“Bear Stearns Cos., a powerhouse on Wall Street for nearly nine decades, ceased to exist Thursday in a meeting that lasted about 11 minutes.
“Gathered in a crowded second-floor auditorium of Bear's Madison Avenue headquarters, several hundred stockholders voted to approve their company's sale to J.P. Morgan Chase & Co. for $1.4 billion. In doing so, they sealed a deal made in haste two months ago amid one of the most terrifying bank runs in history.
“The meeting was led by Chairman James Cayne, 74 years old, who ran Bear Stearns as chief executive for 14 years before stepping down in January. Mr. Cayne, a tough-talking former broker, has operated largely below the radar since the leadership transition.
“As the votes were counted, Mr. Cayne made his first public comments in months, expressing for the first time his own sadness at the shocking turn of events. ‘I personally apologize,’ he said, according to attendees, fiddling with the microphone as he spoke. ‘Words can't describe the feelings that I feel.’
“Mr. Cayne said Bear ran into ‘a hurricane’ and summed up his feelings on the firm's demise as ‘remorse’ as opposed to ‘anger.’
“Moments later, the deal was approved -- by holders of 84% of Bear Stearns's stock. No questions were asked.
“In early 2007, before the rout, Bear's market capitalization was $25 billion.”
(“The Fall of Bear Stearns: Bear's Final Moment: An Apology And No Lack of Ire.” Kate Kelly, Mike Spector and Randall Smith. Wall Street Journal: May 30, 2008. pg. C.1)
EVEN IN THE FACE OF hurricane winds that we cannot control, and that are well beyond our power to cope, own up, take responsibility, feel bad, apologize.
The terror is in the dodge, not in facing the storm.
"Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
"It'll soon shake your windows
And rattle your walls..."
(Dylan)
Hurricane Terror
It's Time!
“Chief Executive Officer Howard Stringer, after grappling with Sony Corp.'s unwieldy corporate culture for the past three years, has told managers that it is time to be more aggressive.
“At a closed-door management conference Wednesday, Mr. Stringer said the company should act more quickly in order to take back its leadership position in the electronics industry, say people who attended the meeting.
“‘I'm asking you to get mad,’ Mr. Stringer said in one of his most strongly worded speeches, according to those people. He also asked them to be more ‘energetic,’ ‘bold’ and ‘imaginative’ in running their businesses...
“The meeting is an annual event in Tokyo attended by more than 1,000 Sony managers from around the world, and is meant to set the direction for the coming year. This year was particularly important because it came after the company had completed a turnaround plan, and before it sets a growth strategy for the next three years. Sony says it will unveil this plan in June.
“When Mr. Stringer took over the helm of the Japanese electronics maker in June 2005, Sony's core electronics unit was losing money, there was infighting among executives, and different product groups were reluctant to work together…
“To fix this, Mr. Stringer over the past several years has used the slogan ‘Sony United’ to encourage employees to work more closely together. He has also made the company leaner, by closing factories, shedding jobs and getting rid of unprofitable businesses...
“At the management meeting, Mr. Stringer implored the audience to ‘not be complacent,’ said the people who attended the meeting. At times, he employed his trademark humor, showing a slide of a big fork sticking in the middle of a road. He told them that Sony was ‘at a fork in the road,’ in which its various units needed to step up their combined efforts further to come up with new products.
“He also encouraged employees to be more innovative, and suggested energy, medicine and the environment as examples of areas where Sony might play a bigger role.”
(“Sony CEO Urges Managers 'to Get Mad'; Conference Told That Company Needs to Be More Innovative, Bold.” Yukari Iwatani Kane. Wall Street Journal: May 23, 2008. pg. B.8)
VISION, HUMOR, SLOGANS, anger, metaphors, catch phrases, meetings, and cutbacks (but fortunately no paintball, ropes courses, or trust walks)...
All that remains is execution.
I Don't Know
“Twelve hours after agreeing to sell Bear Stearns Cos. for $2 a share, Alan Schwartz wearily made his way to the company gym for a much-needed workout.
“It was 6:45 a.m., March 17, and Bear Stearns's chief executive had slept little since hammering out the ugly details of his fire-sale deal with J.P. Morgan Chase & Co.'s chief executive had slept little since hammering out the ugly details of his fire-sale deal with
“When Mr. Schwartz, already dressed in his business suit, trudged into the locker room, Alan Mintz, still in his sweaty gym clothes, made a beeline for the boss.
“‘How could this happen to 14,000 employees?’ demanded the 46-year-old senior trader, thrusting his face uncomfortably close to Mr. Schwartz's. ‘Look in my eyes, and tell me how this happened!’
“Two and a half months later, Mr. Schwartz still isn't quite sure. To Mr. Mintz and others, he has blamed a market tsunami he didn't see coming. He told a Senate committee last month: ‘I just simply have not been able to come up with anything, even with the benefit of hindsight, that would have made a difference.’”
(“The Fall of Bear Stearns: Lost Opportunities Haunt Final Days of Bear Stearns --- Executives Bickered Over Raising Cash, Cutting Mortgages.” Kate Kelly. The Wall Street Journal: May 27, 2008. pg. A.1)
IF IGNORANCE IS INDEED the beginning of wisdom, are you ready to start learning?
"Where have all the young men gone?
Gone for soldiers every one.
When will they ever learn?
When will they ever learn?"
Once Again and Again
“They're called ‘tweeners,’ one- to two-year-old Web 2.0 companies with some name recognition and maybe a bit of revenue. They managed to raise one round of funding, but it's running out fast -- no real revenues, plus a bum economy in general. Yikes. So they're swarming around VCs on both coasts, begging for more. ‘We see dozens that fit that profile every week,’ says Todd Dagres, a VC with Boston's Spark Capital. ‘They're going to have a hard time raising more money.’
“Pageflakes is a tweener. Founded in late 2005, the site lets users personalize a browser's home page with widgets. It raised an estimated $4 million from Balderton Capital but never caught fire. Former Yahoo exec Dan Cohen came on as CEO and in January went looking for financing. No luck. In the absence of a big user base or a clear path to revenue, VCs scoffed. ‘The environment is much tougher than it was six months ago,’ says Cohen. ‘The bar for the second round is much higher.’
“Cohen sold Pageflakes to LiveUniverse and says he eked out a small return. But such exits are fading fast, leaving Web 2.0 companies with fewer and fewer options. No IPO window. M&A shriveling. What's left? ‘There are hundreds of cute little application companies out there that have no real hope for revenue,’ says Sharon Wienbar, a VC with Scale Venture Partners in Silicon Valley. ‘They're about to go out of business.’”
(“Cash Runs Dry for Web 2.0” Michael V. Copeland. Fortune: May 26, 2008. pg. 40)
GET TOUGH, ENVIRONMENT; GET TOUGH! Here is creative destruction at its best, destroying me-too-itis throughout the land -- hurrah!
We are glad that you cuties give it a try, but we are just as glad to see rigor rearing its fearsome head.
Let's hear it for the invisible hand's push toward the highest and best use of resources!
From "It Ain't Me Babe" Dylan, to Hendrix
“This decade has already seen burst bubbles in tech stocks, homes and credit. Now, it seems, another segment has fallen victim to irrational exuberance: the U.S. auto market.
“Like investors who sent dot-com stocks or house prices to unsustainable levels, auto manufacturers in the U.S. have pushed their sales volumes to new peaks over the past decade. They invited customers to buy cars at employee prices, extended no-interest loans for up to six years and sold unprecedented numbers of vehicles to rental fleets -- all strategies that some analysts say drove U.S. auto sales to artificial highs.
“Through most of the 1990s, auto makers sold a little over 15 million cars and light trucks a year in the U.S. market. That changed in the late 1990s: With gasoline prices low and many U.S. consumers feeling flush from the tech-stock boom, auto sales surged. Sales peaked at 17.4 million in 2000 and remained near 17 million for another five years. Heads of General Motors Corp. and Toyota said the U.S. was entering a golden age of the automobile. In 2003, Toyota's head of North American sales predicted the industry would soon be selling 20 million vehicles a year.
“They were wrong. Sales started falling in 2006 and this year are expected to be right back where they were in the 1990s, at just over 15 million...
“The slump in auto sales is already complicating the turnaround efforts of the Big Three -- GM, Ford Motor Co. and Chrysler LLC -- and pinching the earnings of foreign auto makers including Toyota Motor Corp. and Nissan Motor Co.
“A bubble occurs when market participants push prices of assets -- stocks, homes, tulips -- higher than their intrinsic values would appear to merit. While the auto-industry doesn't fit the classic formula of an asset bubble, a similar degree of mania was apparently at work: Makers believed they could sell vehicles in much greater numbers than the market would ultimately bear.
“GM spokesman Tony Cervone said the company didn't overestimate demand and blamed the current sales slump on the U.S. economy's slowdown. Earlier in the decade, he said, trends in household income and spending power all pointed toward steady growth.”
(“Rear View: Car Makers' Boom Years Now Look Like a Bubble.” Neal E. Boudette and Norihiko Shirouzu. Wall Street Journal: May 20, 2008. pg. A.1)
BLAME SOMEBODY ELSE. You did all you could. Exogenous factors are not within your control, so how could you be responsible for your actions? Everything you wanted to look at pointed the way toward doing what you wanted to do, and what you wanted to believe.
So what else could we expect? Don't we yearn for the narcotic that success is intrinsic while struggles are extrinsic?
From mania to depression, Hendrix said it best:
“Manic depression is a frustrating mess.”
Re-writing The Rules
“Late last year Mark Zuckerberg, the 24-year-old CEO of social-networking phenomenon Facebook, got onstage before a Madison Avenue crowd and declared that he was leading a once-in-a-century media revolution. Long story short: The revolution hasn't panned out. Six months later, advertisers could be forgiven for mistaking Facebook for a smaller MySpace or a much larger Friendster (remember them?). And far from changing media as we know it, the virtual home of Superpokes, Funwalls, and other such time wasters is showing cracks in its foundation…
“Facebook's biggest concern has to be the blasé attitude that media buyers have toward the company. Microsoft paid $240 million for 1.6% of Facebook, giving the startup an eye-popping valuation of $15 billion; according to media reports, as of early May the Redmond crew has been exploring ways to buy Facebook outright. But Microsoft's ardor obscures the fact that Facebook generated only $145 million in revenue last year, according to eMarketer, much of it from an ad deal with Microsoft. MySpace, by contrast, had $510 million in revenue. Facebook ads can sell for as little as 15 cents per 1,000 impressions (CPM) -- compared with the estimated $13 on Yahoo properties. And even at those bargain prices, marketers are reluctant to spend money on a venue where users aren't paying attention. Jeff Ratner, a managing partner at WPP's MindShare Interaction, whose clients include Motorola and Unilever, spends less on Facebook than he did six months ago... ‘Facebook doesn't look that different,’ Ratner says. ‘It just becomes another buy, and there are cheaper, more efficient ways to reach eyes.’”
(“Finding Cracks in Facebook.” Jessi Hempel. Fortune: May 26, 2008. pg. 37)
WE ARE DIFFERENT. The (old) rules don't apply to us. We are re-defining the rules of the game. We are re-defining the industry. Old calculations don't apply to us. We are introducing a new calculus.
It will be different this time.
This Time It Will Be Different
“When Hewlett-Packard announced its $13.9 billion acquisition of tech services giant Electronic Data Systems on May 13, pundits heralded it as a bold move by HP Chief Executive Mark Hurd. In one stroke, it seemed, he had put HP on a more equal footing with market leader IBM in the fiercely competitive tech services business...
“Yet a closer look at the deal raises questions about Hurd's strategy and choice of dance partner. EDS… was slow to respond in the early 2000s to the threat of nimble Indian rivals offering services at sharply lower prices. Revenues stagnated, and EDS racked up huge losses. Eventually, the company began hiring more overseas, and bought control of an Indian company, MphasiS. But even now MphasiS operates independently, with its own sales force and customer base.
“So this deal won't change the game when it comes to one of the most important factors in tech services. The top-tier services companies need large, low-cost, global work forces, and their operations need to be tightly integrated so employees with diverse skills collaborate smoothly.
“IBM, Accenture, and Indian companies such as Infosys Technologies lead in this effort, while EDS and HP have lagged...
“Sanford C. Bernstein analyst Toni Sacconaghi questioned Hurd's choice of EDS. ‘You could have bought a smaller, faster-growing company with the offshore characteristics.’ … Hurd rejected suggestions that Indian companies such as Cognizant Technology Solutions or Satyam Computer Services might have been a better match. ‘We thought this made sense,’ Hurd said.
“For Hurd, the logic is simple. He prizes EDS's giant outsourcing business because it has a large number of customers producing annuity-style revenues. There isn't much overlap between the companies. And he says there will be considerable cost savings...
“EDS… [CEO Ronald] Rittenmeyer says, ‘We'll look at integrating all of these things over time, and we'll do it efficiently and effectively.’
“Hurd, who excels at cost cutting, had a choice between buying a big racehorse seemingly past its prime or a young colt with lots of potential. He bought the mature horse. Now we'll see if he can whip EDS back into shape.”
(“Can HP Whip EDS into Shape? The much-heralded purchase of Electronic Data Systems by Hewlett-Packard has its critics. But CEO Hurd insists it is the right choice.” Steve Hamm. businessweek.com: May 15, 2008)
PHOENIX SYNERGIES -- the dysfunctional are beguiled by a hobbling partner's promises of wedded bliss.
Microsoft & Yahoo, Blockbuster & Circuit City, Sears & K-Mart, Delta & Northwest, WB & UPN, Chrysler & Daimler... Imagine people getting married like this!
But we just have to do something, don't we? The clock is ticking...
Added Value -- Turn, Turn, Turn
“The nation's typical worker now retires at age 62, up from 60 a decade ago, according to the Employee Benefit Research Institute. About 60% of men between 60 and 64 are in the labor force, and 20% of men over 65, up from 55% and 17%, respectively, a decade ago, says the Bureau of Labor Statistics. The pattern is similar for women.
“But will employers want more older workers?
“‘There's a lot of happy talk around that we're going to have slowing in the rate of growth in young workers and, therefore, employers are going to want to hire older workers just at the time that older workers are going to want to work,’ says Boston College economist Alicia Munnell... ‘We think it's much less clear than that.’
“The ‘happy talk’ case relies on the demographic fact that the ranks of prime-age workers will shrink as the huge baby boom generation ages and on the logic that employers will have no alternative to older workers...
“At the Blue Cross Blue Shield Association in Chicago, 40% of 1,000 mainly professional employees are 50 or older and 25% are 55 or older. ‘We want to keep these people as long as we can. They know the business, the values, the customs. And recruitment is becoming more difficult,’ says William Colbourne, senior vice president for human resources...
“For all the heart-warming pictures such efforts produce, they appear to be exceptions. Buyouts of graying colleagues and early-retirement parties are common in many workplaces. ‘Relatively few companies thus far have fully positioned themselves for the coming work-force demographic shifts,’ consulting firm Towers Perrin said in a 2005 report...
“While employers are ‘reasonably comfortable’ with the older workers they currently employ, "they are not keen on retaining even half who want to stay on to age 67 or 69," the Boston researchers concluded. They predict ‘a messy and uncomfortable mismatch with large numbers of older workers wanting to stay on while employers prefer that they do not.’ …
“The image of companies loyally retaining scarce, seasoned workers is at odds with reality. Among male workers between 58 and 62, only 44% still work for the outfit that employed them at 50, down from 70% two decades ago. And even if labor shortages emerge, they argue, many employers will hire younger immigrants, shift work overseas or deploy labor-saving technology (like the cashier-less grocery-store checkout) instead of hiring older workers.”
(“Older Staffers Get Uneasy Embrace.” David Wessel. Wall Street Journal: May 15, 2008. A.2)
MOVE FORWARD today. Create tomorrow. Don't look back.
Employees and employers, we become what we choose to see.
Corny as it may sound, very few can build on the past, look toward the future, and thrive in the here and now.
"To every thing there is a season,
and a time to every purpose
under Heaven."
Interesting Times
“At around $125 a barrel, crude oil has more than doubled in price since the end of 2006. How is it possible that the vast majority of government forecasters, stock analysts, economists, traders, and journalists who follow the oil market failed to foresee this? Moreover, how can it be that even today, the bulls and bears on oil are extremely far apart, disagreeing not only on the oil outlook but even the present situation?
“The answer is simple. You can't predict what oil prices are going to do even in the short-to-medium term unless you have a good handle on the forces of supply and demand. And that requires thorough and reliable data -- which don't exist...
“The scarcity of good global data is a key reason why it's impossible to know for sure whether the next ‘super-spike’ in oil in the coming three or four years will be up to $200 or more or down to $80 or less. Even though the statistics aren't exact, they're all anyone has to go on, so they still have an enormous impact…
“What makes good information so important in the oil market is that both the supply and the demand for oil are extremely inflexible, especially in the short term. That means even a small, unanticipated shortfall in output… or a bigger-than-expected rise in consumption can send prices through the roof. On the other hand, prices can plummet if demand growth drops because of an economic slowdown or production jumps because some delayed project finally comes on line.
“One indication of uncertainty is the extreme range of bets being made in the oil options market. On May 13, bulls were willing to pay around $1.40 per barrel for a ‘call’ option that will pay off if oil goes over $200 a barrel by next February. Bears, meanwhile, were paying about the same amount for a ‘put’ option that will be in the money if oil goes below $84 by then…
“In other words, there's a big slab of unknown built into the price of oil. Lots of people will confidently predict where prices are headed next, but most of them, including the bulls, have been wrong more than once. Truth is, the world is almost as starved for information as it is thirsty for oil.”
(“Oil's Murky Math; Where are we headed: Up to $200 a barrel? Down to $80? With little good data on supply or demand, oil's next price move is anyone's guess.” Peter Coy. businessweek.com. April 14, 2008)
ONE'S UNCERTAINTY is another's opportunity.
Ambiguity appears to hinge upon where we stand.
1917, 1929, 1941, 1963, 1968, 1973, 1981, 1987, 2001...
Vision
“Circuit City is finally throwing in the towel. Confronted with weak sales, impatient shareholders, and a U.S. consumer pummeled by recession, the electronics chain capitulated on May 9 and retained Goldman Sachs to help negotiate a deal. The same day, Circuit City Stores agreed to allow three board nominees from activist shareholder Mark Wattles to stand for elections.
“The moves almost certainly presage a sale of the chain, likely to Blockbuster, where Carl Icahn has stepped up and agreed to finance a Circuit City acquisition. The billionaire -- Blockbuster's largest shareholder -- has bought into a ‘game-changing’ scheme announced last month in which the troubled electronics retailer would be combined with the troubled movie retailer to create a new national chain selling consumer hardware and software.
“Wall Street is dubious, and no other buyers have emerged wanting Circuit City…
“Last year, several electronics stores were decimated, CompUSA shuttered all its stores before being bought by a restructuring firm in December, and Tweeter Home Entertainment, Harvey Electronics, and Rex Stores all filed for bankruptcy. ‘This is the kind of mess the electronics business is in -- it's like buying a sinking Titanic,’ says Howard Davidowitz, chairman of Davidowitz & Associates...
“Blockbuster has its own litany of troubles. Blockbuster has been forced to reckon with a shift from on-site movie rentals to new venues, with increased competition from video rental models like the one from Netflix and downloads from Apple. ‘The question is will the combination of two crippled companies end up crippling both even further,’ says Burt Flickinger III, managing director of Strategic Resource Group…
“Almost all of Wall Street, and many in the tech community, are puzzled by [Blockbuster CEO Jim] Keyes' pursuit of Circuit City. Keyes envisions a new digital retail company that leverages complementary products and higher-quality, better-focused store sites.
“‘Combined, our companies would create a game-changing $18 billion global retail enterprise that is uniquely positioned to capitalize on the growing consumer appetite for content-enabled consumer devices,’ Keyes said…
“He also anticipates cross-merchandising opportunities, and the opportunity to sell electronics with access to personalized preloaded movies and digital subscriptions. ‘That is what I mean when I say game-changing entertainment retail concept,’ Keyes said. Yet Wall Street smells the potential for a very expensive flop.”
(“Circuit City Gives Up the Fight; The electronics chain puts out the "For Sale" sign, hiring Goldman Sachs to assist on a deal, most likely with Blockbuster.” Pallavi Gogoi. businessweek.com. May 12, 2008)
CHANGING THE RULES of the game, built upon imagined revenue synergies, disparate cultures and the anticipation of consumer shifts is only for the most robust and well-adjusted of firms.
Maybe they should call the Sears / K-Mart team...
"You say you got a real solution
Well, you know
We'd all love to see the plan.
"You ask me for a contribution
Well, you know
We're doing what we can."
Change Masters Twist and Shout
“It's not every day a titan of industry eats humble pie -- at least not in public. But Steve Ballmer, Microsoft's CEO, did just that this week, climbing down from his $45 billion bid to acquire Yahoo!.
“When Microsoft announced the deal in February, Ballmer hailed it as ‘the next major milestone in our companywide transformation to embrace online services, search, and advertising.’ ...
“So why did Ballmer have a change of heart about the deal? …
“If Ballmer thought he would be greeted as a ‘liberator’ in acquiring Yahoo, he was as misguided as the Bush Administration was about Iraq. Jerry Yang, CEO of Yahoo, wasn't just coy in response; he openly repudiated the offer, and his board backed him up...
“Ballmer prophesied that joining forces would yield a bounty of synergies: bringing two of the four highest-traffic Web portals under one roof; more plentiful engineering talent; enhancements in online services; and, of course, the elimination of redundant operations and staff... But then reality reared its ugly head. Antitrust considerations made it unlikely the combined company could unite the world's two top e-mail services... Ditto for instant messaging: The merged entity would control as much as 90% of that market.
“These issues paled in comparison with the lack of cultural fit between the two players. Many Yahoo employees regarded Microsoft as the enemy. And… Yang signaled he was prepared to damage the company rather than yield to the so-called evil empire. This included striking a preliminary deal with Google to deliver ads for Yahoo's search results, essentially installing an archrival's Trojan horse in the Yahoo boardroom.
“When Yahoo rebuffed Microsoft's opening bid, Ballmer huffed and puffed. He openly scorned the ‘deteriorating’ performance of Yahoo's business, only to see his prey perform above expectations in the first quarter. He threatened to ‘go hostile,’ as they say, but Yahoo's board yawned over his menacing imprecations. Yet none of this compared with the scorn he encountered among his own Microsofties, who saw the offer as yet another chapter in the continuing saga of overpriced acquisitions, sluggish innovation [Zune anyone?], and ineffective online strategies….
“So the grand gesture to secure Microsoft's status… as a major force on the Web… quickly became bogged down and unpopular, even among his own brethren...
“Leave aside that the largest acquisition Microsoft had ever made was last year's purchase of aQuantive for $6 billion... Consider that $45 billion would be enough to buy both Ford and General Motors with nearly $20 billion to spare. More pertinently, it would be enough for Microsoft to clear the market if it went shopping for other major Net assets.
“For the same money, Ballmer could roll up AOL at, say, $25 billion; either Facebook or MySpace at $15 billion; and ValueClick at $3 billion, again with a few billion left over.”
(“Why Ballmer Bailed on Yahoo; According to consultant Jeffrey F. Rayport, there are five reasons Microsoft's chief gave up on his bid for Yahoo, including its cost and its not making sense.” Jeffrey F. Rayport. businessweek.com. May 12, 2008)
WHEN YOU'RE NOT SURE what to do, why not shake things up a bit?
"You say you want a revolution
Well, you know
We all want to change the world.
"You tell me that it's evolution
Well, you know... "
