Chanos: Analysts fooled by tech acquisitions

A number of big cap tech companies have fooled this generation of analysts, says Jim Chanos (about minute 11 of the video), by acquiring their way into growth as organic expansion grinds to a halt. He won't name names (HPQ is already trodden ground), but Cory Johnson's mentioning of IBM and 3D Systems (DDD) as fitting the bill has Chanos nodding his head, "Acquisitions are a way of capitalizing R&D."

"I'm very leery of tech companies that become value stocks," he says, partly explaining the reason for exiting another long - his stake in Microsoft (MSFT). Apple (AAPL)? He considers it more a consumer products stock than tech stock, and believes the company is still innovating.


Also from the video: Chanos on China.

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Comments (17)
  • Doyle3000
    , contributor
    Comments (2055) | Send Message
    CRM is extremely guilty of buying their growth and they are still in their growth stage! They capitalize the coffee filters I bet!
    17 Sep 2013, 01:51 PM Reply Like
  • Izzy1
    , contributor
    Comments (194) | Send Message
    I think people like Chanos suffer from a very old disease with the following symptoms. If they didn't invent it, think of it or fund it, well then how good can it be?
    Also remember Chanos is a professional short manager and he probably shorted stocks in this industry.
    17 Sep 2013, 01:51 PM Reply Like
  • kimboslice
    , contributor
    Comments (1817) | Send Message
    My friend's dog is leery of Microsoft.
    Microsoft makes 1/2 their money from products that competitors are giving away for free. Then, Microsoft started giving one away too (skydrive apps).
    All further copycat attempts by Microsoft are failing.
    Surface has a problem: people all have a bad memory of windows computers confusing and frustrating them and almost ANYthing "windows" is considered (fairly or not) inferior to Apple or Android.
    Microsoft ads are lame, their copycat products are failures. They spent $950 million in ads to sell $900 million worth of surface tablets.
    Those windows phone ads were absurd, the surface ads were like some bollywood dancing scene, zune (remember that) was a dud.
    Now some guy is going to tell me about microsoft dominance in the workplace, ho hum.
    17 Sep 2013, 02:16 PM Reply Like
  • techy46
    , contributor
    Comments (12665) | Send Message
    Microsoft makes better than 50% of their revenue and profits from real enterprises that don't worry about idealistic rhetoric. Andriod is Linux/Unix based shareware and so is iOS and OSx. Kids love to dispute knowledge and structure.
    17 Sep 2013, 05:26 PM Reply Like
  • JDDurango
    , contributor
    Comments (484) | Send Message
    MSFT has 16+ lines of business that bring in revenues of over $1b each.
    17 Sep 2013, 05:30 PM Reply Like
  • kimboslice
    , contributor
    Comments (1817) | Send Message
    I'm no kid, I have been using computers since 82 in science.
    My comment was about the other 50% of microsoft's business.
    Lucky for them they can keep throwing stuff against the wall to see if something sticks.
    Android is derived from Linux not UNIX.
    Apple OS (mac and iOS) is derived from UNIX.
    Mac and iOS are shareware? Funny last time I checked you have to buy an Apple product to own either one.
    It doesn't matter anyway. There are 5 billion more people who want an Apple product, I don't know how many businesses are out there who need another copy of office.
    17 Sep 2013, 06:35 PM Reply Like
  • wrynot
    , contributor
    Comments (378) | Send Message
    "the surface ads were like some bollywood dancing scene"
    That wins the prize for the funniest thing I will read today.
    18 Sep 2013, 09:48 AM Reply Like
  • mkbgsoar
    , contributor
    Comments (110) | Send Message
    IBM is an old company that contemplates its roots. It is still growing globally.
    DDD is a new generation company; a trailblazer of a new industry it pioneered and for which the time has come to bloom.
    DDD acquires companies that expends its horizon and its customers spread it has already started its global expansion; with the wisdom of its business strategies, it is likely to grow better than its industry.
    I am staying long on DDD.
    17 Sep 2013, 02:37 PM Reply Like
  • Confirm
    , contributor
    Comments (18) | Send Message
    Re 3D Systems, thank you for calling our attention to this interview segment and Chanos' nod. Notably he did not mention 3D Systems, but didn't disagree with the reporter's placing DDD in the context of tech cos and the issue discussed ie companies who are acquiring their growth. If the market came to lose interest in funding this company via secondary stock offerings or if there sooner or later aren't cos worthy of purchase, ("printing" icing and confections?), where would they be in terms of growth? At some point, (the timing is always the hard part to call), we will see.
    17 Sep 2013, 03:16 PM Reply Like
  • mr_dinky_dot_bomb
    , contributor
    Comments (421) | Send Message
    After Marc Hurd took over as CEO of HPQ he cut the R&D budget down to about 2,5%. HPQ then bought back a lot of its stock pumped up by higher EPS. That's when DELL and HPQ got into a couple of bidding wars that got ridiculous. At the time Sam Palmisino said that DELL and HPQ were driving up prices because they had to buy R&D. IBM has maintained about a 6% R&D spend for the last 8 - 10 years. Since IBM spent $5b for COGNOS its acquisitions have been strategic bolt-ons. I heard Chanos say on CNBC that IBM was the only one that was doing R&D. So the Cory Johnson mention was picked up in a careless manner.
    17 Sep 2013, 04:02 PM Reply Like
  • techy46
    , contributor
    Comments (12665) | Send Message
    MS has done quite well with acquiring DOS, FoxPro, Ruby, Sybase and Windows/NT, yes it copies from DEC/VMS and DG/AOS. So what almost everything in technology has been build on or copied from original ideas and works.
    17 Sep 2013, 05:26 PM Reply Like
  • riotango07
    , contributor
    Comments (69) | Send Message
    DDD is a no brainer, Looooong DDD!
    17 Sep 2013, 06:10 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1465) | Send Message
    Interesting how the biggest short in the business wouldn't short Apple and thinks they are still innovating. Even after the business "journalist" teed it up for him to criticize Apple. Smart people know whats up.
    17 Sep 2013, 06:41 PM Reply Like
  • Momintn
    , contributor
    Comments (6116) | Send Message
    I guess Chanos doesn't believe that banks should be making so much money in M&A either. The man is a complete joke. IBM has innovated more than any other company in the entire world and has the patents every year to prove it. And they do sell their business units off when margins weaken as well as lease or sell their patents to companies like Google. When you hear someone like this talk, you see just how messed up the market really is, with the media interviewing people who are only peddling their book and misleading the public. It should be illegal to put out misleading information and not have to have someone afterwards correct it.
    17 Sep 2013, 08:12 PM Reply Like
  • Momintn
    , contributor
    Comments (6116) | Send Message
    Analysts are fooled by short sellers.
    17 Sep 2013, 08:14 PM Reply Like
  • ConvertClassic
    , contributor
    Comments (254) | Send Message
    As with CRM?
    18 Sep 2013, 07:45 PM Reply Like
  • Bob Rowland
    , contributor
    Comments (11) | Send Message
    I am long DDD and intend to go longer. However, I believe some real money will be made when the company that develops the mission impossible device that will destroy the products that are created with 3D printing when the case, box, package, envelope etc., etc is tampered with. Anything that can be created, improved upon or designed can be recreated or improved upon with 3D printers. There will have to be some way of protecting proprietary property.
    18 Sep 2013, 02:04 PM Reply Like
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