JimPinto.com - Connections for Growth & Success
No. 9 : July 24, 2000
- BAAN & ICS - Companies in trouble
- Pointers: Don't Solve Problems !
- More & More Memory - EMC
- eMarkets - The Big-guys Move in
- eFeedback - Power Politics
What happens when a company gets into trouble and cannot recover?
Well, the natural answer is that it gets bought out or sold off or merged
into another entity. Something they have is valuable to someone else,
a competitor perhaps - products, technology, market-share, people,
location. But sometimes, the rot goes much deeper - and there is very
little left to save.
Let's review two going-on-as-we-e-speak examples:
The enterprise software company based in the Netherlands was once
worth $ 10b. Invensys recently made an offer worth $ 700m (about
6% of the peak value). The Invensys bid still remains a question, while
shareholders squabble over the remains. The Invensys offer is
conditional on 95% of Baan's shares being tendered in support.
There is some speculation that some institutional shareholders might
reject the offer to reap tax write-offs. If Baan goes bankrupt, one major
holder could get about $131m in tax benefits on its investment, while
selling its stake to Invensys would yield only about $40m. Baan's board
and management support the offer, with warnings that if the takeover
offer is unsuccessful, it will reduce the company's viability, fuel a
management shakeout, and put survival in question. The Invensys
deadline is July 25 (tomorrow, as this is written) and the end-result is
still anyone's guess.
Take a look at the latest Invensys-Baan story
ICS Group (UK)
An interesting example of things gone sour in industrial automation is
ICS Group (in the UK). They bought a bunch of dogs-MAX Control Systems
from Leeds & Northrup which itself had been sold off piecemeal to Honeywell
and others) and also Triplex and Transmitton. At about $110 million in sales
a couple of years ago, its recent market-cap of $17 million (down from about
$100 million) reflected serious losses and sales decline. To bail them out of
default on bank-loans, a cash-bid of just $2.5m was made by a low-ball
venture group in late July. The bid has apparently been accepted by the
board of directors, though rumors abound that rival bids are brewing -
probably wishful thinking on the part of disgruntled shareholders.
The problem with this type of company is that, although it has some good
pieces and management, nobody wants to buy it, because nobody wants
the wants the headaches. The only ones willing to buy a pig in the poke
are vulture-capitalists who will carve up the carcass and sell it off piecemeal.
Never play with pigs...
Some time ago, I asked a venture-capitalist friend why he never got involved
with turnarounds. His reply: “Never play with a pig. You both get dirty, and the pig likes it….”
Pointers : Don't Solve Problems!
Peter Drucker preaches: "Don't solve problems!"
This sounds strange, because most of us think that management involves
solving problems. The key point Drucker is making is this : For growth and
success, your energy should be focused on opportunities!
Problems drain enthusiasm, energy, resources and time! Those are needed
to manage and maximize growth and opportunities. Problems suck up the
very things you need to stimulate success.
Suggestion: Outsource your problems, give them away! Find managers or
agencies that will solve the problem on a temporary basis, and will disappear
when it is done.
Quote : When you're in a hole, the first thing to do is STOP digging!
Read Peter Drucker's latest book :
"Management Challenges for the 21st Century"
Click for my brief review and links to Amazon.com to get your copy
Hey, I just got a new computer, 1 gigaHz, 128Mb RAM, 50 gigabytes
hard-drive. I was happily moving everything from my 2-year-old 200Mhz
computer, when I suddenly realized - how do I backup that 50 gigabyte disk?
Ouch #@! Sure, a backup tape (which I don't have). Or, another computer
with a 100 gigabyte disk? This is where one realizes that probably the only
choice is off-line-storage, via the Internet (my cable modem provides
In its July 2000 issue, Electronic Business has profiled how in the course
of a decade EMC has been transformed from a floundering company on the
brink of bankruptcy to “an 800-pound gorilla in the storage business".
Read the Electronic Business story
B2B Echanges - the big-guys move in
The Internet is described as the great equalizer because it gives small
businesses the chance to compete with big brick-and-mortar,
brand-name companies. But even in the Internet economy, fat cats
are finding ways to get fatter - by collaborating in e-marketplaces.
The e-marketplace model was originally meant to be a neutral ground
on the Net where companies could streamline supply chains or find new
business partners. But this year, leading companies in a wide range of
industries have been rushing to form their own e-marketplaces.
And with that comes the fear that a significant group of buyers or
suppliers could exert unfair market power over smaller players.
Read this interesting eWeek article
Regarding my item on Power de-regulation politics, old friend Joe Shull,
VP Marketing at Mt. Sierra College, Monrovia, CA. e-comments :
"Your piece on the doubling electricity rates in the San Diego area is
interesting. It is tempting to send dinosaur utility poobahs a copy of
Theodore Levitt's "Marketing Myopia" originally published in the Harvard
Business Review in the 60's (updated in the 80's to include a discussion of
the utility industry). While these guys fiddle away, defining their
business as distributing electricity over an antiquated and unsightly system
of wires, chemical companies, such as Dow and Union Carbide and their own
parent, Sempra Energy, are developing fuel cell technology. On the other
hand, perhaps they should be given credit for paving the economic path for
the introduction of the cell as an alternative power source. It may even be
part of their strategic plan. Have faith -- a better, cleaner world is coming!"
Dave Hillquist, Plant Engineer at Inland Paperboard & Packaging, Inc.
Ontario, CA. e-says :
"As the prospect of deregulation approached reality, it was apparent that
those who addressed the subject publicly were almost universally ignorant
of its essential details. Years of contact with local utilities have led me to
think of them as bureaucratic dinosaurs, heedlessly spending vast sums of
money without regard for results. This reveals reasons why deregulation
is likely to fail: first, because the utilities themselves are central players in
deregulation, and second, because the vast database of information on
which deregulation is founded comes largely from this source of
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