Pierr Johnson

Genzyme's Very Bad Year

Kudos for the insights. Still, it is important to point out the Lumizyme approval and related manufacturing issues are separate from the viral infection that halted production of Cerezyme and Fabrazyme at the Allston plant. The company has moved beyond remediation and is well through its first run of production on both therapeutics. It has transferred production of Myozyme to the Belgian plant as is seeking approval there, which should remove pressure for the approval of the related Lumizyme. (An aside: because Myozyme displayed slight variations when manufactured in 2000L bioreactors, the FDA required a new appellation and approval track.)

The impact on the marketability of competing products to Cerezyme is unclear to me. Anecdotal evidence suggests many patients could adapt to the temporary shortage of both Cerezyme and Fabrazyme. But consensus estimates encompass a return to 20% annual growth. A stock that serially stumbles deserves its detractors. That said, if the company meets its established mileposts (at long last, indeed), the smarter money will be long at this point in time

IBM and Sun: Simply March Madness?

In my view, the logic of this deal has always been suspect. Yes, the value of Sun’s technologies is understated by the market cap that its existing financial structure allows. Unlocking this value through some sort of dis-amalgamation of Sun’s legacy and forward-looking businesses should be Mr. Schwarz and Co.’s primary goal. But IBM could hardly be the key to this value creation, because it directly competes against Sun in most of this latter company’s core businesses. Would IBM support Solaris against its own AIX? Though most of us hardly think about Unix computing these days, it is critical to most of Sun’s customers. And why acquire Sun if you don’t need (and shouldn’t acquire) Sun’s Unix-server and StorgeTek businesses? Indeed, if IBM’s goal is to acquire and retire these legacy businesses, anti-trust enforcement will indeed preclude its completion.

My advice to Sun management: It is time to slice and dice. In a normalized economy, technologies and businesses must not be supported with the expense structures of bygone eras. With regard to your products, show us (as Michael Capellas once said) what’s under the Kimono. Once these businesses are more profitably and clearly reflected in financial results, higher valuations will follow. Once non-core middling’s are gone (or at least disaggregated), investors will accord shares the appropriate valuation.

Vishay, International Rectifier Cat Fight Continues

I agree that both companies should be left to stick to their knitting. I have covered both Vishay and International Rectifier for over a decade and knew previous managements of both companies pretty well. And I eagerly awaited IRF's restated results in plotting the purchase of its depressed stock. No sooner were they here than Vishay pounced with a paltry premium.

Surely IRF was brought to its knees striving to seek the highest value in its franchise through serious accounting and business malfeasance. That said, the reporting mechanisms are back in place and a new management presides over a higher value Power IC and Discrete franchise that is intact. Even in its weakened state, this business model is inherently more profitable than that Vishay has so capably pursued over the years. It requires higher levels of investment and different channels that target different sorts of customers.

It is not clear to me why Vishay is expending such effort to pursue what seems clearly to be an ill-conceived business combination. Granted, IRF shares are severely depressed, and the accounting scandal has strained its business. Yet a cheap price alone hardly justifies this intervention in IRF's turn-around. And given its size and difficulty, it could very well gum up Vishay's execution as well. For now, I am on the side lines (and unable to vote).