longer afraid to change vendors or otherwise disrupt their networks, it appeared to many that Compuware was arrogant, refusing to negotiate and hiking prices for a captive customer base. Rivals began taking Compuware customers. Compuware denied that it was losing business, but two top executives in the professional services unit were let go. The real problem, according to analysts, was a software division in disarray, and software accounted for 60 percent of Compuware's business. At the same time, Karmanos was facing two sexual harassment charges and underwent double bypass surgery in January 2000. Even with these challenges, revenue growth was anticipated to be 25 percent, disappointing by Compuware standards but excellent for most businesses.

Compuware was in downtown Detroit when it decided to launch Compuware 2.0 in an attempt to rebrand the thirty-five-year-old company. Despite the outdated labeling of the change as 2.0, analysts considered Compuware to be doing the right thing in improving its performance with the customers. The quality of its products had never been in question, but its performance in selling them was troubling. Rebranding, refocusing, shaking up the leadership, and a new logo (based on an image of a guitar pick, to represent Compuware's determination to "rock" the information technology industry) were put to work to revitalize the business. Karmanos hired Jason Vines from Detroit's automobile industry as chief of communications; Vines had been responsible for the initial success of the Chrysler 300.

In 2011, Karmanos stepped down as chief executive officer (CEO) of Compuware and became executive chair. He retired from the latter role in 2013, initially retaining a consultant position, although this ended soon after Karmanos criticized the company's board of directors. He sued for wrongful termination and loss of vested stock options; an arbitrator forced Compuware to pay him $16.5 million.

He went on to form another software venture, Mad Dog Technology, in 2014. The company was the parent of Resolute, a cloud-based energy management company that aided companies in monitoring and directing energy use.

Personal Life

Aside from Compuware, Karmanos became well known for his ownership of several hockey teams. In 1974, Compuware started sponsoring Detroit youth hockey teams in a league dominated by teams sponsored by pizza chain Little Caesars, owned by Mike Ilitch. The two businessmen were sports-mad rivals. Compuware recruited coaches and players heavily and challenged Ilitch's Little Caesars teams. The rivalry became bitter, intensifying when Karmanos bought the Hartford Whalers in 1994, giving him a rival NHL team to Ilitch's Detroit Red Wings. (He subsequently oversaw the team's move from Connecticut to Raleigh, North Carolina, after the 1996–97 season and rebranding as the Carolina Hurricanes.) Karmanos's other hockey ownership ventures included the Plymouth Whalers junior club and the Florida Everblades minor league team. He earned several awards in the hockey community, including the Lester Patrick Trophy for service to hockey, the Ontario Hockey League's Bill Long Award, and induction into the US Hockey Hall of Fame and the Hockey Hall of Fame. Karmanos sold his controlling interest in the Hurricanes in 2018, retaining a minority ownership.

Karmanos, who belonged to the high-IQ group Mensa, is recognized as a hero by many people in his hometown of Detroit for his philanthropy and involvement with the community. He donated millions of dollars to cancer research and other causes. However, he has also been described as loud and profane, and endured several high-profile scandals and controversies. In 1998 Sheila McKinnon, Compuware's senior vice president for human resources, accused him of sexual harassment, alleging to other company officials that he had propositioned her and touched her, turning abusive when she rebuffed him. McKinnon also asserted that Karmanos had harassed former secretary Troy Strong. Within days, McKinnon sued Karmanos and Compuware for harassment and retaliation. Strong also sued. Karmanos and Compuware countersued McKinnon before dropping the case later and coming to an out-of-court settlement. Karmanos was also scrutinized for loaning large amounts of money to Detroit's mayor Kwame Kilpatrick, who was indicted for lying under oath about a relationship with a former aide. Karmanos remained loyal to the mayor as he headed off to jail in 2008. A Texas subsidiary of Compuware employed Kilpatrick but let him go in 2010 after he was sentenced to prison.

Karmanos's first wife, Barbara, with whom he had three sons, was diagnosed with cancer in 1981. Karmanos offered to sell his business to be with her. She died in 1989, and in 1995 Karmanos donated $15 million to a Detroit research facility that renamed itself in Barbara's name. He later remarried but divorced. In 2005 Karmanos married his third wife, Danialle, and they had four children together. He and his family made headlines in 2016 when he was sued by his three adult sons for over $105 million in missed payments and interest to a family stock partnership.

Bibliography

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