Contributor since: 2012
Company: Merjerz
Merjerz mavericks were right on the money, they called this deal ages ago. See: Be a voter, add your insight, and make great M&A happen!
UPDATE: CSCO is selling Linksys to Belkin. No financial terms were disclosed (yet), but reportedly for much less than the $500m CSCO spent on it.
Interesting interview with Wheelz CEO here:
Jose - you've written a nice article there. An alternate explanation for Michael Dell's buying up Dell shares is 'hubris' (is that also at play in Bestbuy?). Dell's performance since the founder retook the helm has been dismal. He is holding on fiercely to the company that bears his name, and desperately wants it to regain its luster.
On reflection, Michael Dell, Silverlake and MSFT are an unlikely group, but each have a different interest in buying Dell. MD thinks it will save his company and fortune; Silverlake thinks they can turn it around and make good money; MSFT will do anything to stop the third biggest Windows PC/laptop maker from doing what IBM did (leaving PCs).
At any rate, thank you for the thought-provoking comment.
Rumors of Dell's expected buy-out broadly support the case made above. The company has failed to deploy its assets effectively. We wish them lots of luck and success either way.
dbtunr - interesting. You seem quite certain that this is a 'RBM' (Reinventing the Business Model) acquisition. If that's the case, we can expect to see Avis shift business to the Zipcar model.
Remember, DISH bought Blockbuster for $320M, whereas NFLX is now a $5B company. If Blockbuster had bought NFLX and shut it down, someone else would've have competed with a new model, say Amazon Prime. Very, very few companies are able to look at a new acquiree, say 'we're moving our business into that' and do it. It is doubtful that Blockbuster would have done it, and doubtful whether Avis can do that. Even if they say they want to - which would be rare, since they're bigger, they're the acquirer, why should they morph? - the cultural and structural challenges are immense.
Either way, we wish they lots of luck making the most of this.
Thanks for the insightful, thought-provoking comment!
Curious. Dave Johnson, quoted in the article above, has left Dell for Blackstone:
Cool idea. Post it at, and you can get that conversation going.
Flower enthusiasts with an M&A twist have proposed two deals for FLWS:
(1) to acquire Edible Arrangements. Read all about it here:
(2) to acquire flower startup H. Bloom:
Add your opinions there.
Thanks. It would be great to read your take here:
Good article, highlights nicely just how problematic the role of iBankers is in the M&A process.
Could M&A still save HP? How about this: Be a voter and add your insight.
Merjerz community thinks HP could buy a much smaller player, specifically Makerbot. HP's distribution could make this an M&A deal to be proud of (in contrast with Autonomy, Palm, EDS, Compaq...).
Do you agree? Vote now and add your insight:
This just in: CSCO is trying to sell Linksys, acquired for $500m in 2003, apparently expecting to make back a fraction of the price paid. And that's a networking company! The Cisco M&A fallacy is falling apart...
Thanks for clarifying. We seem to present different perspectives on who ostensibly benefits from the buybacks; you're emphasizing the former shareholders who get bought out. The premise of the article is that the buybacks are conducted to benefit ongoing/remaining shareholders, as they now own a bigger piece of the pie. It is their value that is assessed here. Of course you're right that those shareholders who sold ought to be happy with their cash (happier, it seems than shareholders who've seen their stock go nowhere for years).
Thank you again for the insightful remarks.
ConservativeOutperformer - thank you for your detailed comment.
Naturally the author is aware of the tax consequences. To oversimplify a little: Cisco could have given money back as dividends, taxed over the last decade at 15% as qualified dividends, and Cisco's effective tax rate was 20.8% in 2012, so shareholders get $0.67 on the dollar, after corporate and dividends tax. As the article shows, that is much, much better than shareholders got from buybacks and M&A over that period.
Of course, Warren Buffet put it best: "...repurchases are all the rage, but are all too often made for an unstated and, in our view,
ignoble reason: to pump or support the stock price. The shareholder who chooses to sell today, of course, is benefitted (sic)
by any buyer, whatever his origin or motives. But the continuing shareholder is penalized by repurchases above intrinsic
value. Buying dollar bills for $1.10 is not good business for those who stick around." (Letter to BRK shareholders, 1999, available here: Cisco has been buying dollar bills for $1.10 for a very long time. Same goes for its M&A activity.
In that sense it is much, much better to receive double-taxed cash, than to receive some spurious benefit (not spurious for executives, as it pumps up stock price of course).
You wrote: " I can point to hundreds of companies that would have had far better results over time if they purchased their own equity as opposed to issuing dividends" - presumably you mean results to shareholders. That sounds like an interesting idea for a SA article! Good luck!
Thank you for the comment. The author too is long CSCO (as disclosed). Time will tell if CSCO is undervalued; what the article tries to show is that its doubtful whether share repurchases and M&A are doing much to realize that value that CSCO could have.
Jonathan - thank you for the comment. Not sure how your point shows this is, as you say, nonsense. I made the (obvious) point that buybacks hit the denominator in 'EPS'. That in itself doesn't change the value of the company; the company is simply paying cash out for shares at market price. One problem in Cisco's case is it spent $67B on one company. One that hasn't done terribly well over that same period.
Feel free to clarify if you've been misunderstood. Thanks either way for the comment.
Mementomori - you're right that it's becoming less and less workable. Would Compellent+NetApp provide Dell the salesforce, and talent, to compete effectively and grow this segment? (BTW, please copy your response here too, so others can benefit from your insight).
Any other ideas on effective M&A for Dell?
Julius - add your vote here Would be great to read your take analysis on a DELL-NTAP combination.
Ted - great article on the buybacks! Thanks for bringing that to our attention.
Syarzhuk - good point. Mayer has said she's looking particularly at smaller acquisitions, so sounds like she is thinking along similar lines to you. Let me offer here a different perspective:
Geocities was a bubble bought with bubble shares. I think it's hard to analogize from that period. Google has had some very prominent large acquisitions in recent years, such as Doubleclick ($3.1B in 2007), AdMob ($750M in 2009), Motorola ($12B, 2011) and many many others. The jury is still out on Motorola, but at least Google thinks the others were mostly successful:
Yahoo is not where Google has been for the last 5 or 8 years, growing nicely, innovating, developing. Yahoo has been stagnating. Little acquisitions can be great to bolt-on to a great cor product suite. But Yahoo doesn't have one. They need to reinvent their core offering and they need to do it quickly or they continue their slide into oblivion. Perhaps you're right and they can do this with small incremental deals; would be interesting to read your suggestions. Thanks for your insightful comment.
Luke - that's an interesting idea, though Yahoo can't sell if AAPL won't buy. Funding doesn't seem to be YHOO's problem, certainly not after the Alibaba sale. Is there value to AAPL? To YHOO? If you think there's a case for the deal, add it here: Look forward to reading your take on it.
It's true that Mayer has stated a preference for small acquisitions - and rightly so. Those will help YHOO make progress, and over say, 5 years it could show nice growth. We doubt that small acquisitions will help YHOO reinvent itself as a company worth following, and a product suite worth using.
YELP is pricey. YHOO already offered $1B for it. I think Stoppleman will be more malleable now that he sees what's happened to Zynga and especially Groupon; we'd guess that he'd take the $$ at this point.
Can you say more on the OpenTable idea?