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Although the Industry Standard is no more, they are still doing some
stories on the tech world. Some good stories here and on the web
page.
JW
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THE INDUSTRY STANDARD'S
I N T E L L I G E N C E R
The Week's News and Insights
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| http://www.thestandard.com |
Friday, September 07, 2001
TOP STORIES:
* DOJ Backs Away From Microsoft Breakup
* Desperate Times, Desperate Mergers: H-P Marries Compaq
* Eric Savitz: More of the Same, Only Worse
NEWS BRIEFS:
* The week's news headlines
=-=-=-=-=-=-=-=-=-=-=-NOTICE TO SUBSCRIBERS=-=-=-=-=-=-=-=-=-=-=-=-=-
Dear Industry Standard newsletter subscribers,
As many of you know, things have changed a bit at the Standard since
you received your last newsletter. The Industry Standard magazine
has suspended publication, and parent company Standard Media
International has filed for Chapter 11 bankruptcy protection.
However, a team of Standard journalists continues to publish orginal
and insightful articles on TheStandard.com Web site.
We are also continuing two of our most popular e-mail newsletters,
Intelligencer and Media Grok. If you were a subscriber to any other
Standard newsletter, you have automatically been added to the
Intelligencer list. This newsletter gives readers a concise and
penetrating look into the week's events in technology and business.
If you wish not to receive this newsletter, or would prefer to
receive Media Grok instead or in addition, go to the following URL:
http://thestandard.com/newsletters
RELATED LINKS:
Standard Media Files Chapter 11
http://www.thestandard.com/article/0,1902,28820,00.html
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=/
TOP STORIES
~~~~~~~~~~~
More of the Same, Only Worse
The problem with Hewlett-Compaqard is that two bricks don't make a
life raft.
By Eric J. Savitz
Now that was a fun week, wasn't it? The stock market sank like a
stone. Unemployment spiked. Intel said things were, well, bad, but
no worse than they told us a few weeks ago. The Justice Department
said it would stop trying to break up Microsoft. And not least,
there was Hewlett-Packard's surprise bid to buy Compaq.
Put it all together, and you get increased evidence of the same old
problems: The economy is sagging, particularly in the tech sector,
and there is little reason to think a recovery is around the corner.
The problems that plagued the HP deal nicely illustrate the depths
to which we've sunk. Sinking, in fact, is what shares of both
Hewlett-Packard and Compaq did last week. Which is not surprising:
As a wise man once said, tying two bricks together doesn't get you
a life raft.
HP and Compaq have both been suffering from the general malaise
afflicting IT spending, as well as a vicious price war in the PC
sector. Indeed, Compaq in recent months took steps to reduce its
reliance on the increasingly commoditized PC business - by beefing
up its service arm, where margins are higher. Almost everyone in
the Valley, meanwhile, had an idea or two on how to fix
Hewlett-Packard. For months, there has been speculation about how
much longer CEO Carly Fiorina could survive. Wall Street and the
media offered plenty of advice, which often included the suggestion
that HP exit the cutthroat PC business entirely.
That, of course, is not what they did.
No, instead of folding their hand at the high-stakes, low-payout
PC poker table, HP has doubled down. Wall Street clearly thinks
this is a silly idea, thus the big selloff in shares of both
companies. While there no doubt are cost-savings to be wrung from
the combination of these two lumbering giants, it will take more
than the slashing of back-office and manufacturing jobs to win the
hearts of investors. They want the whole to be more than the sum
of its parts - and it is far from clear that is the case.
Hardware mergers can be tough to pull off. Consider, for instance,
the 1998 acquisition of Digital Equipment, by none other than
Compaq. That deal was supposed to diversify Compaq's product lines
into minicomputers and Internet content - you may remember that DEC
used to own AltaVista - and it was also supposed to give Compaq
some needed strength in the service sector.
"Together, we are a much stronger competitor than we were as
separate companies," Digital Chairman Robert Palmer said in a
conference call when the deal was announced three years ago.
Reality check: Since then, Compaq's stock has lost two-thirds of
its value.
Can this deal escape a similar fate? It's not going to be easy in
the current environment. Clearly, the tech downturn has yet to run
its course. Once upon a time, the conventional wisdom held that a
rebound would come in the third or fourth quarter; but few people
still believe that.
Fundamentals continue to erode in semiconductors, telecommunications
hardware, cell phones, PCs and various other parts of the tech
spectrum. Meanwhile, the IPO market is moribund, there are few
corporate stock buybacks and almost no cash deals; insiders are not
rushing to buy their own shares.
In short, the smart money - corporate buyers who could be doing
deals for strategic reasons - is staying on the sidelines. Which
helps explain why investors see the creation of Hewlett-Compaqard,
or whatever they'll call it, less as two companies seizing a golden
opportunity, than a desperate attempt to tie two bricks together in
hopes that they'll float.
DOJ Backs Away From Microsoft Breakup
By Miguel Helft
The Department of Justice and the software dreadnought now have a
similar goal: quick resolution of the antitrust case. Reversing a
Clinton-era objective, the U.S. Justice Department said it would
not seek a breakup of Microsoft in its long-standing antitrust
battle with the software giant. The DOJ also said it would not
pursue a key software-tying claim, which alleges that Microsoft
illegally bundled its Internet Explorer browser software with its
Windows operating system, when proceedings in the case resume later
this month before U.S. District Judge Colleen Kollar-Kotelly.
http://www.thestandard.com/article/0,1902,28906,00.html
HP, Compaq Keep Lobbying as Shares Drop
By Dow Jones
Wall Street continues to express deep skepticism about the proposed
merger and to push the stocks down. But Hewlett Packard also
continued its acquisition spree by announcing it is shelling out
$629 million in stock for the remaining shares outstanding of
printing-systems company Indigo NV that it doesn't already own. The
deal is intended to push H-P into the commercial-printing market,
an arena from which it has largely been absent.
http://thestandard.com/article/0,1902,28913,00.html
NEWS BRIEFS
~~~~~~~~~~~
TIME TO BUY YAHOO? Lehman's Holly Becker thinks so. Yahoo shares
gained ground in a sagging tech market Thursday after Lehman
Brothers analyst Holly Becker said the 40 percent slide in the
company's stock price in over the last month had created a
"compelling buying opportunity." Unfortunately, the gains didn't
hold; Yahoo shares dropped Friday as the Nasdaq slipped marginally.
Becker said the weakness in the stock in recent weeks reflects fears
the company might not hit its third-quarter estimates due to the
weak advertising environment. But she maintains that the dot-com
meltdown and the continuing economic weakness are already reflected
in expectations for the quarter.
HANCOCK EXITS EXODUS Ellen Hancock, who oversaw Exodus' growth
into a Web-hosting leader, left as the company faces a stagnant
economy and $3 billion in debt. Hancock, a Silicon Valley veteran
with more than 35 years in the technology industry, resigned as
chairman and CEO of the company she built into the largest Web
hosting concern before the bursting of the Internet bubble sent it
into a tailspin.
INTEL SEES 3Q REVENUE LOWER The chip giant said it expects
third-quarter revenue, as well as its gross profit margin, to come
in below the midpoint of its previously announced range. Back in
July, Intel had projected third-quarter revenue of $6.2 billion to
$6.8 billion, and a gross profit margin of 47% plus or minus "a
couple of points." Intel maintained those estimates Thursday, but
added that it expects revenue "slightly below the midpoint" of the
range. The chip maker is expected to post third-quarter revenue of
$6.41 billion, according to a Thomson Financial/First Call survey
of 11 analysts.
SWING AND A MISS FOR MOTOTOLA Motorola Inc., continuing to
flounder amid weak demand in the telecommunications market, warned
that its third quarter will miss expectations and said it plans to
cut an additional 2,000 jobs. The beleaguered communications
equipment and semiconductor maker said Thursday it expects sales to
be flat with the $7.52 billion posted in the second quarter, after
previously predicting 5% quarter-to-quarter sales growth. Analysts
were expecting sales of $7.89 billion for the third quarter.
Motorola also said it expects to post a third-quarter loss of
between five cents and eight cents a share. Analysts surveyed by
Thomson Financial/First Call predicted a loss of five cents a share.
STAFF
~~~~~
Edited by Darren McDermott (dmcdermott2@xxxxxxxxxxxxxxx).
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