one hundred billion dollars!
HP’s board has spurned the advances of Xerox, saying the $33.5bn opening bid “significantly undervalues” the business. In a letter sent today to John Visentin, Xerox’s CEO and vice chairman, HP CEO Enrique Lores and chairman Chip Bergh said the HP board “unanimously concluded” the proposed price falls short of their valuation …
As usual, what is in the best interests for the company and for its staff doesn't factor anywhere, just make sure the shareholders get their extra few cents on their next dividend and fuck the employees. HP doesn't need to merge with another company, it needs to sort out the quality and longevity of its printers, rationalise the software it supplies with its printers (would Sir like 1Gb of Disney branded shit ramming onto your machine with your drivers?) and price its consumables competitively. The USP of having the print head on the ink cartridge has served HP well for 35 years but everyone else has caught up now and there is no noticeable advantage to that design any more, so they should consider ditching it and moving to a separate print head and ink cartridge (like everyone else) to significantly reduce the price of their cartridges as its the main reason the bottom has fallen out of their entire printer business model anyway.
And as for the shareholders, bollocks to them! It may seem old fashioned now, but the 'HP Way' which Bill Hewlett and Dave Packard used to manage the company served it very well for over 60 years when it made a profit in just about every single operating quarter while having a very happy, productive and fiercely loyal workforce as well as producing high quality, reliable products which people were prepared to pay for and which gave good service.
While you're right to be annoyed, the duty of a company's board has always been to its owners, which can often mean a quick sale for cash now. and screw the future. The current trend in the US is to market concentration with the expected higher prices intended to pay for the acquisition.
Things started changing in the 1980s with market deregulation and changes in accounting and tax law which made debt-financed buyouts possible and then atractive, because debt can be registered as a charge and capital gains is taxed less than income.
I think we can assume that some kind of merger here will go through.
It might stink, but it's all connected.
Pension funds are the "owners" of most stocks. So forgetting to make money means grandma has to eat less of a lower grade of cat food.
People do what they're incentivised to do. The current scheme of rewarding the C suite and board members via stock options - because no one wants the optics of eye-watering amounts of cash - is at fault for a lot of the evils here. The system has allowed them to vote on their own pay.
I don't feel anyone should be entitled to a "good paying job in nice conditions" if they don't produce more value than they cost. If you do, that's a different discussion. Marxism only works till you run out of other people's money.
Good luck changing the rules as they are, since the people who enforce them are the ones who benefit. It's "we've let the plebes vote for bread and circuses" again, just at the level of not-plebes who get their way whether anyone else likes it or not.
This is a long winded way of saying "follow the money", of course.
I don't feel anyone should be entitled to a "good paying job in nice conditions" if they don't produce more value than they cost.
That's never been the problem. Money-losing companies go away soon enough.
The problem is when a good, solid, stable business is making plenty of money, but since other companies (perhaps less steadily and reliably) are making MORE MONEY, QUICKER at any given point in time, something is wrong with the otherwise good and profitable business, and drastic moves to turn greater profits MUST be done. Laying off good and profitable employees (i.e. eating your own seed corn and guaranteeing less profitable future quarters) is often Step #1 on the list.
That is the theory at least, though in practice it virtually never happens. Instead, investors prefer to buy enough stock to get a seat on the board, 4 - 5% is usually enough, and get the ball rolling there. Shareholder votes have for years been dominated by large investors, with cross-shareholdings and monosopodic practices leading to a form of regulatory capture. For example, Black Rock often owns large parts of competing companies, and Icahn might well have shares in Xerox. The odd thing is that this is all perfectly legal.
From the point of someone with pensions I don't have a problem with the pension funds spreading out the investment and that includes having investments in competing businesses. OTOH I don't want to see winner-takes-all monopolies developing because I want to see all those competing businesses prospering.
"Icahn might well have shares in Xerox"
According to the previous article on this he does.
There's the big problem. The HP board's statement “In reaching this determination, the board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock, It pretty much says they have Icahn's strategy figured out: he'll bleed them dry and destroy whatever is left.
The issue is that the best interest of shareholders seems to be evaluated over a ever shortening future times span, and not over the longer time span that would be the responsible thing to do for both the company and shareholders. It's a simple fact that the two questions "How do we give the shareholders the most money NOW" is very rarely compatible with "How do we give the shareholders the most money over the next ten years"
I keep hearing about these debt-funded buy-outs where the minnow tries to swallow the whale, but I've never heard of it being particularly successful. It just seems like a way to get the financiers' hooks back into legacy businesses that really can't remain profitable and service the debt.
Any examples available where the reverse takeover has been a net win and strengthened the resulting entity?
It can end well. Wendy's reverse takeover of Burger King springs to mind as it brought in a more aggressive and capable management and allowed reduction of duplicated effort. A helping factor was that Burger King was already saddled with debt and as they were stood had little hope of ever discharging the debt.
Unless the debt can be magicked away then the resulting entity is normally to endebted to survive. What generally happens is that the merger is followed by restructuring, spin-offs and sales, etc. For example, Xerox might want to focus on the printer and copier market and look for a buyer for the other stuff.
For a while 3G Capital had a good reputation for these kinds of deals but they've started to sour over the last few years. And, of course, this is the model of the company that bought Broadcom. But a lot of the time the financial engineering is what determines whether something is a success or not.
When Mike's Taco Truck proposes to buy out a major fast food franchise, it's possible that Mike is a brilliant manager who will, over time, greatly enhance the value of the restaurant chain. But it's also possible that Mike is a scam artist who will gut the fast food business, pocket all the loose cash, and be found drinking Pina Coladas in the Cayman Islands when the crazed fiscal monstrosity he creates eventually crashes.
Which scenario do you think is more likely?
Wow. Maybe somebody is actually remembering something about the past and doesn't want a repeat - that'll be a first for HP.
Apart from that, it's management as usual. Kudos for having erased a layer of management, that's new, but 9000 layoffs to "save costs" ? Looks like not everything is changed at HP after all.
I really hate that term. It implies that a decision is so obvious that the details don't need to be thought about.
The trouble is, it's the possibilities that you didn't think about that later pop up and bite you on the bum.
It's not a good decision-making method when large amounts of money are at stake.
You can usually tell when Icahn wants something, it is all about reaping in the biggest leap in stock price in the next quarter, the future of the company be damned.
As long as the company is still in business and the stock price still buoyant when he dumps the stock, everything is fine, what happens after that is irrelevant.
This sort of corporate raping investment is what is wrong with modern business. The executives strive to make a go of it and these corporate raiders come in and ruin everything for a quick buck and don't care if they destroy companies or lives in the process. The stockholders should be pushing for long term stability and gain, not how much they can make in the next quarter.
The market has already set a value on the company - that's what the stock market does - that is less than what Xerox is offering, so we have one value there.
To tell the truth, I look at some of those valuations and just think someone is insane: myself or all the people willing to buy shares at that price. It's an uncomfortable feeling.
Perhaps another sillycon valley company (which has a bunch of $$$ floating around) that has IP addresses that start with 17 (one more than HP's) might be in the market, you never know....
The other option might be for HP to acquire Xerox. It has happened before.....
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