Baseline 500: A Matter Of Survival At Moody`s

When your house is crumbling around you, it’s easy to make drastic decisions. Like, say, grabbing on to that new lifeline to pull you clear of the rubble, rather than relying on sturdy supports designed to hold up a roof that’s no longer there.

That’s roughly the situation at Moody’s Corp. (Baseline 500 #47), which reorganized in January in order to segregate its traditional credit-analysis and reporting business into its Moody’s Investors Service—a business that is irrevocably tied to the subprime mortgage crisis. Moody’s more innovative efforts went into the new Moody’s Analytics unit, where the goal is to increase sales of data and analysis tools.

Leading the charge—or, at least, the development, unification and standardization of the technology needed to make that shift happen—is Moody’s senior vice president and CIO Perry Rotella. During two stormy years as the No. 2 technology guy at American International Group, Rotella built a reputation among IT executives as an original thinker and an effective change agent.

Rotella took the Moody’s gig in December 2006. He was lured by the challenge of remaking the technology underlying the business of the nation’s second-largest credit agency ($1.7 billion), and he looked forward to working in a business in which investing in sophisticated technology is a requirement.

“Moody’s is still in credit rating, but our second business—selling analytic tools and services to the investment community—became more formalized in the last year,” Rotella says. “That’s where a lot of our growth is going to come from, and I’m here to create an IT infrastructure to enable that.”

However, the last 15 months have been more challenging than Rotella expected. The company’s leading role in the credit market has put it and competitors Fitch Ratings and Standard & Poor’s at the center of the subprime-mortgage crunch. The three firms have come under fire for allegedly giving excessively optimistic ratings to companies and bonds funding the subprime-mortgage business.

Corporate bond sales are down 70 percent this year compared with last year, reports Bloomberg, and sales of all bonds could drop 15 percent, to $3.4 trillion, according to a January report from the Securities Industry and Financial Markets Association. By comparison, the 54 percent drop in income Moody’s posted for its most recent quarter isn’t so bad, especially considering that analysts were expecting a steeper decline.