Diggin' technology every day

May 10, 2013

Activist investors and not wanting to be public

Filed under: Random Thought — Nate @ 11:49 am

Another somewhat off topic post but still kinda tech related.  There has been somewhat of a rash of companies the past few years that say they either don’t want to go public or some that already are public and want to go private again.

Obviously the leading reason behind this is often cited as companies not wanting to have to deal with the pressure of short term investors. Some are more problematic than others.

Two events caught my eye this morning, the first one is Carl Ichan’s attempt to crush Dell. The second is apparently a dual headed assault against the board of Emulex for not taking the buyout offer from Broadcom a few years ago.

The average amount of time people hold stocks for has collapsed over the past decade or two( I saw some charts of this at one point but can’t find them). People are becoming less and less patient demanding higher returns in shorter amounts of time. The damage is being done everywhere, from companies surrendering their intellectual property in order to be allowed to do business in China, to companies just squeezing their staff trying to get everything they can out of them. I saw someone who claimed to be an IBMer (widely regarded as giving investors what they want) claiming IBM is being gutted from the inside out, all the good people are leaving, it’s only a matter of time.. This certainly may not be true, I don’t know. But it wouldn’t surprise me given IBM’s performance.

Corporate profits are at record highs as many like to cite. Though I see severe long term damage being done across the board in order to get to these profits in the short term.

HP is probably a prime example of this, as a result they felt they had to go spend a ton of money acquiring companies to make up for the lack of investment in R&D in previous years.

But of course HP is not alone. This problem is everywhere, and it’s really depressing to see. The latest attempt from Icahn to kill Dell is just sad.  Here is Michael Dell the founder and CEO trying to save his company for the long term, and here comes in Icahn who just wants to squeeze it dry. Dell may not succeed if they go private maybe they go bust and investors lose out. Maybe Icahn’s deal is better for investors. For some reason I rather view the situation as for what’s best for the company. Dell has done some smart acquisitions over the past few years, they need (more)time to sort through them. If investors don’t like what Dell is doing they are free to sell their shares.

Not long ago BMC got acquired as well (I really have no knowledge of BMC’s products) by private equity and it’s quite possible the same happens there too.

HP attacked Dell when the plan was announced to go private, saying things like “Dell is distracted now”, and HP is a better fit for customers because they are not distracted. I got news for anyone who believed that – HP has more distractions than Dell. I have absolutely no doubt if HP could manage a way to go private they would do it in a heart beat.  I think HP will get past their distractions, they have some great products in Proliant, 3PAR, Vertica, and others I’m sure that I can’t cite off the top of my head.

Same sort of short sightedness I see all the time with folks wanting to embrace the cloud, and the whole concept of shifting things from CAPEX to OPEX (though some accountants and CFOs are wising up to this scam).

The same thing is happening in governments around the world as well. It’s everywhere.

It’s just one of those things that has kept my vision of the future of our economy at such low levels (well if I said what I really thought you might think I’m even more crazy than I already come off as being 🙂 )

anyway, sad to see….

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