Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Wednesday, February 16, 2005:
There are many reasons takeovers happen:
1. When management can't grow the old business, it looks for a new business.
2. If you're a public company, buying things is ultra-cheap. Just print share
3. Some companies make a bid to attract other, higher bidders, thus making their
own shares more valuable. This may be the case in the Highlands' bid for
4. Wall Street makes huge fees. It identifies takeovers, then peddles the idea
aggressively to management. It's hard to resist Wall Street when it also writes
analyst reports on your company, recommending (or not recommending) your shares.
And not the least, management stands to make out like a bandit: It gets paid in
cash. James Kilts, Gillette's chairman and chief executive, made $153 million
personally by selling Gillette Co. to Procter & Gamble Co. Carly did well
by buying Compaq, etc.
70% of all mergers don't work long-term. The reason is typically different corporate
cultures. The acquiring company tries to impose its ways on the company it bought.
The management of the bought company then leaves in disgust, but rich. There
are few good buyers. Two I can think of are Berkshire's Warren Buffett and News
Corp.'s Rupert Murdoch. Both encourage the management to stay and encourage
them to manage the way they see fit. But, in most companies, egos gets in the
way and fails. The largest ego to fail recently was Carly's acquisition of Compaq.
Wall Street investment bankers make fortunes "advising" firms on being
bought, being sold, protecting themselves against being bought, etc. Acquisitions
happen in waves, often at the end of a bull market. We're in one of those Acquisition
Phases at present. Yesterday I asked my readers for their best takeover ideas.
Here are some:
from Dan Good
Big drug makers such as Pfizer, Merck and Glaxo are likely to consider acquisitions
this year. Possible targets could include Bristol, Wyeth and AstraZeneca.
from Rob Moody
Siebel Systems (SEBL) by SAP
Stamps.com (STMP) by Pitney Bowes (PBI)
Chiron Corporation (CHIR) by GSK
Ill give it a unique twist with a focus on real estate, more specifically
retailers which could provide a liquidation premium to an acquirer due to the
estimated value of real assets held on their balance sheet. Outside of an M&A
event I find it difficult to believe most will be around in their current form
for any length of time.
Value of Real Estate per Share
I should have seen Circuit City coming. In a mushrooming section of Tampa
they lucked out and have a store that has no convenient competition from Best
Buy or practically anyone else. But, even there, when you walk into the store
you always feel the sword hanging. How do these guys compete? You
looked at any financials. I dont know if these retailers are owned by
somebody bigger that can carry them forever, but Ill simply report that
I get the same hanging sword feeling in:
they have some good locations, but many stores are vacant of shoppers. They
need marketing, marketing, and some more marketing. Ill bet that someone
out there can provide it after a takeover.
The latest store closings probably helped. The new store layout and floor polish
are great. Yes, K-mart is a necessary balance to Wal-Mart, but still
is moving uphill against a headwind.
yes, they were told they cant merge, but that was a shortsighted
and artificial decision. Something has to happen there.
exactly the same feeling as Circuit City.. only maybe a little worse. They continue
to try to get by on thinner margins on lower prices.
I believe XM Satellite Radio will buy Sirius. This is going to be big business.
Newton (that's me)
Independence Community Bank (ICBC) and TriPath Imaging (TPTH)
from name protected:
My favorite takeover target...Is my employer and your favorite German bank;
Deutsche Bank. There is endless speculation about the Vorstand cost-cutting
to the bone to make the securities arm of the group look more attractive for
sale, including cutting more people than they can afford to. Last suitor was
Citibank, however, "Zee Germans" could not tolerate the thought of
Americans buying them out. Unfortunately, as the old saying goes: "A polished
turd is still a turd."
anti-spyware software: Spyware is insidious.
You visit a site on the Internet and before you know it, the site has installed
software on your computer, which reports some of the things you do on your computer
to someone somewhere on the Internet. The definition of spyware has to do with
software that is installed on the user's PC for the financial benefit of someone
else without the user's full knowledge and consent. Such programs range from
relatively harmless -- telling a distant computer which web sites a user visits
to capturing the user's social security number and sending it to someone who's
intent on stealing the user's financial identity. There are two reasons you
don't want spyware on your machine:
It can steal your identity.
2. It can slow your machine down to a crawl.
The major problem with spyware is that it's hard to find and hard to remove.
I have previously recommended two programs to rid your computer: Lavasoft's
Ad-Aware and Spybot's Search and Destroy. I'm writing this today because Microsoft
is now giving away a beta version of its brand-new spyware called, naturally,
Microsoft AntiSpyware. You can pick up a free copy of here.
here. This morning I ran the three programs on one of my PCs. Results:
+ Microsoft said I had no spyware.
+ Ad-Aware said I had 11.
+ Search and Destroy said I had 17 -- even after Ad-Aware had removed 11.
My conclusion and recommendation is there is no one magic program and that you
now need to run all three at least once a month. Which gives boredom
a whole new meaning. Sorry.
son's birthday today: He's 23. Would some stock in Greenfield
OnLine (SRVY) be an appropriate present? If my son had real talent, he'd
have a real job. Sadly, this is not him. This is some other father's son who
clearly has real talent. Check this incredible video out. Click
here. You need a broadband connection.
another scam: Watch out for this one:
"I am MR. KIMAEVA LIOUDMILA,the personal accountant to Mikhail Khodorkovsky
the richest Person in Russia and owner of the following companies: Chairman
CEO: YUKOS OIL (Russian Largest Oil Company) Chairman CEO: Menatep SBP Bank
(A well reputable financial institution with its branches all over the world).
I seek your partnership to accommodate the sum US$423M for us. My Boss got arrested
for his involvement on politics in financing the leading and opposing political
parties (the Union of Right Forces, led by Boris Nemtsov, and Yabloko, a liberal/social
democratic party led by Gregor Yavlinsky) which posed treat to President Vladimir
Putin second tenure as Russian president before he was reelected On March 14,
2004. I will present you/your company as one of the contractors we are owing
so that you can stand as the beneficiary of the above quoted sum or part of
the fund according to your financial strength or the strength of your company.
I will arrange for the documentation which the payee bank will need to transfer
the sum to you. The transaction has to be concluded before as soon as possible.
You will be rewarded with 10% of the total sum for your partnership. Can you
be my partner on this?"
Stupid is as Stupid Does. I love this one.
It reminds me of the "logic" I hear every day on Wall Street.
Airline Captain walks into a sports bar at his layover hotel around 9:58pm.
He notices one of his Flight Attendants from his crew and sits down next to
her and stares up at the TV. The 10:00 o'clock news was on. The news crew was
covering a story of a man on a ledge of a large building preparing to jump.
The Flight Attendant looks at the Captain and says, "Do you think he will
The Captain says, "You know, I bet he'll jump."
The Flight Attendant replied, "Well, I bet he won't."
The Captain places $20 dollars on the bar and says, "You're on!"
Just as the Flight Attendant placed her money on the bar, the guy did a swan
dive off of the building, falling to his death. The Flight Attendant was very
upset and handed her $20 dollars to the Captain and said, "All is fair.
Here is your money."
The Captain replies, "I can't take your money. I saw this earlier on the
5 o'clock news and knew he would jump."
The Flight Attendant replies, "I did too, but I didn't think he'd do it
This column is about my personal search for the perfect investment. I don't
give investment advice. For that you have to be registered with regulatory authorities,
which I am not. I am a reporter and an investor. I make my daily column -- Monday
through Friday -- freely available for three reasons: Writing is good for sorting
things out in my brain. Second, the column is research for a book I'm writing
called "In Search of the Perfect Investment." Third, I encourage
my readers to send me their ideas, concerns and experiences. That way we can
all learn together. My email address is .
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