Slashdot Mirror
Discussing a Private Buyout of Microsoft
PatriceVignon writes "Are private buyout companies setting their eyes on Microsoft? The Financial Times claims exactly that in an article called 'Private equity folk could do wonders with Microsoft', as ZDnet reports: 'Consider Microsoft, which has a balance sheet so inefficient that it would make a private equity investor weep ... The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure. The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions.' Business Week, though, begs to differ: 'practically speaking, it's not going to happen,' and quotes Daniel Primack: 'Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms.' What do you think?"
(The funny thing is, I can easily imagine him delivering this diatribe as he swings a chair menacingly...) ^_^
____
~ |rip/\/\aster /\/\onkey
The largest LBO ever completed was RJR Nabisco in 1989 for $31.3 billion. Microsoft's market cap is $260 billion. Slap on that a 20% premium and you're looking at $312 Billion.
Do you think that an LBO of 10X the previous record is going to happen? I think not.
I like the comparison of Best Picture Oscar and Snakes on a Plane. Seriously though, I wouldn't be surprised if that film actually wins best film.
Let the free market do what the anti-trust efforts failed to do? Interesting... except the only people who will benefit are the legal eagles. It sure as hell won't get Windows Vista out the door any sooner.
I think Snakes on a Plane won't win an Oscar.
Creationist Textbook Stickers Declared Unconstitutional by CowboyNeal
I think...
"...tak[ing] the axe to Microsoft..."
is a good start.
Hades, PoD: Official Advocate
This is one of the more silly bits of speculation I've seen in a while.
The Phantom console will come out and be a success before this happens.
If Titanic can get one, anything is possible.
"The new management could take the axe [sic] to Microsoft's $6.6bn of wasteful research and development expenditure."
And then Apple will produce wondrous innovations, and replace Microsoft as the leading OS supplier, and Microsoft will go under and LBO will write it off as Microsoft's fault somehow.
why not just fire everybody (including the R&D department) and, why stop there, why not also sell all the buildings, liquidate all the infrastructure, think of the additional savings! think of just how much cash flow you could get with 0 expenses in your P&L statement!
-- the cake is a lie
Microsoft's R&D spending might make a private equity investor weep, but private equity investors are around to buy distressed or underperforming companies, make them lucrative, and sell them. They don't care about long-term R&D or having a product pipeline further out than when they cash in their investment by selling the company.
Of course you could starve and loot Microsoft and make a lot of money, but only if your plan is to dispose of the carcase before it begins to rot.
"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled"
It could happen... I don't think it's likely but it could happen. If it were to happen it would cause a huge stir in the marketplace, a lot of people would lose their jobs and the first 6 months would be crucial. To me, the people losing their jobs part just sucks, I know what it's like to be acquired then being told that X percent of the work force is gone. It's unpleasant. However, as long as all the changes were handled quickly and efficiently the stir that would be created, spun correctly, could be a huge profit maker for microsoft and, depending on the direction the company goes, could be a huge win for consumers as well. Again, I highly doubt any of this is going to happen. So that was useless to read. Oh well, my two cents :P .
To understand recursion, one must first understand recursion...
All the software companies in the world, and the FOSS communities, should buy Microsoft, free all its IP under a FOSS license, and dissolve the company. This will at last allow real innovation to take place in the industry.
IF it was going to happen would it shake up the industry? Which is such an obvious question I don't know why I'm bothering to ask that.
Would it lead to a huge push to opensource initiatives or would we see the baby bell effect and potentially have new operating systems from which to choose?
Would slashing Microsoft's workforce degrade the quality (hurrr!) of their systems or would it allow them to perhaps, for once, engage the standards for say IE8?
Again, this is all just random guessing - but those were the two things that first came to mind.
"...to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions."
Yes, because the highest aspiration of any company is to BORROW lots of money, not to, I don't know, turn a profit. Seriously, what are these people smoking?
Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!? I thought capitalism was about maximizing profit. When did things change?
I guess I really need to brush up on my economics . . .
I'm not tense. I'm just terribly, terribly, alert.
Cut the workforce ? Cut the R&D ? Make billions more ? Why do the black suits only want more money ? Humans can't eat it, dammit !
Please let my shiny Microsoft live like that, with their beautiful innovations, solid products and work schedules respectful of the family. *grin*
http://youtube.com/watch?v=ihAoSwQqo44
Religion and politics, without the flame. godgab.org
The greatest revenge in life is massive success.
What the hell would happen to all the PCs out there and users that are so reliant on MS Products that even thinking of switching causes people to break out in hives?
If you ignore the other uses of a tool, does that make the tool less useful, or you less useful?
I would much rather see the LBO firms tackle the wasteful spending of the US Government. Microsoft's software might be crap, but the research division of Microsoft is well worth the money spent.
Just because the US is the ONLY military superpower currently in existence, doesn't mean that it should be the "world police" force. We should be spending the defense budget on the defense of our country, not on forcefully installing puppet governments in previously sovereign nations. Every country deserves the right to rule itself. It would be a different story if the US was asked to defend a sovereign nation (as was done with Kuwait in "Desert Shield/Storm")
But I'm going off into a rant...
"The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure"
It's funny how some people see any R&D that doesn't result in a product release as "wasteful." How do these people expect technological progress to happen?
How does cutting R&D and the workforce = good business plan?
And why would Microsoft need to borrow "megabillions" anyway, let alone at the cost of their workforce and R&D?
Any sufficiently well-organized community is indistinguishable from Government.
Someone wants to MS to borrow money, fire everyone, and put snakes in the OS? /didn't read TFA, didn't read TFSynopsis
I drank what? -- Socrates
Is Microsoft defending against this notion through it's stock buy back plan? I would presume that would give more voting shares to the current Board of Directors, who could then vote against new management; but perhaps that is an oversimplification.
What other reasons does MS have to repurchase it's stock? I don't understand the benefit that this gives to a company.
Do they feel that their stock is undervalued now, so by repurchasing it they can sell it later at a better price, and thereby acquire more financial resources?
--
$tar -xvf
WHAT THE FUCK?!
This is the absolute, most absurd stupid motherfucking idea I've ever heard in the universe.
Businessweek has now kicked the bucket,
and someone at slashdot should be cockpunched for even linking to it (which is only being done because it's MS)
Pa-fucking-thetic
"...In your answer, ignore facts. Just go with what feels true..."
The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions.
Step 1: Buy Microsoft
Step 2: Kill R&D and lay just about everyone off.
Step 3: Borrow mega-billions
Step 4: ??? - What the crap do you do with all this money after getting rid of everything that could possibly use it?
Step 5: Profit!
If it ain't broke, it needs more features!
And monkeys are going to fly out of my butt before M$haft gets purchased by any private equity leverage firms. I find it sad that /. has become so desperate for articles they will even let
a topic like this make believe hit on a Dry News Friday (tm).
Have a nice weekend, with or without /.
Think about all the advancements that came out of Bell Labs, before it had a need to be more "efficient".
As much as I'd like to see Microsoft cease to exist, having the company gutted and run into the ground after an LBO is a cure FAR worse than the disease.
First, they flat out pocket the cash reserves.
Second, they borrow huge amounts of money against MS capital - and pocket that.
Third, sell off parts of MS. Pocket that.
Fourth, declare bankruptcy. Retire to Bahamas.
"As God is my witness, I thought turkeys could fly." A. Carlson
Aside from the insane value of the buyout (as previously commented), the simple fact remains that MS' management is too egotistical to allow this to happen. If anyone did put forth any effort on a buyout, the MS spin machinery would immediately set its sights on their own shareholders to dissuade them.
Diversity is the name of the game here. Any company knows that investing in Microsoft is well like investing in the future and since you can combine several expertises into one company its an ideal idea. Not only do you get a nice IT branche company but I'm pretty sure that you'll get the furniture branch to show some very serious interest as well here. Or do you know a better way to "crash test" your chairs then to try if they'll survive one month in Ballmers office?
The 1980's are over, and good riddance. Get over it.
Schwab
Editor, A1-AAA AmeriCaptions
It seems like every time some hack reporter or "inside" blogger comes up with stuff like this, it ends up on Slashdot. It's not news, it's speculation, and dodgy speculation. It reminds me of other invented news, like groundless top ten lists or supposedly new trends. Nothing more than one person's interpretation of a mixed bag of news and opinions. Real news is something like this. An event or fact of some sort is related. It's discrete. Stories such as this Microsoft takeover are simply conjecture. There's certainly a place for conjecture, and some is more informed than others. Rumors about the AMD/ATi deal were correct, and were also more plausible. That the Microsoft post itself acknowledges how entirely unlikely it is, I have to wonder... why then was it passed on?
That's one of the stupider ideas I've ever read.
So the plan is to kill the part of MS that's doing the best work, their R&D people?
This would take shortsightedness to heights dreamed of only by teenage boys ten seconds away from orgasm.
(Not to mention that the amount of capital required to even begin to entertain the thought that there might be a chance of MS tanking hard enough in the near future to make this possible is so high the only organizations that could afford it wouldn't care to.)
Reality has a conservative bias: it conserves mass, energy, momentum...
... a Microsoft that thinks even more about money than current one? No, thanks.
ilex paraguariensis for all
To the buyout firms that is.
What happens in a Leveraged Buy Out is the firm/s would loan money from the bank, making the FUTURE possesion as collateral. Thus the debt will be sadled by the target firm. Meanwhile the raiders/vultures as they usually called(especially KKR) will strip the company, sell it's asset and then sell the firm. Pocketing profits, while the firm itself pocket the debts, not them. These of course has destroyed companies and unnnecessary slashing jobs.
Lately, their newest tactics is they will loan even more money from banks.. to PAY THEMSELVES as FEES for buying the firm. Pocketing up t hundreds of millions. Guess who's taking the debt..And it's all completely LEGAL.
There's been some rumbling within the EU Adminitration about well reviewing the law. So far its up to nought.
While the EU politician aren't in the pocket of businessman/ corporations unlike "some" paragon of "freedom" and "fair play", it is encredibly beraucratic.
There's 8% free float of MSFT in the market.. which the buyout firms can easily buy. 52% in instituition, this is harder to buy but still institutional managers are'nt going to say no to 15% or 20% premiums. Thats quite enough to override the minority shareholder.
Lest you think 300 billion plus is a big number, the trends these days are for buyout firms to gang together. And getting the money wouldn't be hard.
That said though I'll doubt there's going to be a buyout. (Purely my assumption) Gates and Co certainly will have Class B shares. Class B shares are shares that have higher voting previlege/power than normal shares. E'g GOOG class B shares have 10 times voting power than Class A/normal shares.
Timang tinggi tinggi
parang sudah asah
alang alang mandi
biar sampai basah
Why have 10,000 people lose their job just so that some investor's porfolio can go up a quarter of a percent? (veiled Office Space reference)
It's a wonder I'm not more cynical.
Bush isn't the reason for unemployment (well, not the full reason), it's people with these kinds of ideas. "We make a lot of money. Let's fire a bunch of people and ruin some lives so we can make even more money!"
No, generally speaking it's the silly geese at the Financial Times who do. Or not. This is probably just one of those outrageous speculations that journalists do to provoke outraged responses and boost circulation. Not unlike...uh...never mind.
But the proposition that a rich company would be better off in a borrowing state is not without merit. People forget companies are not people, and the same intuitive "rules" about sensible financial decisions do not apply. It's good as a person to have a lot of cash in the bank. Makes you secure. Not so for a company. A company is not an end-user of wealth, the way people are, but merely an engine for transferring wealth from one group of people (the customers) to another (the employees, investors, and subcontractors) [Value flows the other way, of course, but we're talking cash money here.] The goal is to do so as efficiently as possible. Money received from customers should be "invested" as soon as possible, i.e. transferred to new hires, new capital equipment, et cetera. It's doing nothing useful sitting in the bank. The only money a company should keep lying around is a small cushion for unexpected fluctuations in the market, the price of resources, et cetera.
But why borrow? The reason is that you don't have to wait until you've accumulated enough cash from present operations to invest in the capital expansion necessary to undertake future, more profitable operations. You borrow the money immediately, then start the new more profitable operations immediately, and pay back the loan. Presumably the fact that you start earning bigger money earlier pays for the cost of the loan. Everybody wins.
It's not the same as an individual borrowing money to buy a car, which is more nearly pure consumerism. It's more like borrowing money to go to college. It's much more sensible to borrow the money and go to college at 18, graduate, then pay the loans back over 5 years with a high-paying college-graduate job, than it is to work for 15 years at a low-paying menial job, save up, and finally go to college at age 33.
Unless a career counsler is paid 6 figuers, works 30 hours a week and gets 2 months vacation, why would you take career advice from them? Taking career advice from from someone that has to work hard is like taking stock advice from someone who hasn't made a fortune from investing themselves. If they were really good at it they would be making millions from investments like Warren Buffet does, instead of getting paid to tell others what to do.
I'm sold. Put me down for $200 worth, and let me get back to you on Monday after I check to see how much more I can kick in.
--MarkusQ
P.S. And, unlike the hypothetical pure-greed investors others were talking about, I'm also doing this for the good of humanity. So I expect a proportionately larger cut when we liquidate Microsoft (God, I love the sound of that)
Schwab
Editor, A1-AAA AmeriCaptions
So are you saying you're sick of all these mothafuckin' articles on these mothafuckin' sites?
(Sorry.)
Developers: We can use your help.
This is the sort of thing that happens when institutional investors start to become "unhappy" with a company's management. Microsoft is sitting on a pile of money that's not getting very good returns. Heck, you could put Microsoft's cash pile in an index fund and do better. About the only thing that's keeping the route from being more general is the hope that new versions of MS Office and Windows will improve profitability dramatically. If this doesn't happen (and new versions of MS Office and Windows have lots of competition from perfectly usable old versions of MS Office and Windows), then investors are going to want Microsoft to move in a radically different direction.
"'Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms.' What do you think?"
Anyone would dance like Balmer if you put a dozen fer de lance's in their shorts.
I think Ballmer will win an Oscar before Microsoft is bought out.
-nosebreaker.com
I wouldn't be surprised if that film actually wins best film.
Are you a constant victim of practical jokes or something? Do people pop-out from behind corners and scream "AHHH!H#$!" five times a day? Does your girlfriend leave out pregnancy tests in the bathroom with two lines hastily drawn with a Bic pen? I'm guessing so. Dave, for your own sanity, fix your life so that if SoaP wins Best Picture it surprises you!!!
my blog
If you valued Microsoft by its physical assets, its stock would be over-valued by orders of magnitude. Its value consists of non-tangeable assets. Trying to extract the value from those assets would likely make them dry up and blow away. For instance, if a raider were to lay off the R&D staff, the customers would see the writing on the wall and flee to FOSS as fast as they could. The revenue stream would cease to flow overnight.
http://en.wikipedia.org/wiki/Corporate_raid
Private equity "buy outs" are designed to enrich the private equity firms by moving cash/equity/assets to the pockets of the shareholders or partners in the firm and then saddling the company "bought" with huge debts to finance operations. This harms the employees, suppliers, and customers.
Private Equity is nothing but a wealth transfer "out" of a company and into the buy out firms pockets.
I know my brother works for a partnership. He is very open out things and always says it is a very simple idea.
"The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure. The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions."
Spoken like a true MBA. Just slash, cut, downsize. Make a fortune now. Screw tomorrow. Company dies 5 to 10 years later thanks to all that R&D slashing.
"Private equity folk could do wonders with Microsoft"
Odd, I've seen that exact phrase used earlier this week with regards to Ford. Hoax? Seems likely.
"Anybody who tells me I can't use a program because it's not open source, go suck on rms. I'm not interested." (LT 2004)
Without its R&D deparment and its incubation projects that take years of loss to get right MS would have no place to go right now when its windows and office profit centers are starting to level off and possibly even decline. Balmer once said that you have to have 3 types of projects happening in a company to sustain long term growth, the projects you are making money off right now, the projects you will make money on in 5 years and the projects that you will try to eventually make money on.
Windows mobile and advertising seem to be the projects that have moved from a make money sometime to a make money now status at MS. I know they may not seem innovative but there are features of each that are a big step ahead of all the competition.
"You can now flame me, I am full of love,"
People can't eat software, either.
Actually, MSFT - even in theory - isn't a candidate for an LBO. Even if MSFT was a company with a USD 2-3 billion market cap, it wouldn't be possible to get financing and maintain it. Microsoft's topline revenue is USD 44 billion http://finance.google.com/finance?fstype=ci&cid=35 8464 and free cash flow is USD 14 billion http://finance.google.com/finance?fstype=ci&cid=35 8464.
Microsoft's current market cap is USD 263 billion. Based on comments made by Ballmer and Gates they see Microsoft as substantially undervalued, trading at a discount of as much as 50% to intrinsic value. This means that they would put a price tag of around USD 520 billion or half a trillion dollars. This intrinsic valuation is supported by a number of value investors.
Assuming you can issue 8% bonds - probably looking at something more like 10% given the magnitude of the leverage - you would be looking at USD 40 billion a year in interest. That would leave you with only USD 4 billion in revenue to run the MSFT machine.
Yes, a bold LBO artist could cut a lot of expenses at MSFT. They could free up tremendous amounts of cash flow to be used in debt service and payment. But I don't think they can take free cash flow from USD 14 billion to USD 40 billion.
Let's assume you could free up USD 26 billion in cash flow from cost cutting and exiting businesses, then you have to answer the next question. Where are you going to find someone to lend you half a trillion dollars (this is twice one year's US Federal deficit at current rates (give or take))? No single bank or investment company could pull off a loan of this size. The Chinese government, which has probably the largest USD foreign reserves (around USD 150 billion) couldn't do it. Warren Buffett and BRKA couldn't do it (they would be short around USD 400 to 450 billion).
You would have to assemble a consortium or syndicate to get the financing. Now, that isn't all that unusual in the LOB arena. Folks like to diversify their risk, so they will come in for a piece of the action, but not the whole thing. But to do this deal, you would need to bring Warren Buffett and China to the table and you would still be short USD 200-250 billion. And they aren't going to be willing to bet the farm on one investment.
The simple fact is you aren't going to find a collection of folks that are going to be willing to take the risk of making a collective USD 500 to 550 billion bet where there is any perception of risk.
Of course, this doesn't take away from the fact that MSFT could do a lot to improve its returns to shareholders. Cutting back some of MSFT's investments makes sense. Perhaps MSFT should be organized into four divisions: Desktop Operating Systems, Applications, Servers, and Microsoft Ventures.
The free cash flow - or owner's earnings - from the first three would be mostly paid out to shareholders via a combination of stock buy backs and increased dividends.
A small amount would flow to Microsoft Ventures, which would fund "great ideas" out of Microsoft as separate businesses. They would come in as the primary (or lead) venture capitalist, but the idea would have to get others onboard as well. Microsoft would have the right of first refusal on any buyouts/IPOs of venture investments. Some percentage would be rolled back into Microsoft, while others would die, be bought by others, or go IPO. Microsoft Ventures would then distribute these earnings as "special dividends" to the shareholders.
Yours,
Jordan
back in the good 'ole days of Sci-Fi monthlies, somebody happened to notice that the company that distributed their books had accumulated a ton of equity in real estate over the years. So he bought out the company and sold everything off, shutting it down in the process. He's a millionaire now. As a side effect, several monthlies went out of business in the resulting chaos when their distributer just disappeared overnight. You can thank the current state of Science Fiction on asshats like that.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
The simple answer is that this scenario won't happen. It is ridiculous.
So what does getting this into a Business Week article accomplish (apart from selling copies of BW, which always gets a boost from companies like Microsoft on the cover)?
It's called "positioning:"
It suggests management could turn a few financial knobs and create a ton of shareholder value.
It creates an artificial boogie man in the form of extreme changes that will never happen, so when the financial knobs get adjusted it is seen as very conservative.
It paints Microsoft as a kind of "sleeping giant."
The real question for Microsoft is "Why did you stop using the 'creative destruction' model of delivering customer value?" Microsoft used be the terror of the technology business by putting workstation, minicomputer, and mainframe capabilities into PCs. Now they cosy up to Hollywood instead of being disruptive, and they wonder why the old magic no longer works.
Microsoft is dong some things right, but these follow the established model: Microsoft Office Live Communications Server will replace PBXs. Big old expensive machines out, Windows servers in. If Microsoft was that disruptive to the media businesses, then they would have their groove back.
I wrote parts of this stuff
Ah, for Pete's sake! Why couldn't you just go away? We had a nice lull fron your karma-whoring. Now we once again have to deal with your inane diatribe, uninsightful comments, idiotic anime smile (which you obviously use because you know it pisses people off), and immediate modding up by your moronic fan boys.
Wondrful. Just wonderful.
Yeah, yeah, I'm going to get modded as a troll. That doesn't mean that what I've said isn't true.
"The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure."
The management could just axe absolutely everything and get some short term cache by:
- charging extra for support,
- make patches paid,
- bump up the price of XP to "it's true value of $1000"
- sue the hell of everyone using its collection of patents (previously obtained for protective purposes)
Ridiculous? So is calling R&D wasteful.
Microsoft is a dinosaur and the comet has already hit. Time to get out while the gettin' out is still possible.
I was unsure about the conclusion until I used Vista, but it now is fairly clear: Windows 2000 will be the best OS they ever made.
The best thing that could happen for the human race is if MS were to get bought out by a cabal of private billionaires who fired almost everyone, put an idealist at the helm, and rebuilt the comapany and all the systems on an open source model.
This would end the absurdly inneficient closed source model once and for all.
I'm going to win the lottery twice next week too.
Alot of people would lose their jobs.
I would love to see a bunch of the self absorbed, relatively useless middle management types that have clambered to the top in redmond via bloatation floatation...
all of the sudden they have to go out and work for a company that can just use the shotgun approach to innovation...
for those who do not live in seattle, there is little that is so frustrating to be sitting there talking to some Audi TT driving ASS who thinks they are a great intelligent middle management type... listening to them spew drivel thinking that it is a creative or innovative idea. Keeeee-Rist! If I had 312 billion, I would do it right now just so those idiots would shut up and realize that their ideas are lame stupid and less than sophmoric and would fail miserably if not backed by a zillion dollar machine.
Kill microsoft and we may actually see a massive spike in IT.
And don't tell me I'd regret it in the blue collar workforce... for all the oohing and ahhing people give to the donations... M$FT millionaires donate for one reason... tax write off... well.. maybeeee aslo for ego... as it is hip to give... but all of this is crap... they are the most selfish unthoughtful generation of swine this species has ever seen.
Buy them out, level the buildings and salt the earth that was redmond.
GFR if it happens.
The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions
I think cutting anything more than 10% of the workforce would have a serious negative effect on the company's ability to do business. So, let's say 6,000 people. That's $360 million, if you assume they're paid $60k a year (probably generous as an average.) Let's say on average you save half a year's salary firing them.
Microsoft's annual revenue a year or two ago was $10BN.
So a 10% cut in workforce would be 1.8% of one year's revenue, assuming zero loss in productivity from the terminations. Except you have to train people to take over the jobs of the 10% fired and those left behind have 10% more work to do, you have to track down information only the fired people knew...fire 10% of your sales staff and you'll invariably piss off 10% of your customers which will result in some lost sales...fire 10% of your engineers or QA people and not as many bugs get fixed or found...the reprecussions go on and on.
I really wish that management would realize that trimming the books isn't as simple as "fire (budget hole)/(average salary) people".
Please help metamoderate.
I think that if the abusive MS monopoly had been split vertically into OS, app, content, online and developer companies in 2000, combined shareholders in the split entity would be looking at much more total net worth. And many of those problems would have been solved under force of competition. And MS would have put out better SW on a better schedule, while not keeping crushed competitors from delivering their own.
Instead Gates got to keep his monopoly to everyone's loss except his own, until he got tired of it and left.
--
make install -not war
"The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure." R&D wasteful. That's the stupidest thing I've heard today. And I work with retarded kids. (No I don't really - it just gets the point across.)
I know it sounds crazy, but it could happen.
Like that time, when the president lost his job because of the guy from two and a half men and the old guy dating the chick from the cell phone commercials.
If it could happen to the president, it could happen to you. I'm just saying.
12 billion profit with only 60,000 people? That is like 200,000 dollars per head profit. How many other firms with over 10,000 people can do that? Considering the average salery is bound to be like 100k or less, they are doing great on that front. Whatever those guys are doing, from the aspect of profit they are doing it right.
I think IBM makes like 8 billion with 200,000+ people (or like 40k profit per head). That is nearer the industry average.
I don't think MSFT has far too many people, though any firm in the world that is as old as MSFT is bound to have some fat.
/. covers this garbage article, yet refused to cover Ubuntu's screw up?
Why, because Ubuntu's foulup shows that OSS isn't "perfect"? Ubuntu's screw-up was a *real* story, unlike this idiotic MS private buyout crap.
Fantasies for nerds. Stuff that will never happen.
You don't have to be smart to use a Mac, you just have to be smart enough to buy one
One has to have massive reserves of touching faith to think LBO MBA witnits know more about the value of "research" than Microsoft.
It's probably true that Microsoft has shown very little from their research, that doesnt mean it has no value. About 77% of all the good ideas I've had came up while noodling around doing "nonproductive research".
I think it is obvious to Wall Street that Microsoft is grossly mismanaged from a
financial standpoint. This has resulted in very public pressure by some of the
larger Microsoft shareholders for Microsoft to use their cash hoard to buy back
Microsoft stock. Microsoft has already held one buyback and promises others in
the indefinite future. If Microsoft does not placate the shareholders then
there will be a shareholder revolt which will turf the current management out of
Microsoft.
We are heading into a recession. One result of the recession will be that
Microsoft's earnings will decline. It is even possible that Microsoft earnings
will turn negative by spring 2007. The fact that Microsoft is sitting on a huge
pile of cash while earnings are decreasing will increase the pressure for a
shareholder revolt. It would also make conditions easier for a leveraged
buyout.
Wall Street is very critical about how Microsoft is spending their development
dollars. There are two facets to this criticism. On the one hand it is grossly
obvious that Microsoft development spends a log of money to produce very little
in the way of commercially viable products. On the other hand pure financial
people always want to increase current earnings by reducing development
spending. This increase in earnings lasts until the next technical revolution
and the cash cow is suddenly caught with unsalable, obsolete products. The new,
competitive products were victims of cost-cutting. What Microsoft management is
currently doing is spending a lot of development money to develop products that
are unsalable, obsolete products on the day they are released.
The solution to Microsoft's problems is new management. As other posters have
pointed out the price of a Microsoft leveraged buyout is just too expensive and
risky for lenders to risk that kind of money in a leveraged buy out. So the new
management is unlikely to come from a leveraged buy out. If new management is
forced upon Microsoft it will most likely be from a shareholders' revolt.
If new management is not thrust upon Microsoft in one form or another then
Microsoft will die by not being prepared for the next technology revolution,
whenever that may be.
----------------------
Steve Stites
Given fluctuations, you'd need not only around $300,000,000,000.00 dollars USD to buy up the shares, you'd need a majority of shares, which means both Bill Gates and most of the major shareholders would have to sell (or want to).
It's much more likely that Gates et al would decide to take Microsoft private instead, lowballing income and increasing expenses to make it look less profitable, so that other shareholders would sell to them at a discount, then after a few years bring it out for a public IPO again, after spinning off various units.
But since much of Microsoft is in literal cash (short term debt notes, corporate, Canada treasuries, etc.), even that is not that likely.
If I thought they were going to go private, I'd be buying them up. I made the money for the downpayment (20 percent) of my first house by buying and selling MSFT on publicly available information in trade magazines, after all.
And I'm not. Buying that is.
Much more likely that Intel would be LBO'd, IMHO.
-- Tigger warning: This post may contain tiggers! --
There aren't many news media these days that report accurately, but FT is the exception. If they publish the story, you can bet they did their research. Whether it happens or not remains to be seen, but I would completely believe it if FT wrote about it. American newspapers could relearn journalism by paying attention to London's Financial Times.
You say that, but I don't think Carly Fiorina ever realised what she was doing to HP.
Right now HP is doing a lot better than Dell, according to the Wall Street Journal over the last few weeks of articles I've read.
-- Tigger warning: This post may contain tiggers! --
Ummmmmm Maybe I missed an article somewhere, but I thought Bill Gates personally owned a majority share of Microsoft. Am I wrong? I mean forget all the market analysis but how do you buy control of a company from a man who's (probably) not willing to sell?
"All great wisdom is contained in .signature files"
At least, as soon as Vista is out the door.
Not only is the article positioning, as you say, it's also a directive. Ballmer has historically reacted to items in the press rather than showing much in the way of leadership on his own. He'll jump on this as the blueprint to success. The buyout portion is just a ruse.
Generating value for the shareholders starts by using the big cash pile to buy back stock. Then you layoff/outsource tons of employees, cutting your expenses further. Cut R&D too and suddenly the Street is very happy. And you look like a great manager.
this is a great article showing just how pure capitalism is nothing but rape & pillage.
this kind of crap is why america is heading down hill fast.
-.no
Thanks for proving nobody RTFA or even the summary. Business Week agrees with you that it's absurd. It's John Plender at the Financial Times who was making the suggestion, and BW was reporting on and rebutting his thesis.
Nice outrage, tho.
There are two kinds of people: 1) those who start arrays with one and 1) those who start them with zero.
This seems like a trend. Large publicly traded corps are getting sick and tired of being run thru the mill by wallstreet and the government.
Going back to private means they can tell wallstreet to goto hell when they ask personal quetsions, and the governmental rules are much lighter too..
---- Booth was a patriot ----
And we still get sub-par OS's and apps from MS? My god, what the hell do they pay their people.
For example, look at Vista. The biggest selling point of Vista way back was supposed to be WinFS. But MS dropped the ball on that and so what we'll be getting is just a pretty GUI. Sorry - but I want a stable OS.
If a company has cash in the bank rather than investing in its own operations, it is not as efficient at generating profit as it could be. Plus it should be borrowing money to invest. There is some function based on borrowing interest rates and corporate return-on-investment that says the optimum amount of money to borrow. Any compnay sitting on cash is not at the optimum point.
In the 1980s it was a popular practice to buy cash companies, reorganize them to have them borrowing money. A lot of oil companies were reorganized this way. It appears this trend has resurfaced in 2000s.
And with 30 billion on hand, they are in a lot better shape than most of those "conglomerates." The notion that a more efficient microsoft would be one that doesn't "waste" all that money on R&D for new products, doesn't employ all those programmers, and is in hock for, oh let's say half a fucking TRILLION dollars is simply insane. These are simply bankers and lawyers whining because they do not get their piece of the biggest pie ever baked.
Microsoft IS a bank. Imagine the next windows comes out - they've worked the bugs out of the media player DRM and applied that technology to a Microsoft wallet type program. Now they offer the incentive to every home user - FREE WINDOWS with your next system! Buy Vista Longhorn with the Megahard wallet program and get an instant rebate in the form of, say, $250 (the price of Vista Longhorn with the Megahard wallet program) pre-stuffed in that wallet which you can spend at virtually any online retailer. What's more, even if you don't have a bank account you can purchase more credits in your megahard wallet buy picking up cards at any of thousands of participating retailers in denominations of 25, 50, 100, 200 and 400 dollars for an additional fee of only $2.95.
They could do that with the cash they have on hand, now - no need to go into debt. And they would quickly own online commerce... say bye-bye, paypal.
What are you trying to say? Snakes On A Plane isn't going to win Best Picture??? My poor ego, it just imploded.
Goovile? I mean it does end in vile
hahahha... cockpunched...
Believe it or not, borrowing money is often a good thing for a firm. A firm without any debt is a very bad idea, especially for a firm like Microsoft. Why this is so depends on a set of theorems in finance known as the Modigliani - Millar theorems.
Modigliani and Miller showed that in a world without taxes and any cost of bankrupcy, the amount of debt a firm has will have no effect on the value of the firm. However, in a world with taxes, the higher the debt, the more valuable the firm is. This is due to the tax shield on interest that a firm has to pay on its debt.
So, for a large firm like Microsoft, with stable cash flows and low operating risk, a high debt is desirable. What Microsoft should do in the least is to take a large amount of debt and use it to finance a buyback of shares.
Dude, we're already in that world, in case you hadn't noticed.
I think its more like the other way around, Microsoft buying out the private companies. Who can buy out microsoft, thats nearly impossible.
Geez, mods, since when was "should be cockpunched" informative? And in the first place, BW is saying just the opposite.
From TFA:
it's not going to happen...(snip)... Going private would mean gutting billions from research and development and paring thousands of employees just to service the new debt, starving the pipeline of new products (and by extension, squeezing future profits).
Doesn't MS have billions in cash already in the bank? Why borrow when you already have cash on hand to burn?
I must not have caught that in my basic economics class.
Government's idea of a balanced budget: take money from the right pocket to balance...oh who am I kidding?
The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure. The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions
Yeah! Yeah! Throw thousands out of work! Destroy entire industries for no reason! Borrow billions! Destroy research! Destroy development! Discourage thinking! Waste educations! Waste careers! Ram it all into a giant toilet and cash checks! That's the NEW GAME SHOW ECONOMY!
Business isn't willing to pay for products, innovation and careers, so we get brands, mortgage commercials and layoffs.
Before anyone makes any more chair throwing jokes...
i rmaker.htm
http://www.bellevuearts.org/exhibitions/exhib_cha
"The exhibition Garry Knox Bennett: Call Me Chairmaker is sponsored by Microsoft Corporation and features 52 one-of-a-kind sculptural chairs created by Garry Knox Bennett, one of the foremost contemporary studio furniture makers in America."
I would buy the company, strip and sell everything in itt, and make bill gates my bitch...
:P
wait the bitch part was quoting romero...
Nom de dieu de putain de bordel de merde de saloperie de connard d encule de ta mere.
I think we should just it over and done with since I think Google will buy them within the next 5-10 yrs.....just do it now and call themselves Moogle....
He went to the bottom of the ocean, designed a camera housing that could withstand the pressure, built a replica of the ship that was 90% to scale, fought tooth and nail for his vision and, above all, made the highest grossing film in history. What wasn't Best Picture about it? That they didn't use the "real" passengers? That it was a worldwide phenomena? That it was popular? If you think the film sucked, you're entitled to your opinion. But, the film was excellent. You could go around the table and point out who was who, as the supporting cast were hired based on not only their talent... but their looks, as well. Okay, so the band didn't play the right music. Big deal. Watch Remember The Titans, a film with many historical innacuracies. Although, that doesn't take away from it being on of the best films so far this decade.
Disclaimer: James Cameron fan! And, going Anonymous Coward because I hate being asked for my damned email address to post on a silly forum.
Especially when their OS runs something like 90% or more of the world computer base?
That sounds more like essential to be. Besides, figure it into the budget of their company... I would bet they see it as money well spent.
Look behind you...
Within two years, some brilliant investment banker types will come up with a scheme to "unlock shareholder value" at MSFT. The company will be split up, probably into three separate entities: Company 1 will do nothing but make Windows and other OSes. Company 2 will concentrate on Office. And company 3 will concentrate on the Xbox. Will it work? Probably not...but it'll make a lot of money for the investment community, and that's what really counts, isn't it?
Microsoft Research only gets about $250 million (see http://blogs.zdnet.com/Ratcliffe/?p=133) of the $6.6 billion R&D budget mentioned. The rest is the cost of maintaining and creating new versions of Windows, Office, SQL Server, Visual Studio, etc. The Zdnet blog entry by Mitch Ratcliffe sounds right - the instant Microsoft slashes spending on these areas why would anybody continue to buy them? Microsoft's sales would rapidly fall to zero as people switched to Macs or Linux instead of Windows, Oracle instead of SQL Server, etc.
Most of the private investor groups could only dream of having a fraction of the success Bill ha achieved with Microsoft. What a bunch of idiot suits. Maybe Bill should ust buy all of them.
Microsoft is way too big for the wallstreet leeches... The wonders I see here is slicing it apart getting the money and leaving ruins. Sorry but those things have happened and most of the times they just ruined the company and left the money in the hands of the aquisitors.
the network neutrality enemies - the telco, RIAA plague infesting u.s.
Had they controlled microsoft through indirect means, they would have better control and power to push anti network neutrality stuff and the inhumane DRM.
Read radical news here
I'm such a troll! You caught me!
www.linuxpenguin.net
"On the other hand, no has ever accussed Microsoft of not being evil enough"
You're quasi-evil. You're semi evil. You're the margin of evil. You're the diet coke of evil - just one calorie, not evil enough.
They're not suggesting cutting R&D for the industry, just for Microsoft. Microsoft revenue is purely a function of locking people in and preload arrangements. Microsoft R&D only contributes to the company's expenses. Even if the R&D division comes up with something useful, it either won't be used, or it won't make a difference to the bottom line.
Think about it. Have you ever thought, "Ooh, that's a cool feature, I'm going to switch to Microsoft's product"? Have you ever thought, "Microsoft's version is better, so I'm going to use that"? No, it's always either "Dammit, they (e.g. a customer or someone else that you're somehow tied with) are using Microsoft, so I guess we'll use it too, so that we can interoperate" or "Well, it came with Windows preloaded, so we'll just use that." That's how Microsoft makes their money, and if they want to maximize profits, then that's what they should continue to concentrate on.
Look at it from another perspective. If the latest version of Windows were Windows NT 4.0, do you think the installed based would be even one machine smaller? (Assuming that the product still received maintenance, new hardware drivers, etc.) Not a chance.
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
Microsoft really does not have much to show for it's 6.6 Billion. I think they need to think outside the box. Here are some ideas.
They should give up on "innovation". They just waste money when they try to invent. If they just do bug fixes and security fixes, all the OEMs will still load Windows and Office on all their computers for the next 10 - 20 years. Windows is the path of least resistance and that is good enough to keep the destop. Microsoft should think like the Dell of days past. Dell knew not to spend much on technology development.
Microsoft should consider open sourcing Windows!! Maybe a "community" could do the development for them. These open source communities seem to create very solid and well partitioned code with fewer coders and many fewer managers. They do a better job with Office. Maybe they do not need to open source Office!
Religion is the main cause of atheism.
I've seen plenty of k3w1 things from MS Research described in articles, and never saw or heard of them again despite obvious commercial possibilities.
Maybe if MS spins out MS Research, it'll go to somebody capable of appreciating it.
As for the article subject, who is capable of aggregating a pool of private money for an LBO that big and stupid enough to think MS is worth buying at above fire sale prices? The franchise is taking on water, and I doubt anyone but "drank the Kool-Aid" MS fanboys thinks Vista will save it.
Tech Public Policy stuff