So that's why Xyratex management erected a poison pill defence against hostile take-over attempts. The company's largest shareholder, activist investor Baker Street, which owns 23 per cent of the common stock, wants board changes to correct Xyratex's "flawed" HPC and Big Data array strategy. Xyratex makes disk drive drawers for …
We need a carpet bagger icon.
Research, waste of money.....
Punched tape was good enough for Grandad, so its good enough for you.
As we all know, companies that pull the plug on R&D to save money are the ones that survive, so stop farting around and sell them 80mb winchesters.
Hell we made a mistake when we moved from stone to bronze.
Re: Research, waste of money.....
You appear to be assuming that the survival of the company is in the interest of the shareholders. All these Baker Street guys are interested in is making money. Unfortunately, they bought a bunch of shares in the company and saw them lose value, so right now, they're losing money. If the board's plan works, it might turn things around and the shares might then rise in value, allowing them to sell at a profit. But that's a crapshoot. Whereas if they force the company to run itself into the ground for a couple of years and give all its spare cash to the shareholders whilst it does so, they ought to make a tidy little profit before it implodes. Which is a guarenteed win.
Welcome to capitalism. Nice here 'innit?
Re: Research, waste of money.....
activist investor is the BS name they gave them selves. They don't like the more descriptive name corporate raider.
Company is under valued = we can sell off the good bits and grab the cash.
All research should be self-financing
And in most innovative (c.f. companies that grow merely by gobbling up the innovators, rather than doing and R&D themselves) companies research IS self-financing. In fact it makes a profit.
The profit that good research makes is the company profit as without the R&D and the products it gives rise to, there would be no company. Sure, it's a gamble. You start 10 research / development projects and maybe one bears fruit. But so long as the people who make decisions have a grip on the costs and prospective returns - and know what to cancel and when, that 1 success will easily pay for the 9 failures.
Even the failures can make you money. All you have to do is patent every single aspect of them and then lie in wait for some other company to wander into your patent minefield and then set the lawyers on them. Though in civilised countries, that's frowned upon - it's not really cricket, is it?
Re: All research should be self-financing
But there is normally a lag between the R&D starting and the finished products being sold. For a while after that the company will be recovering the R&D costs, so while in long term it should be cash positive in the short term it is an expense on the company books.
I remember, way back in the mid-late nineties, early 00s, installing many of their Mobile Data Terminals (MDTs) in OOH Doctor's cars nationwide, along with Vodafone Paknet Pads and Brother 12v printers.
Time moves on.
I refer the commentards talking about corporate raiders...
... to the article by Tim Worstall recently:
The best thing for shareholders (the owners of the business after all) may be to milk the cash cow then shut it down, rather than gamble on R&D that may not pay off. You may argue that stifles innovation, but it may be that the shareholders would rather make that gamble in another company rather than this one.
In macro economic terms, as per the article, corporate raiders are the good guys :)
The floggings will CONTINUE until morale IMPROVES!
"Management has to focus immediately on boosting employee morale by inspiring a customer-centric culture of high productivity, cost leadership and efficient innovation."
Translation.:Make the drones work harder for less money and, if they complain, off-shore it all.
"A prudent course of action ... would require the Company to aggressively right-size the business and focus on generating significant amounts of cash."
Translation: Give us all the money NOW! NOW!! NOWNOWNOW!!!
Re: The floggings will CONTINUE until morale IMPROVES!
Couldn't agree [with Mike!] more! And I'd be fascinated to understand how Baker Street intends to accomplish this, 'cos I've never seen it work before. And they're claiming that R&D is risky.
Xyratex has no expertise in these areas
Sometimes even when you see the end of your business it doesn't mean you are the one to take the next one (see Kodak and digital pictures).
Xyratex could sell basic equipment to service providers who use open source for super cheap storage offerings. It's a dull and low margin business, but one that they already do well and are likely to succeed. Then they could have some nice dividends until they die and leave the speculative research to VC's, who have a investment model more inline with that type of speculation. The issue is that no manager wants to man the tug boat...they want the cruise liner so they get paid more.
Not saying R&D is bad, just bad for Xyratex.
So when you take your company public, the emphasis changes from producing a quality product people want to maximizing shareholder return?
Wow. Didn't see *that* one coming.
On one hand, they are doing R&D in what I consider to be a 'flash in the pan' area...on the other hand, they are doing R&D during a recession, which, if done right, can put the company miles ahead of others when the recession ends. Now, the raider types want to just cut the company up, and auction off the components...this typically generates some great short term returns, but will destroy the company in the process.
So, the question is, will this company give better long term returns than short term returns? "Xyratex makes disk drive drawers for OEMs, a business that's shrinking, and test equipment for disk drive manufacturers, a business that's unprofitable. Its strategy to get out of these holes is to build ClusterStor storage arrays for the high-performance computing (HPC), Big Data and public cloud markets." -> despite the profitability of current operations, they are very much in demand. Disk drive drawers are kind of the nails and screws of the computing industry -> they're used everywhere in the server and even consumer market places. As for the ClusterStor stuff, I have not reviewed it, but the metric is the same: is it reliable (99.999999% up time), is it easy to apply hotfixes and upgrades, can it be expanded easily, does it play well with other vendors, that sort of thing; if they can come in for a nice price with the pre-reqs, they're relatively secure for the future. If they are having trouble with the design, or have made some awful trade offs...not so much.
its worth remembering......
Steve jobs was kicked out of Apple by activist investors who nearly ran the company into the ground by ,among other MBA approved strategies , cutting R & D.
Ironicly after a mega R & D spend at Pixar he made more money than the then Apple board could dream of.
He was able to buy back control of Apple at a bargain basement price.
Re: its worth remembering......
Yes, for all his detractors and everything else - he did a good job.