Germany's economy shrank 0.2% in the last three months of 2004 (confounding hopes of a 0.2% expansion). The Federal Statistics Office said growth in the third quarter had been zero. It said growth for the whole of 2004 was 1.6% (down from an earlier estimate of 1.7%).
The German economy actually contracted in 2003 (as opposed to the near-zero but positive growth previously reported), in what was a year of healthy growth for most other OECD countries.
[Thanks to DVD for bringing this to my attention]
Tuesday, February 15, 2005
Thursday, February 10, 2005
WSJ weighs in on HP
Text in black is mine; text in blue is the Wall Street Journal's; text in red is FTP Online's.
http://www.ftponline.com/weblogger/forum.aspx?id=1&Date=1/26/2005&blog=#311
"Many knew it at the time, but now everyone should: Walter Hewlett was right."
Hewlett was the board member from the founding family who argued that the Compaq merger would depress HP's stock and make the company overly reliant on the PC industry with its negligible or nonexistent profit margins. Since then HP has laid off thousands of workers and has a 55% decline in its stock price to show for those sacrifices.
"Since the merger, HP has lost market share and failed to revive its profit margins. It relinquished the #1 position in market share of personal computers last year to Dell. The Compaq merger hasn't helped in other areas either. In the 12 months ended in September, IBM and Dell gained share in network servers, while HP fell to 26.6% from 28.7%, Morgan Stanley says. HP's operating margins in business services have fallen for two years."
http://www.ftponline.com/weblogger/forum.aspx?ID=1&DATE=01/27/2005&BLOG=#313
"At bottom, they made a huge error in asserting that the merger of two losing computer operations, HP's and Compaq's, would produce a financially fit computer business. The irrefutable evidence on how wrong they were is contained in the two companies' own merger proxy, which precisely laid out the healthy operating margins that the combined company expected to be earning in its 2003 fiscal year (HP's ends Oct. 31) on its computer operations. The margins weren't earned then, and in 2004 they weren't either—not by a long shot. Only the prodigious, money-coining strength of HP's star business, Imaging and Printing (better known as 'printers'), has kept the company looking respectable."
Public accounting standards could force HP to write off $14.5 billion in goodwill allocated toward the value of Compaq. HP is carrying $15.8 billion in goodwill [that's the excess of purchase price over book value for an acquisition] on its books.
Twenty top executives have left in what some call a brain drain, and the legendary HP culture has been deliberately destroyed to be replaced by an "East Coast management culture." But the fundamental problem is that HP is not a leader in any of its markets other than printers. Fiorina recently decried the media's and analysts' inability to see HP as a software company, yet she has virtually gutted all marketing for HP's software.
http://www.ftponline.com/weblogger/forum.aspx?id=1&Date=1/26/2005&blog=#311
"Many knew it at the time, but now everyone should: Walter Hewlett was right."
Hewlett was the board member from the founding family who argued that the Compaq merger would depress HP's stock and make the company overly reliant on the PC industry with its negligible or nonexistent profit margins. Since then HP has laid off thousands of workers and has a 55% decline in its stock price to show for those sacrifices.
"Since the merger, HP has lost market share and failed to revive its profit margins. It relinquished the #1 position in market share of personal computers last year to Dell. The Compaq merger hasn't helped in other areas either. In the 12 months ended in September, IBM and Dell gained share in network servers, while HP fell to 26.6% from 28.7%, Morgan Stanley says. HP's operating margins in business services have fallen for two years."
http://www.ftponline.com/weblogger/forum.aspx?ID=1&DATE=01/27/2005&BLOG=#313
"At bottom, they made a huge error in asserting that the merger of two losing computer operations, HP's and Compaq's, would produce a financially fit computer business. The irrefutable evidence on how wrong they were is contained in the two companies' own merger proxy, which precisely laid out the healthy operating margins that the combined company expected to be earning in its 2003 fiscal year (HP's ends Oct. 31) on its computer operations. The margins weren't earned then, and in 2004 they weren't either—not by a long shot. Only the prodigious, money-coining strength of HP's star business, Imaging and Printing (better known as 'printers'), has kept the company looking respectable."
Public accounting standards could force HP to write off $14.5 billion in goodwill allocated toward the value of Compaq. HP is carrying $15.8 billion in goodwill [that's the excess of purchase price over book value for an acquisition] on its books.
Twenty top executives have left in what some call a brain drain, and the legendary HP culture has been deliberately destroyed to be replaced by an "East Coast management culture." But the fundamental problem is that HP is not a leader in any of its markets other than printers. Fiorina recently decried the media's and analysts' inability to see HP as a software company, yet she has virtually gutted all marketing for HP's software.
Wednesday, February 09, 2005
HP Chronology
I have cross-referenced the chronology against the stock price (adjusted for dividends and an October 2000 2:1 stock split).
July 1999: HP appoints Fiorina as president and CEO. [$27.24]
June 2000: HP completes divestiture of Agilent Technologies. [$58.18]
September 2000: Fiorina is named chairman of the board of directors. [$45.33]
October 2000: HP announces plans to acquire middleware vendor Bluestone Software. [$43.46]
March 2001: HP creates a new business organization, HP Services. [$29.39]
September 2001: Plans are revealed for HP to acquire Compaq in an all-stock deal. [$15.20]
May 2002: HP officially closes its acquisition of Compaq. [$18.22]
January 2005: HP announces that it will merge its PC and printer divisions. [$19.59]
That's an annualized return of -5.8% per year over Fiorina's 5.5-year reign.
July 1999: HP appoints Fiorina as president and CEO. [$27.24]
June 2000: HP completes divestiture of Agilent Technologies. [$58.18]
September 2000: Fiorina is named chairman of the board of directors. [$45.33]
October 2000: HP announces plans to acquire middleware vendor Bluestone Software. [$43.46]
March 2001: HP creates a new business organization, HP Services. [$29.39]
September 2001: Plans are revealed for HP to acquire Compaq in an all-stock deal. [$15.20]
May 2002: HP officially closes its acquisition of Compaq. [$18.22]
January 2005: HP announces that it will merge its PC and printer divisions. [$19.59]
That's an annualized return of -5.8% per year over Fiorina's 5.5-year reign.
Fiorina out!
Carly Fiorina's nearly six-year reign at Hewlett-Packard ended today as the company's board forced her out as chief executive, disappointed by her efforts to make the technology giant whose strongest business is printers more nimble and innovative. HP shares jumped more than 6%. Board members said they fired Fiorina because she failed to execute a planned strategy of slashing costs and boosting revenue as quickly as directors had hoped. Fiorina had championed the 2002 acquisition of Compaq despite fierce resistance from shareholders and directors. Critics have called the merger a drag on profits.
Good riddance. She was not a good leader at Lucent, and she has not been a good leader at HP. Here is a good chronology of the highlights of Fiorina's tenure at HP.
Good riddance. She was not a good leader at Lucent, and she has not been a good leader at HP. Here is a good chronology of the highlights of Fiorina's tenure at HP.
Problems at Krispy Kreme
Krispy Kreme's turnaround efforts began in earnest Tuesday with the layoff of about 125 workers, or 25% of the work force, at its corporate headquarters and other key facilities. The struggling doughnut chain also said it was getting rid of its corporate jet to conserve cash. Krispy Kreme said the cuts would affect workers about one quarter of the workers at its Winston-Salem headquarters and at plants where doughnut mix is made, equipment is manufactured and doughnuts are distributed. Krispy Kreme's 360 United States stores are owned and operated by franchisees; as such, they are not affected by the corporate cuts announced Tuesday.
Krispy Kreme said the moves are necessary to avoid a cash crunch. The company said it also will need additional credit to fund operations and capital expenditures by March 25, when a waiver from its primary lenders expires. "There can be no assurance that the company will be able to reach any agreement with the banks or that funding will be available when and in the amounts needed," the company said. Last month, the company's lenders agreed to push back to March 25 a deadline under which the company would be in default of its credit line because it has not filed quarterly financial statements for the period that ended Oct. 31. In the agreement, Krispy Kreme agreed not to borrow any more cash without its lenders' consent.
Krispy Kreme closed at $7.21, down 9.2% for the day and 85% from its all-time high. (When I wrote this post, the stock was trading at $9.64.)
Krispy Kreme said the moves are necessary to avoid a cash crunch. The company said it also will need additional credit to fund operations and capital expenditures by March 25, when a waiver from its primary lenders expires. "There can be no assurance that the company will be able to reach any agreement with the banks or that funding will be available when and in the amounts needed," the company said. Last month, the company's lenders agreed to push back to March 25 a deadline under which the company would be in default of its credit line because it has not filed quarterly financial statements for the period that ended Oct. 31. In the agreement, Krispy Kreme agreed not to borrow any more cash without its lenders' consent.
Krispy Kreme closed at $7.21, down 9.2% for the day and 85% from its all-time high. (When I wrote this post, the stock was trading at $9.64.)
Wednesday, February 02, 2005
Vacation v The Economy
The next time you get one of those emails (or see one of those TV commercials) pontificating on how American workers are getting cheated and abused because European workers get so much more vacation than American workers...
Average Vacation Days
France 37 days
Germany 35 days
U.S. 13 days
... I urge you to remember the other side of the coin ...
Unemployment Rate (January 2005)
Germany 10.0%
France 9.7%
U.S. 5.4%
Real GDP Growth (2005 Prediction)
Germany 1.0% [Edited based on more recent information]
France 1.7%
U.S. 3.5%
This thought was inspired by this Bloomberg article (condensed below).
[Edited on 3/1/2005 based on more recent information.]
Average Vacation Days
France 37 days
Germany 35 days
U.S. 13 days
... I urge you to remember the other side of the coin ...
Unemployment Rate (January 2005)
Germany 10.0%
France 9.7%
U.S. 5.4%
Real GDP Growth (2005 Prediction)
Germany 1.0% [Edited based on more recent information]
France 1.7%
U.S. 3.5%
This thought was inspired by this Bloomberg article (condensed below).
[Thanks to DVD for emailing the Bloomberg article to me.]German unemployment jumped to the highest level since World War II as new rules added welfare recipients to the jobless register. The number of people out of work in January rose by 227,000 to 4.71 million in seasonally adjusted terms, including 230,000 new jobless claimants. The adjusted unemployment rate rose to 11.4%, a seven-year high, while the unadjusted jobless total passed 5 million for the first time since the war. Schroeder's government had cut jobless benefits and forced claimants to take low-paid jobs in an attempt to get more people into work in Europe's largest economy.
Economy and Labor Minister Wolfgang Clement said he expects a further rise in unemployment in February, though experience from other countries suggests the new policies may eventually cut the jobless total by as much as 20%. Even before the labor-market changes, German unemployment had risen for 11 straight months, as companies moved jobs to countries with lower labor costs and stagnant domestic demand deterred hiring. In December, Germany had the second highest unemployment rate after Spain among the 12 countries that share the euro, at 10% on a comparable basis.
Disregarding the effects of the new labor law, seasonally adjusted unemployment was "stable," Labor Agency Vice-President Heinrich Alt said. The adjusted unemployment rate is higher than it has been since March 1998, when it was 11.5%. The record rate was set in October 1997 at 11.8%. "Unemployment has grown steadily over the last three decades and then reunification came on top of that," said Bert Ruerup, the head of Schroeder's council of economic advisers. The government last week pared its forecast for economic growth in 2005 to 1.6% from 1.7%. [New predictions indicate that even this number is overly optimistic. March estimates indicate growth could be as small as 1%. By contrast U.S. growth is predicted to be 3.5% in 2005. - ALD] Germany is losing 1,200 full-time jobs a day, Juergen Thumann, head of the BDI industry federation, said last week. Unemployment won't decline unless labor costs are cut, he said.
[Edited on 3/1/2005 based on more recent information.]
The Decline of Lucent
Adapted from chapter one of Optical Illusions by Lisa Endlich. The comments in brackets are my own.
No industry looked more promising [in 1996] or bled more money [in 2000-2002] than telecommunications. With a collapse in market capitalization of more than $4 trillion [yes, that's Trillion with a capital T] and job losses in excess of 500,000, the telecom meltdown ranks as the greatest stock market debacle ever.
[This is something that's often lost as the dot-com bust has somehow dominated headlines related to the 2000-2002 stock market collapse. The dot-com losses in terms of both the companies' bottom lines and the stock market wealth wiped out are the merest drop in the bucket compared to the telecom collapse.]
Lucent was born in April 1996 as a spin-off of the foundering telecom giant AT&T. It was the largest initial public offering ever, and because each AT&T shareholder became a Lucent shareholder (along with the new investors attracted by Lucent's stellar performance), it was not long before Lucent was the most widely held stock in America. Lucent was born at the inception of the greatest market bubble ever, at the outset of an investment boom that poured billions of dollars into the telecommunications industry. Lucent's startling transformation from an obscure division of AT&T to the sixth-largest corporation in America and then to a company gasping for its financial life left investors and observers by turns delighted, shocked, confused, and finally dismayed as they sought an explanation for the company's descent. The speed of Lucent's decline was as staggering as its magnitude. In the space of twenty-four months, the market capitalization of the company dropped by a quarter of a trillion dollars as its stock price plummeted by 99 percent. Lucent went from spending $100 million to advertise its new name to turning off lights and shuttering bathrooms to save pennies. [emphasis mine]
This is the story of a financially sound company steeped in world-class talent, dominant in one of the world's fastest-growing industries, that in the space of two painful years found itself branded with a junk-bond credit rating, under investigation by the SEC for its fraudulent accounting practices, fighting off rumors of insolvency, and, hat in hand, begging its bankers for a little more time. But the story is surprisingly dramatic for a telecom equipment vendor, complete with a boardroom coup, a stock rise and fall in the shape of Mount Everest, and a series of financial and product decisions that left the company enfeebled.
Lucent's leaders were the men and women of AT&T, the people who practically invented the modern corporate structure. As an old-world stalwart turned new-world bellwether, Lucent experienced the fallout from this historic event with as much force as any ethereal dot-com. When it was over, CEO Henry Schacht was forced to admit that the frenzy that engulfed the stock markets had badly distorted the company's value structure, tampered with its moral compass, and led to decisions that would never have been made in saner times. [Right, Henry, it's the market's fault.]
No industry looked more promising [in 1996] or bled more money [in 2000-2002] than telecommunications. With a collapse in market capitalization of more than $4 trillion [yes, that's Trillion with a capital T] and job losses in excess of 500,000, the telecom meltdown ranks as the greatest stock market debacle ever.
[This is something that's often lost as the dot-com bust has somehow dominated headlines related to the 2000-2002 stock market collapse. The dot-com losses in terms of both the companies' bottom lines and the stock market wealth wiped out are the merest drop in the bucket compared to the telecom collapse.]
Lucent was born in April 1996 as a spin-off of the foundering telecom giant AT&T. It was the largest initial public offering ever, and because each AT&T shareholder became a Lucent shareholder (along with the new investors attracted by Lucent's stellar performance), it was not long before Lucent was the most widely held stock in America. Lucent was born at the inception of the greatest market bubble ever, at the outset of an investment boom that poured billions of dollars into the telecommunications industry. Lucent's startling transformation from an obscure division of AT&T to the sixth-largest corporation in America and then to a company gasping for its financial life left investors and observers by turns delighted, shocked, confused, and finally dismayed as they sought an explanation for the company's descent. The speed of Lucent's decline was as staggering as its magnitude. In the space of twenty-four months, the market capitalization of the company dropped by a quarter of a trillion dollars as its stock price plummeted by 99 percent. Lucent went from spending $100 million to advertise its new name to turning off lights and shuttering bathrooms to save pennies. [emphasis mine]
This is the story of a financially sound company steeped in world-class talent, dominant in one of the world's fastest-growing industries, that in the space of two painful years found itself branded with a junk-bond credit rating, under investigation by the SEC for its fraudulent accounting practices, fighting off rumors of insolvency, and, hat in hand, begging its bankers for a little more time. But the story is surprisingly dramatic for a telecom equipment vendor, complete with a boardroom coup, a stock rise and fall in the shape of Mount Everest, and a series of financial and product decisions that left the company enfeebled.
Lucent's leaders were the men and women of AT&T, the people who practically invented the modern corporate structure. As an old-world stalwart turned new-world bellwether, Lucent experienced the fallout from this historic event with as much force as any ethereal dot-com. When it was over, CEO Henry Schacht was forced to admit that the frenzy that engulfed the stock markets had badly distorted the company's value structure, tampered with its moral compass, and led to decisions that would never have been made in saner times. [Right, Henry, it's the market's fault.]
Additional mistakes by AT&T
- Hanging on to Western Electric for years when it should have spun out on Day 1 after divestiture in 1984.
- Handing over its wireless licenses to the RBOCs at divestiture
- Spinning out its recently acquired McCaw Cellular/Vanguard Cellular, the one industry sector that demonstrated growth and value creation.
- Acquiring NCR and then completely dropping the ball in the computer industry.
- Failing to join with other industry participants in a full-scale assault on the regulatory foundations of RBOC dominance, letting the RBOCs fight tactically as needed and ultimately be victorious.
Some of the above are discussed in this article.
Some Telecom Predictions
(1) AT&T will not re-enter the wireless arena. The pending merger will put the kibosh on the pending deal to lease wireless capacity from Sprint.
(2) MCI can not survive as an independent company. It will be bought by either Verizon (in a bid to regain its number one slot from SBC, which will be number one after combining with AT&T) or BellSouth (in a bid to join the big boys SBC and Verizon).
(3) If BellSouth is not the one to merge with MCI, it will be in trouble itself in the new telecom landscape.
(4) Sprint will be in trouble too, no matter what else happens. Maybe it can merge with whoever doesn't get MCI.
Some links with additional analysis and predictions (with more detailed explanations of the reasoning):
http://www.business2.com/b2/web/articles/0,17863,1022825,00.html
http://www.internetnews.com/xSP/article.php/3466691
http://www.itworld.com/Tech/2428/050131sbcattdeal/
(2) MCI can not survive as an independent company. It will be bought by either Verizon (in a bid to regain its number one slot from SBC, which will be number one after combining with AT&T) or BellSouth (in a bid to join the big boys SBC and Verizon).
(3) If BellSouth is not the one to merge with MCI, it will be in trouble itself in the new telecom landscape.
(4) Sprint will be in trouble too, no matter what else happens. Maybe it can merge with whoever doesn't get MCI.
Some links with additional analysis and predictions (with more detailed explanations of the reasoning):
http://www.business2.com/b2/web/articles/0,17863,1022825,00.html
http://www.internetnews.com/xSP/article.php/3466691
http://www.itworld.com/Tech/2428/050131sbcattdeal/
Response to Comment
On a related note, it looks like AT&T will be getting back into the wireless game once again, after the Cingular aquisition is complete, by leasing bandwidth from Sprint.(1) I don't think that will happen anymore. Here's a link to another story from the same source you provide in your comment below. http://www.engadget.com/entry/1234000163029846/
(2) I'll go further, I don't think this re-entering the wireless market will happen at all now. Why would SBC set up an operation to compete with its own Cingular joint venture?
(3) This is further evidence that AT&T has been run by a bunch of yahoos. You divest your wireless business, and just a couple of years later you are going to invest what I'm guessing would be huge amounts of money to get back in? WTH?
Tuesday, February 01, 2005
The Decline and Fall of AT&T
AT&T's revenue has declined from $51 billion in 1999 to $30 billion in 2004, and its residential customer base declining from a peak of 60 million in 2000 to about 24 million at the end of 2004. Now those numbers are not QUITE as horrible as they look in that the 1999 numbers include all the cable and wireless customers who were spun-off and not lost outright, but they are nonetheless very poor results.
In 1999, I (and others) looked at AT&T as a massive cash cow. It was declining in influence and size, and its markets were under attack by wireless and broadband companies and its core business long distance operations were under attack by fiercer-than-expected competition from WorldCom, MCI and Sprint. But it also didn't need to make any massive investments to maintain its existing business, and this business was (a) quite profitable and (b) generating a great deal of revenue and free cash flow. Under these circumstances, I would have expected AT&T to follow a conservative strategy for its core business. If innovation or a new market needed exploring, a joint venture or subsidiary could be set up with the cash flows from the core telephone and business services operation. Beyond that, the company could have / should have paid dividends, lots of them. It didn't need and couldn't effectively use the excess cash.
Instead of this, AT&T embarked on an ill-advised (and ill-fated) strategy under former Chairman and CEO C. Michael Armstrong, which resulted in losses of over $53 billion related to a cable company acquisition spree (MediaOne, TCI, etc.) and the subsequent divestiture of these same companies. Armstrong later advocated splitting the company into four separate entities, a plan which was only partially implemented with the sale of the cable operations to Comcast and the spin-off of AT&T Wireless into a separate company (a company which was utterly unable to compete in the wireless marketplace and was very quickly gobbled up by Cingular Wireless).
[Come to think of it, that sounds almost word-for-word like what happened at Tyco, with an acquisition spree ending in 2001, and the subsequent abortive strategy to break up into 5 companies.]
In October 1999, AT&T had a market capitalization of $152 billion. Today, what's left of that mighty empire is less than $16 billion. Add to that the $47 billion that Comcast paid for AT&T's cable assets and the $50 billion that AT&T Wireless was worth at its spin-off (ignoring the fact that AWE's return was basically a straight line decline and the company was valued at considerably less than that when it was finally put out of its misery by Cingular), and you arrive at $113 billion. So in five years, Armstrong made $39 billion disappear like a fart in the wind. That's a total return of -25.7% or -4.5% per year for five years. Thank you, and good riddance.
In 1999, I (and others) looked at AT&T as a massive cash cow. It was declining in influence and size, and its markets were under attack by wireless and broadband companies and its core business long distance operations were under attack by fiercer-than-expected competition from WorldCom, MCI and Sprint. But it also didn't need to make any massive investments to maintain its existing business, and this business was (a) quite profitable and (b) generating a great deal of revenue and free cash flow. Under these circumstances, I would have expected AT&T to follow a conservative strategy for its core business. If innovation or a new market needed exploring, a joint venture or subsidiary could be set up with the cash flows from the core telephone and business services operation. Beyond that, the company could have / should have paid dividends, lots of them. It didn't need and couldn't effectively use the excess cash.
Instead of this, AT&T embarked on an ill-advised (and ill-fated) strategy under former Chairman and CEO C. Michael Armstrong, which resulted in losses of over $53 billion related to a cable company acquisition spree (MediaOne, TCI, etc.) and the subsequent divestiture of these same companies. Armstrong later advocated splitting the company into four separate entities, a plan which was only partially implemented with the sale of the cable operations to Comcast and the spin-off of AT&T Wireless into a separate company (a company which was utterly unable to compete in the wireless marketplace and was very quickly gobbled up by Cingular Wireless).
[Come to think of it, that sounds almost word-for-word like what happened at Tyco, with an acquisition spree ending in 2001, and the subsequent abortive strategy to break up into 5 companies.]
In October 1999, AT&T had a market capitalization of $152 billion. Today, what's left of that mighty empire is less than $16 billion. Add to that the $47 billion that Comcast paid for AT&T's cable assets and the $50 billion that AT&T Wireless was worth at its spin-off (ignoring the fact that AWE's return was basically a straight line decline and the company was valued at considerably less than that when it was finally put out of its misery by Cingular), and you arrive at $113 billion. So in five years, Armstrong made $39 billion disappear like a fart in the wind. That's a total return of -25.7% or -4.5% per year for five years. Thank you, and good riddance.
Monday, January 31, 2005
Ma Bell to re-unite with Baby Bell
SBC to acquire AT&T
SBC Communications Inc. said yesterday that it would buy AT&T Corp. for around $15.7 billion, making SBC the largest U.S. telecommunications company and ending the independence of the company that created the telecommunications industry over a century ago and is still one of the world's most recognized corporate names.
Former Federal Communications Commission chief Reed Hundt had deemed a reunion of AT&T with one of the companies spun off in a 1984 government anti-trust action "unthinkable" in 1997. But since then AT&T has had a steep decline in fortunes. (See next post up for a discussion of my thoughts on this.) Even so, the $16 billion deal may take until mid-2006 to clear intense regulatory scrutiny.
SBC will issue 0.78 of a share for each AT&T share, valuing AT&T at $18.41 a share. AT&T will then pay a special cash dividend of $1.30 a share. Combined, the deal would value AT&T at $19.71 a share, equal to its closing stock price on Friday. No premium!! The total price would thus be $14.7 billion in SBC stock and $1.0 billion for the special cash dividend.
Analysts have criticized the $16 billion purchase price for the deal as too much for a company with shrinking revenues and questionable growth prospects.
Sources:
Reuters (at Yahoo Finance)
Associated Press (at Yahoo Finance)
Something which neither of these stories mentions, but which was in a story in this morning's AJC, is that this deal may strain relations between SBC and BellSouth (SBC's partner in the Cingular Wireless joint venture) because BellSouth has long wanted to acquire AT&T but could not settle on terms with the AT&T board.
[edited to add link to AJC story]
SBC Communications Inc. said yesterday that it would buy AT&T Corp. for around $15.7 billion, making SBC the largest U.S. telecommunications company and ending the independence of the company that created the telecommunications industry over a century ago and is still one of the world's most recognized corporate names.
Former Federal Communications Commission chief Reed Hundt had deemed a reunion of AT&T with one of the companies spun off in a 1984 government anti-trust action "unthinkable" in 1997. But since then AT&T has had a steep decline in fortunes. (See next post up for a discussion of my thoughts on this.) Even so, the $16 billion deal may take until mid-2006 to clear intense regulatory scrutiny.
SBC will issue 0.78 of a share for each AT&T share, valuing AT&T at $18.41 a share. AT&T will then pay a special cash dividend of $1.30 a share. Combined, the deal would value AT&T at $19.71 a share, equal to its closing stock price on Friday. No premium!! The total price would thus be $14.7 billion in SBC stock and $1.0 billion for the special cash dividend.
Analysts have criticized the $16 billion purchase price for the deal as too much for a company with shrinking revenues and questionable growth prospects.
Sources:
Reuters (at Yahoo Finance)
Associated Press (at Yahoo Finance)
Something which neither of these stories mentions, but which was in a story in this morning's AJC, is that this deal may strain relations between SBC and BellSouth (SBC's partner in the Cingular Wireless joint venture) because BellSouth has long wanted to acquire AT&T but could not settle on terms with the AT&T board.
[edited to add link to AJC story]
Wednesday, December 15, 2004
Oracle to acquire Peoplesoft
The Oracle Corporation announced early yesterday that it would acquire PeopleSoft for $10.3 billion, ending a bitter takeover fight that had lasted more than 18 months.
The shares of both PeopleSoft and Oracle rose sharply yesterday. PeopleSoft shares rose $2.47 a share [10.3%] to close at $26.42 a share, just under the offer price [an indication that Wall Street thinks this is a done deal]. And Oracle's stock price increased $1.35 a share [10.2%] to close at $14.63 [an indication that Wall Street think this is a good deal].
http://www.nytimes.com/2004/12/13/business/14CND-ORACLE.html
The shares of both PeopleSoft and Oracle rose sharply yesterday. PeopleSoft shares rose $2.47 a share [10.3%] to close at $26.42 a share, just under the offer price [an indication that Wall Street thinks this is a done deal]. And Oracle's stock price increased $1.35 a share [10.2%] to close at $14.63 [an indication that Wall Street think this is a good deal].
http://www.nytimes.com/2004/12/13/business/14CND-ORACLE.html
Monday, November 29, 2004
A book review of "Who Moved My Cheese?"
The unbelievably large number of people who think this is a good book is very scary. I hope these people are not important decision makers. Everything bad that can be said about this book has been said before, so I'll just compile a "Best of Amazon Reviewers" list.
(By the way, in case you're wondering, "Dr." Johnson's degree is in education.)
Regarding management and corporate American in general:
* This book is the cop-out for managers who believe in change for change's sake.
* It's corporate brainwashing of the kind that science fiction writers have been warning us about for decades.
* Never have I come closer to the mind crushing monotony and impersonality of corporate America than when I read this book.
* No, change is not a good thing when it happens on a regular basis. That means upper management can't make up their minds.
* If you are thinking about buying this book, I assume you are a manager of some type.
Regarding the intellectual level of the book:
* I have never felt my intelligence more insulted than when reading this.
* It's patronizing, shallow, insipid, and still manages to be patently insulting to those employees who might actually be capable of analytical thought. That's quite a feat.
* Should appeal to the intellectually challenged only.
* It is a sad comment on our culture, society, and educational system that so many people have found this inane drivel to be "life-changing."
* It should appeal to those with an IQ of 68 or less.
* Distilling these important matters into the inane parable of mice in a maze is a literary device meant for grade school students.
* The book provides excellent reading for absolute imbeciles or people high on drugs.
Regarding the message of the book:
* It teaches that you must not struggle. Succumb to the will of the greater power of management, and accept change without regard to whether it is appropriate or not.
* Don't think, just go with the changes as we prescribe them. If you don't, you're inflexible or afraid of change.
* The ideas in this book could have been expressed in a paragraph and even then they would not have been worth the time to read them.
The people who more productively decided just to make jokes about the stupidity that is this book said:
* As I was already familiar with the concept of reality and how to deal with it, the book was not particularly helpful. (my personal favorite)
* Your time would be better spent just taking a nap.
* Buy real cheese. Don't buy this sorry excuse for a book.
* I think people like it cause it can be read and finished while sitting on the toilet.
* Resistance is futile!
* Any manager who would try to force these ideas on their employees would be better off just spiking the coffee with anti-depressants.
* The South Park gang would find it too puerile.
(By the way, in case you're wondering, "Dr." Johnson's degree is in education.)
Regarding management and corporate American in general:
* This book is the cop-out for managers who believe in change for change's sake.
* It's corporate brainwashing of the kind that science fiction writers have been warning us about for decades.
* Never have I come closer to the mind crushing monotony and impersonality of corporate America than when I read this book.
* No, change is not a good thing when it happens on a regular basis. That means upper management can't make up their minds.
* If you are thinking about buying this book, I assume you are a manager of some type.
Regarding the intellectual level of the book:
* I have never felt my intelligence more insulted than when reading this.
* It's patronizing, shallow, insipid, and still manages to be patently insulting to those employees who might actually be capable of analytical thought. That's quite a feat.
* Should appeal to the intellectually challenged only.
* It is a sad comment on our culture, society, and educational system that so many people have found this inane drivel to be "life-changing."
* It should appeal to those with an IQ of 68 or less.
* Distilling these important matters into the inane parable of mice in a maze is a literary device meant for grade school students.
* The book provides excellent reading for absolute imbeciles or people high on drugs.
Regarding the message of the book:
* It teaches that you must not struggle. Succumb to the will of the greater power of management, and accept change without regard to whether it is appropriate or not.
* Don't think, just go with the changes as we prescribe them. If you don't, you're inflexible or afraid of change.
* The ideas in this book could have been expressed in a paragraph and even then they would not have been worth the time to read them.
The people who more productively decided just to make jokes about the stupidity that is this book said:
* As I was already familiar with the concept of reality and how to deal with it, the book was not particularly helpful. (my personal favorite)
* Your time would be better spent just taking a nap.
* Buy real cheese. Don't buy this sorry excuse for a book.
* I think people like it cause it can be read and finished while sitting on the toilet.
* Resistance is futile!
* Any manager who would try to force these ideas on their employees would be better off just spiking the coffee with anti-depressants.
* The South Park gang would find it too puerile.
Book Burning
I’m not normally the kind of person who would ever advocate book banning. But I’ve decided to make an exception for some of the “business” books being inflicted on unsuspecting employees lately, most notably by Ken Blanchard.
Of course, the first book to go on the pyre would have to be the most well-known "management by idiots" book Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life followed closely by …
The One Minute Manager
Putting the One Minute Manager to Work
The On-Time, On-Target Manager : How a "Last-Minute Manager" Conquered Procrastination
The One Minute Manager Balances Work and Life (One Minute Manager Library)
The One Minute Apology : A Powerful Way to Make Things Better
The One Minute Manager Builds High Performing Teams (revised Edition) (One Minute Manager Library)
Leadership and the One Minute Manager : Increasing Effectiveness Through Situational Leadership
Self-Leadership and the One Minute Manager : Increasing Effectiveness Through Situational Self-Leadership
and finally The One Minute Manager Meets The Monkey where the idiotic “One Minute Manager” concept meets the even more idiotic “Monkey On Your Back” concept from Managing Management Time by William Oncken.
Of course, the first book to go on the pyre would have to be the most well-known "management by idiots" book Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life followed closely by …
The One Minute Manager
Putting the One Minute Manager to Work
The On-Time, On-Target Manager : How a "Last-Minute Manager" Conquered Procrastination
The One Minute Manager Balances Work and Life (One Minute Manager Library)
The One Minute Apology : A Powerful Way to Make Things Better
The One Minute Manager Builds High Performing Teams (revised Edition) (One Minute Manager Library)
Leadership and the One Minute Manager : Increasing Effectiveness Through Situational Leadership
Self-Leadership and the One Minute Manager : Increasing Effectiveness Through Situational Self-Leadership
and finally The One Minute Manager Meets The Monkey where the idiotic “One Minute Manager” concept meets the even more idiotic “Monkey On Your Back” concept from Managing Management Time by William Oncken.
Monday, November 22, 2004
Krispy Kreme
Struggling doughnut shop chain Krispy Kreme Doughnuts (KKD) on Monday reported an unexpected quarterly loss, hurt by store closing costs and sluggish sales, and its stock fell 15.5%. The company, which is facing a Securities and Exchange Commission investigation into how it accounts for repurchased franchises, also withdrew its forecast calling for systemwide sales to rise 15 percent for its fiscal year, which ends in January. The quarterly loss is the latest in a string of troubles for Krispy Kreme that began in May, when it posted its first quarterly loss since going public and cut the number of planned new stores, blaming the low-carb diet craze for curbing appetite for doughnuts. Some investors have also suggested the company expanded too quickly and the one-time darling of Wall-Street has lost 80% of its market value since its peak in August 2003. [Source: FoxNews]
Here's my question: Who are the idiots on Wall Street who valued Krispy Kreme at $2.577 billion?
Here's my question: Who are the idiots on Wall Street who valued Krispy Kreme at $2.577 billion?
Thursday, November 18, 2004
Sears and Kmart are merging
Kmart and Sears are merging in an $11 billion deal that will create the nation's third largest retailer, after Wal-Mart and Target. The company being created in the merger announced today would be known as Sears Holdings Corporation, but it will continue to operate Kmart and Sears stores under their current brand names. The combined company is expected to have $55 billion in annual revenues, 2350 full-line and off-mall stores plus 1100 specialty retail stores. The new company will be headquartered in the Chicago suburb of Hoffman Estates where Sears is based, but it says it will maintain a "significant presence" in Troy, Michigan, which is home to Kmart.
The man behind this deal is Edward Lampert, Chairman of Kmart Holding Corporation. As a major debt-holder in Kmart, he eventually ended up with a 55% stake in Kmart after it emerged from bankruptcy protection last year. His investment company also holds a 15% stake in Sears.
The man behind this deal is Edward Lampert, Chairman of Kmart Holding Corporation. As a major debt-holder in Kmart, he eventually ended up with a 55% stake in Kmart after it emerged from bankruptcy protection last year. His investment company also holds a 15% stake in Sears.
Friday, November 12, 2004
Delta Pilots Approve Deal
Delta Air Lines pilots approved a new five-year contract that includes a 32.5% pay cut, fewer benefits, longer working hours, and additional job losses. With the pay cuts, Delta pilots will drop from the highest paid in the industry to the middle of the pack. For example, a first year pilot's pay will drop from $50,400 to $34,020, and a veteran pilot's pay will drop from $275,000 to $185,000. The pilots agreed to pay more for their health insurance and to allow the company to freeze their traditional defined-benefit pension plan and replace it with a 401(k) plan. In return for these concessions, pilots will be given options on 30 million shares plus future profit sharing and other incentives.
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