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Data Centers Crucial To Lehman Sale
miller60 writes "What assets retain value in the midst of a financial panic? Data centers. When assets of bankrupt Lehman Brothers were sold to Barclays Tuesday for $1.75 billion, Lehman's data centers and headquarters accounted for $1.5 billion of the value in the deal. That echoes the JPMorgan-Bear Stearns fire sale, in which Bear's two data centers and HQ represented much of the sale price. Amidst financial turmoil, Wall Street's high-tech data centers become the crown jewels for buyers of distressed assets."
Hi! I'm a programmer for Lehman brothers and I'm looking for work. I was the designer of Assett Manager 1.0, a powerful tool that allowed our brokers to get values of our contracts....it's not a bad program, but it had a couple of bugs in it that I would like to have fixed.
This is my sig.
I guess this is one 'disaster' Lehman Bros couldn't failover?
You know what else retains value in the midst of a financial panic? Skyscrapers.
Anytime you have physical assets, you have value. Especially if those physical assets are in continuing demand. (Which data centers are in particular, because the Technology sector is doing quite well right now.)
The only difference is that companies rarely own their own spaces anymore. They sold them off to realty companies long ago, because they didn't want to be in the real-estate business. This sort of sell/lease arrangement is almost certain to become common with data centers in the future. CoLos are already the standard of the industry, and are going to take over increasing amounts of large corporate business in the future.
Javascript + Nintendo DSi = DSiCade
No. it's all about avoiding the expense of building one yourself. The actual data in those centers may or may not be worthwhile to the buying organisation, but the floor space and ready-to-roll IT structure most certainly is.
Posted anon since I was involved in one of these things recently.
Is it any surprise that the most valuable assets in a company that is going down the tubes would be its physical assets, real estate, etc? The summary itself says data centers AND HEADQUARTERS. What a shock that "datacenterknowledge.com" is telling us how valuable and important data centers are. I'm almost tempted to say this is spam, but I can't be bothered to go to the website to learn more about it.
Posted anon since I was involved in one of these things recently.
At least, it would have been if I'd had a brain.
OK, since my name's out I'll finish the job. The operations are most likely valuable, as are the apps running in there. However, come merger and consolidation time merely having those centres around is a tremendous advantage. These things cost serious amounts of cash, and the electronic transaction volumes are growing all the time - yes, even now. So the raw existence of a pre-equipped building is the thing, not necessarily the data files within it.
Cheers,
Ian
And let's not forget the multi-gigawatt generators, the fail-over system, the trained staff, the fire suppression systems, the network infrastructure, the secured access, etc., etc., etc.
The actual servers in the racks are the LEAST valuable part of a good data center. They're also the highest depreciating.
Javascript + Nintendo DSi = DSiCade
Real estate: billions
Data centers: couple million
Information is timeless and valuable.
I just can't agree with this. When something is timeless that means that it does not age. But information does age. Virtually all information ages; all information relating to human affairs certainly does. The aging of information can be measured not merely in whether it is forgotten, or known, but in how it is considered. Remember: we can still watch the original series of Knight Rider on re-run channels. This does not mean it is 'timeless'. It would be too polite to call it anachronistic.
Even for example the information we have about the collapse of Lehman.
Two weeks ago that information would have been worth billions.
Now it is common knowledge, and the details must be investigated, after the fact.
In twenty years it will be of historical interest, taught in economics classes.
In a thousand years it may have been forgotten.
The very fact that we have already seen different states of this information over two weeks means that it is not timeless.
People are born with compassion and empathy circuits in our brain for a reason, and those that don't have them or can't use them are seriously handicapped.
you had me at #!
Also, a difference between 'dumb' and 'uneducated about financial matters.' Is there a class on ARMS in high school people can take? I don't think those are covered in home ec.
People can't be experts on every field. Add to that fact that finances bring up survival fears in most people, and fear shuts down the brain, and you will see that many people may be smart in many areas, but uneducated about finance.
So people have to trust the experts they hire to do right by them. When those experts say, "Hey, you can own a house now and save that money you were putting into rent. Don't read the fine print, it's boring and it doesn't matter," people trust those experts. And they were misled.
Finally, I know you probably agree with me but I have to point it out: dumb people do not DESERVE to be taken advantage of by smart people. Social Darwinism is an inherently fascist, evil, and anti-social philosophy that destroys societies and people's lives. Don't subscribe to it. Society works because of trust, and social Darwinism destroys that trust.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
First of all, these are unprecedented times in global financial markets. Once in 100 years is putting it mildly.
Second, a data center and a building are the only assets that can be valued with the shotgun marriages the Administration, Treasury, and Fed are making right **now.** By now, I mean no sleep, no one leaves until the deal is closed NOW.
BofA got a sweetheart deal with Countrywide, they are getting another sweetheart deal with whatever brokerage they acquire. The same holds true of JPMorgan Chase and Co.
The Fed has literally run out of money with the AIG nationalization and has asked the treasury to print more dollars NOW. http://www.ft.com/cms/s/0/271257f2-83f1-11dd-bf00-000077b07658.html
Once again, the losses are being socialized while the titans of financial executive management just walk away.
You would be wise to re-balance your asset pool to reflect coming inflation. And any pension holders out there should do your best to liquidate your pension today, that is, if your pension isn't underfunded already or if that is even possible.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
I have to point it out: dumb people do not DESERVE to be taken advantage of by smart people. Social Darwinism is an inherently fascist, evil, and anti-social philosophy that destroys societies and people's lives. Don't subscribe to it. Society works because of trust, and social Darwinism destroys that trust.
Quoted because it deserved to be posted twice.
No sig for the moment.
Almost! It's actually about the location of the data center, i.e, close to the exchange. A fast, low latency connection to the exchange gives you a crucial edge over the competition. It means when things change you can get your trades in before your competition does. This is ever more important in the up-and-coming automated trading systems.
No, you're mixing two separate things up. If you don't understand ARMs that doesn't make you dumb. But if you then buy one and you don't understand them, that definitely makes you dumb. What the hell?! A mortgage is a huge commitment. You're going to be paying it back for a long, long time. If somebody commits to a huge thing, turns around and says "Oops! I guess I can't deal with this after all. It was scary and my brain shut down" then I don't see why they are deserving of much sympathy.
No, they were stupid. The risks involved with large debts are enormous. This is way different than being misled by a second hand car salesman and buying a SUV with poor mileage. This is a vast sum of money. If there's one time in your life you read the boring fine print and think about it really hard, it's when taking out a gigantic loan.
Now this I do agree with. However trust can cross a line into blindness. Somebody who does whatever they're told without considering the consequences eventually crosses the line from being a poor innocent misled person into something else - a liability to society.
I am an investment banker and can say with confidence that the datacenters were an afterthought in this deal. Important? Certainly. The most important? a joke. Bob Diamond and Barclays have wanted to extend its US investment banking business for several years, and found an opportunity to grab one at a fire sale. But the true value of the deal is enormously larger than listed, as it involves taking on assets estimated (with confidence, I'm sure)at $72 billion and liabilities of $68 billion. I'd recommend reading http://www.ft.com/cms/s/0/5c9dcc26-83f1-11dd-bf00-000077b07658.html?nclick_check=1 to inform yourselves about the transaction.
As to the Bear Stearns datacenters comprising the bulk of the value - that is about as wrong as you can get. The breakup fee (the fee paid to JP Morgan if the deal did not go through) was the building. JPM could have walked from the deal and gotten the builing, so to argue that the deal was for the building/datacenter is absurd. Let's not forget that the Federal Reserve alone lent $29 billion for the transaction. Datacenters are valuable, but not worth that amount of money.
Here's the real problem. Everything the banks have lent money to people to buy are kinda valueless because they are obsolete. Technology keeps advancing such that there is no such thing as collateral any more and thus all the banks are worthless...
I was under the impression that houses were the main cause of the problem- and with the possible exception of some ludicrously techie piles built by multi-billionaires, they aren't really "tech" items and they certainly don't go obsolete within four or five years.
Even though cars (which I'd guess are probably second in terms of loan-spending) only last a few years, it's generally not because the tech goes obsolete, it's because they wear out and/or fall apart. (I'm sure that my parents first car (built in the late 1970s) would still be going today with some engine adjustments for unleaded petrol, except that its rusting to pieces by 1986 precludes this possibility!)
Granted, I'm sure that people take out more (and less justifiable) loans to spend on tech crap than they should- along with home decorating and expensive holidays- but I doubt it's the driving force behind the current economic mess. In fact, moderately cutting-edge tech is *dirt cheap* compared to what it used to be twenty- and even in some areas ten- years ago. People can fill their new homes with techie crap which will generally still be worth a small fraction of what they paid for the house itself. Yeah, the house will last longer and can be considered an "investment" in the way that electronics technology almost never can. But the value and losses involved when that "investment" goes wrong dwarfs the cost of most peoples' boxes of flashy boys' toys.
"Slashdot - News and Chat Sites Deviant". (Click "homepage" link above for details).
-Any taken-advantage-of borrower requires an even-more-taken-advantage-of lender. The borrower gets to walk away, at least having a gained some time in a home they shouldn't have moved into, while the lender suffers a huge loss. (Of course what actually happened here was the immediate lender, a broker, pocketed a huge gain and dumped it on other investors.)
I love how you gloss over this statement in parenthesis as if it's a minor point. The situation that occurred is that predatory lenders issued ARM mortgages to people that they knew would be unable to pay for them. Keep in mind, the issuing bank has a full financial report of the borrower's income, debts, and credit history. These bankers then offered deals such as "you can have a fixed rate mortgage, but you'll need a $10k down payment, but if you get an ARM, we can do it without a down payment!" I live in Tennessee, and by and far this state is not as hard hit as some others. One of the reasons is that we have protective lending laws. In this state, you cannot get a mortgage without a 10% (IIRC) down payment. That may seem unfair to those who cannot afford the down payment, but it's for their own good; if they can't afford the 10% down, odds are they cannot afford the mortgage, and a bank should be prevented from signing them into a contract they cannot afford to pay off.
Picking up the spoils of a catastrophe they were instrumental in causing. What a bunch of dicks.
They weren't instrumental in causing it. They just chose not to rescue them out of fear of the damage that lehman's debt could cause barclays. And they had good reason. There was no way to evaluate the risk level or value of lehman's toxic debt. Their actions were just good business.
Disconnect your television. Do your own research. Draw your own conclusions. They're probably lying. Don't be a sheep.
For people who are still struggling to understand what's going on with the whole financial crisis, here's a great primer I was directed to: Subprime Primer.
It's a very simplified explanation of what's happened. From what I understand, it all comes down to everyone believing that real-estate value wouldn't stop rising.
This space up for sale.
From what I understand, it all comes down to everyone believing that real-estate value wouldn't stop rising.
That's a pretty good summation for parts of the country (e.g. the Washington D.C. area, probably areas like California too). Essentially, in W.D.C, people said "Well, the gov't is here, and so jobs are guaranteed. So housing will always go up." The problem is when it goes beyond where the base market can buy.
There's also another issue though - there were a lot of banks, etc. that issued bad mortgages outright. For example - the high school graduate students that moved into my parent's neighborhood - no jobs, but they got a mortgage, and eventually ended up in foreclosure. Of course, the city of Columbus, OH had some issues too politically as they tried to "clean up" downtown by moving the "poor" out into new housing (helping to get the qualified for loans they shouldn't have had) elsewhere in the state - e.g. by my parents, and other places in the Greater Columbus, OH area. For them, the politics work out good - their constituents are happy, and those people are now "someone else's problem" (literally), so it is hard to hold them accountable (their district was improved while someone else's was deteriorated).
Another good example - my wife and I were looking at buying a house in 2006. In getting pre-qualified, we looked at Washington Mutual and several others. Because we did not have a large-enough down-payment available (we had closing costs) at that time, WaMu was going to give us a double loan so we didn't have to have PMI (mortgage insurance). The first loan would be the mortgage itself, and the second was to become the down payment. We didn't really like it; but they were going to let us do that. We ended up not buying that year, and have since moved and bought a house through BB&T, with a better loan - only one loan too.
All-in-all, it was not just one issue that caused the problem.
Truth is like the sun. You can shut it out for a time, but it ain't goin' away. - Elvis Presley (source: imdb.com)