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Discussing a Private Buyout of Microsoft

Posted by ryuzaki0 on from the that's-quite-a-deal dept.

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?"

20 of 315 comments (clear)

  1. Come on! 10X Bigger than the Biggest Ever? by davevt5 · · Score: 5, Informative

    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.

    1. Re:Come on! 10X Bigger than the Biggest Ever? by Red+Flayer · · Score: 5, Funny
      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.
      I'd like to thank the motherf***ing Academy for this got-damn award. I'd also like to thank my motherf***ing wife, my motherf***ing agent, and the motherf***ing director.
      --
      "Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
    2. Re:Come on! 10X Bigger than the Biggest Ever? by sp3d2orbit · · Score: 5, Interesting

      Exactly. Any reasonable person can see that its 100% infeasible for this to ever happen. I would think that a professional journalist for the Financial Times wouldn't be so blind, but I stand corrected. At least it will sell some subscriptions.

      Google stands a better chance of a buyout than Microsoft (I'm not saying this would happen either). Google has a smaller market capitilization (around $120 billion) and has unrealized revenue in the form of "evil". Seriously, an "evil" Google would be much more profitable than an non-evil version because evil is just so lucrative. On the other hand, no has ever accussed Microsoft of not being evil enough -- I doubt there is much room for growth.

    3. Re:Come on! 10X Bigger than the Biggest Ever? by soft_guy · · Score: 4, Funny

      Pretty pictures make great games, but why would I want that for an OS?

      And if you did want such a thing, you would have bought a Mac two years ago.

      --
      Avoid Missing Ball for High Score
  2. SoaP by just_another_sean · · Score: 4, Funny

    I think Snakes on a Plane won't win an Oscar.

    --
    Creationist Textbook Stickers Declared Unconstitutional by CowboyNeal
    1. Re:SoaP by markwalling · · Score: 5, Interesting

      maybe. http://www.imdb.com/title/tt0071494/

      i haven't seen either, but i googled fer de lance for the ballmer comment below, and this hit came up.

      mod me down. i'm on a bad streak anyways.

      --
      ...For the beast had been reborn with its strength renewed, and the followers of Mammon cowered in horror.
  3. Snakes on a Plane will win a best picture Oscar by Anonymous Coward · · Score: 5, Insightful

    If Titanic can get one, anything is possible.

  4. And then... by The+MAZZTer · · Score: 4, Insightful

    "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.

    1. Re:And then... by 99BottlesOfBeerInMyF · · Score: 4, Insightful

      Apple could do that *now*, if they'd sell MacOS for commodity systems.

      You're both wrong. MS's monopoly is not dependent upon the quality of their OS compared to other vendors as much as it is upon lock-in and market position. Apple can't compete outside its vertical monopoly unless they can get OEMs to pre-install. OEMs won't pre-install because MS will kill their entire Windows business with discriminatory pricing and that means they're betting the company on the single, unlikely possibility that all the lock-in strategies MS has built into Windows won't work. At the same time Apple is betting their company on the same since they are then decapitating their hardware business and most of their profits.

      In short, for both Apple and at least two other, major companies to all take such a huge risk is highly unlikely and could very well get whoever made such a risky decision sued to oblivion.

    2. Re:And then... by Coryoth · · Score: 4, Insightful

      Microsoft research is a little wasteful, at least in as much as the amount being spent doesn't compare very well to shipped product improvements. The problem, as far as I can see as a complete outsider, seems less to do with MS Research not doing a lot of interesting work (just have a look at some of the people working there, and some of the research papers they put out), and more to do with the gap between MS Research and shipping products. I have no idea if its a communication thing, a management thing, or what, but the end result is that a lot of great research work seems to struggle to find its way into products. It seems that's the real difference between MS and Google or Apple in terms of innovation. MS has the ideas, but sometimes I wonder if there's anyone in the "product development" side actually listening.

      --
      Craft Beer Programming T-shirts
    3. Re:And then... by dslauson · · Score: 5, Insightful

      Seriously. I can't stand people who call having a big R&D budget wasteful. There are a lot of things I don't like about Microsoft, but spending money on Research and Development isn't one of them. I'd rather see them spending money there than just lining the pockets of investors.

    4. Re:And then... by Vicissidude · · Score: 4, Interesting

      Having worked at Microsoft, mostly because I desperately needed the money rather than actually wanting to work there, I can honestly say they do have some cool stuff used internally which they SHOULD push out to the general public.

      Some of the best are their test automation tools which made it a breeze to do work there. With a push of a single button, I could automagically reinstall Windows on 100 machines simultaneously, have it automatically start different automated tests on each machine, upload the results to a central server, and have those results parsed for any problem that came up in the tests.

      Of course, the public will never see tools anywhere near like that. Even if they could make it so that Windows wouldn't be pirated, their management is so dense and top-heavy that they can't manage their way out of a paper bag. Mini-microsoft is right, they should thin out their management.

  5. private equity not long-term by nicolaiplum · · Score: 5, Insightful

    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"
  6. Wha? by The+Angry+Mick · · Score: 5, Insightful
    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

    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.

  7. Is This a Joke? by susano_otter · · Score: 5, Insightful

    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.

  8. "Wasteful" by TheNumberless · · Score: 5, Interesting
    That $6.6 billion of "wasteful" R&D is one of the few things I like about Microsoft. Long-term research without a guarantee of short-term returns is a good thing, and Microsoft is one of the only companies that does it anymore.

    Think about all the advancements that came out of Bell Labs, before it had a need to be more "efficient".

  9. Forward Into the Past by ewhac · · Score: 4, Insightful
    Don't you remember? Michael Milken went to prison. Your "junk bonds" and leveraged buy-outs were disasterous for American industry and productivity.

    The 1980's are over, and good riddance. Get over it.

    Schwab

    --
    Editor, A1-AAA AmeriCaptions
  10. It IS about maximizing profit. by Tracer_Bullet82 · · Score: 5, Interesting

    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
  11. On Surprises by panaceaa · · Score: 5, Insightful

    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
  12. Re:In My Humble Opinion... by darthtrevino · · Score: 4, Funny

    From my parents basement in Wyoming, I stab at thee..