Microsoft Sizes up Dell

I choose this article because as an IT director these type of stories shape purchasing decisions, and are of interest within the industry.


PC sales in the U.S. have been falling as tablets, smartphones, and other internet enabled devices. Dell Computer has been struggling to keep its position of the second largest manufacturer of PCs in the world and has recently expressed interest is going private. Talks with a large private equity firm, Silver Lake Partners is facilitating talks and searching for buyers. Dell is said to be worth $22 billion dollars. Microsoft has expressed in interest in the firm and reported to possibly invest up to $2 billion which would make it the largest shareholder. Although Microsoft wouldn't run the day-to-day operations there would be strong incentive to use Microsoft software exclusively. If Microsoft can broker this deal it would help in developing their own ecosystem for hardware and software, similar to how Apple integrates its iPhone, iPad, and an array of other devices to work in harmony with ease. A short time ago Microsoft partnered with Nokia to help develop the Windows Phone, they supplied the company with billions of dollars for marketing, research, and development. Cash is not a problem for the software giant as they have attainted a $66 billion stockpile of cash, most of which is in foreign accounts. Microsoft wouldn't have to pay taxes on this money if it brought it back into the U.S. as it would be going to Dell and not its parent company. Microsoft does risk alienating its other customers as it would be seen as playing a favorite. When Google purchased Motorola it took a hit from Samsung, LG, and other companies as it was giving Motorola unfair advantages.

This story advances my learning by illustrating the mechanics of mergers and acquisitions.

http://online.wsj.com/article/SB10001424127887323940004578257803594294788.html?KEYWORDS=microsoft+sizes+up+dell

Firms Keep Stockpiles of Foreign Cash in US

The Wall Street Journal published in interesting article this week on how American Companies are able to house an estimated $1.7 trillion dollars in accounts that won't be taxed. Corporate tax rates in the U.S. are among the highest in the world, so there is significant incentive to finding loopholes that allow businesses to keep their earnings.  Businesses' foreign subsidiaries have bank accounts in the U.S. where the money is held but until the money is moved to the parent company no taxes have to be paid. As long as firms declare capital is permanently invested in foreign investments. The U.S. is the only nation that requires a firm to pay taxes on money is has earned abroad. Many of these large firms have employed lobbyist for corporate tax reform where companies have to pay 35% on their earned income. The lobbyist are pleading for foreign income be allowed back in the U.S. without paying taxes on it, then sending the money back to the shareholders in the form of dividends where it will be taxed. It would also allow businesses to invest in new technologies or hire more people in an ailing economy. EMC, a large network storage firm is holding $5.1 billion dollars from the eyes of the government where it could use that money for reinvestment.

Firms may also wish to permanently store their funds in foreign accounts for reinvestment in new factories or research and development abroad. Businesses cite the 35% tax on earnings as the sole reason for not bringing earnings back into the U.S. economy. As fresh debates on taxing take place businesses are hopeful that an overhaul of the corporate tax code is rewritten to one that makes more sense for businesses.
 
Upon reading this article it gave me some insight to how corporations are able to retain more of their earnings.

http://online.wsj.com/article/SB10001424127887323301104578255663224471212.html

Go Ahead, Hit the Snooze Button

As an MBA student, I sometimes find it difficult to juggle full time school studies and work. Often times I will just forgo an hour to two of sleep to get my tasks complete.


Today the Wall Street Journal ran an article everyone can relate to, not receiving enough sleep. Many find it difficult to get the proper amount of sleep each night for a variety of reason. Whatever the reason it has a direct impact on the productivity of employees. The growing concern is opening eyes at Proctor & Gamble and Goldman Sacs which are investing in sleep hygiene programs designed to help employees sleep. When employees feel fatigued they are much more like to make mistakes which can result in lost productivity or harm to their health.

P&G is working with a sleep expert, Nancy Rothstein about creating a pilot program in one of its factories to see how productivity improves as a result of more sleep. Ms. Rothstein pointed out that people should turn off cell phones, laptops, or any other screen device about one hour before going to bed because "the blue light emitted by the screens interferes with production of the sleep hormone melatonin." However many companies want their employees to be accessible after hours or expect emails to be answered which makes the task challenging.

This article was enlightening, companies recognize employees give up sleep before other activities to get tasks done and it is difficult to perform tasks at optimum level with one is tired.



http://online.wsj.com/article/SB10001424127887323301104578257894191502654.html?KEYWORDS=go+ahead+hit+the+snooze+button

HP's fight to stay on top

HP has suffered major setbacks in the past years, whether it be a rotating door or CEOs or acquisitions gone bad. Former CEO Leo Apotheker put the company in a tailspin when he announced plans to sell off the personal computing division, then made an $11 billion dollar mistake with the purchase of a British software firm, Autonomy, before he was fired. It was almost a perfect storm, Mr. Apotheker started in Nov, 2011 then Jan. 2012 five new board members joined HP. The new board members had two major decisions to make, sell off the $40 billion personal computer business and/or the purchase of the software firm. The board split itself into two groups to deal with these major decisions and purchased Autonomy in Aug. 2012. In this same month HP announced it was looking for a buyer to the PC division of the company which stockholders had a strong negative reaction to, forcing the stock to plummet 20%. Apotheker was fired in Sept. 2012 and HP decided to keep its PC division.

While HP was working on negotiations with the software firm, Autonomy gave very little accounting information to HP citing UK corporate rules, however Autonomy reassured their accounting had been audited for years because it is a public company was in good standing. KPMG, a company that helped HP with its due diligence conversed with a firm that audited Autonomy for sometime mentioned there may be some improper accounting at the firm, however the review of these accounts was found to be baseless. The group from HP did not investigate this any further.

 

In the months following the purchase of the software firm HP kept Mr. Lynch, the CEO of Autonomy to run this division, but Autonomy started missing its sales targets. The current CEO Meg Whitman went to Britain to find out what the problems were. It was only two weeks later and Mr. Lynch was fired. HP heard from executives at Autonomy that because of its improper accounting the value of the firm was over inflated. HP then went to the Justice Department, the SEC, and UK's Fraud office. As of now none of these government departments have make and public announcements.

http://online.wsj.com/article/SB10001424127887323635504578211743521976174.html?KEYWORDS=hp

Boeing 787: The consequence of using the latest technologies

This Friday the Wall Street Journal ran a story, Crisis at Boeing. A company that is a beacon in its industry for providing the most reliable planes is suffering a black eye after its flagship plane, the 787 Dreamliner caught fire. Launched in 2011, it has been plagued by supply chain problems, union strikes, and engineering nightmares. Most recently, two 63 pound batteries used to power critical components of the 787 caught fire after overheating. Lithium ion batteries, the same used in laptops have never been used for this type of application and because the plane's power distribution was centered around using these batteries, simply installing different types is out of the question. Using the latest technologies always presents a fundamental problem unknown repercussions. Aside from the 200,000 hours of test flying the company conducted not much else can be done other that to monitor the performance of its aircraft.

The FAA grounded all 787s until it can complete an investigation and Boeing come up with a fix for the problem. If they're able to engineer a fix quickly only the Brand may suffer some minor damage, but if the fix takes a significant amount of time, the profitability of this plane may be impacted for years to come. There are 50 planes in service as of now but all other airlines across the world have grounded their fleets in wake of this problem. Airlines have placed orders hundreds for these planes that can be subjected to cancellation if Boeing isn't able to rectify the situation quickly which may lead investors to punish Boeing by taking their investments elsewhere.


http://online.wsj.com/article/SB10001424127887324624404578255302123044128.html?KEYWORDS=boeing