Let's Make a Deal

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sevenbrooks 12/5/2012 | 2:01:44 AM

re: Let's Make a Deal
Insert favorite startup here has merged with profit challenged company (pretty much everybody but Cisco). How is this a good idea for anybody other than Ciena (overpaying for junk) or Zhone (the telecom world's garbagemen)?

seven

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Scott Raynovich 12/5/2012 | 2:01:41 AM

re: Let's Make a Deal sevenbrooks:

It works when its just cash being bought with stock and the cash gets put into stronger hands Better than going out of business.

Also, I thought my writing was pretty clear, I'm saying somebody should take Ciena's cash off their hands, not that they should keep buying.

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sevenbrooks 12/5/2012 | 2:01:38 AM

re: Let's Make a Deal
So, people should buy startups because its a cheap way to raise cash? The businesses are worth nada so nuke em and take the cash?

seven

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PO 12/5/2012 | 2:01:02 AM

re: Let's Make a Deal It works when its just cash being bought with stock and the cash gets put into stronger hands Better than going out of business.

Better for whom? For the shareholders whose cash is being 'bought'? If they wanted to get into the other business, they would have invested in the other business.

It is a shame that execs treat their bosses -- the owners -- with such contempt. They should return the cash to the investors, and if the business they're running doesn't cut it then shut the doors and send the people off to something that has a chance, even if that's dentistry.

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hyperunner 12/5/2012 | 2:00:48 AM

re: Let's Make a Deal PO said:

Better for whom? For the shareholders whose cash is being 'bought'? If they wanted to get into the other business, they would have invested in the other business.

How many of these deals have been pre-IPO compared with post-IPO? In the pre-IPO cases it's only the VCs who lose out. Since they are supposed to be "experts", then it's their own stupid fault :-)

Personally I was appalled by the Tellium deal. I assume the executives at Tellium were simply bought off (with promises to repay their loans, and then some) for their collusion in this deal. Since it's a Mad World, it's fitting that their motto for the deal was "What, Me Worry?".

Then we have the crop of Debt for Equity deals. The biggest one I know about is Marconi. What say did shareholders have in that deal? Zip. And how much are the executives getting in bonuses? I know it's more than $30M.

Good grief, why would you take the risk of running drugs or stealing cars when you can make some REAL money perfectly legally?

hR.

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allidia 12/5/2012 | 2:00:33 AM

re: Let's Make a Deal division of JDSU seems more and more likely. JDSU seems poised to leave the fiber optic industry and focus on other commercial markets that aren't eroding. Plus JDSU is becoming a fixture in China anyways.

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Tony Li 12/5/2012 | 2:00:13 AM

re: Let's Make a Deal etter for whom? For the shareholders whose cash is being 'bought'? If they wanted to get into the other business, they would have invested in the other business.

It is a shame that execs treat their bosses -- the owners -- with such contempt. They should return the cash to the investors, and if the business they're running doesn't cut it then shut the doors and send the people off to something that has a chance, even if that's dentistry.

----------------

You're assuming that the execs make the decision. In fact, the board must approve it, and the folks on the board are the major stockholders, normally the VCs. So at the very least the deal should be better for the VCs and execs. Of course, if the company is headed for a wall, the VCs would much rather have their funds re-invested than returned. They need their 10 bagger, and only getting 50% back isn't much different to them than 0%. Might as well take the chance...

Tony

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sevenbrooks 12/5/2012 | 2:00:02 AM

re: Let's Make a Deal
Since Tellium was a public company its acquisition required a shareholder vote. Now why would you vote for it?

Well, if you were invested in Tellium you were at the roullette table. At least getting bought by Zhone allows you to stay at the table. Cashing out at a loss (probably a huge one) was just not in the cards for Tellium investors.

From a Marconi standpoint, recall that this management team is NOT the management team that got them in trouble. These guys got bonuses for specific financial milestones on the way to recovery. Sorry, but that seems like the right reason to pay bonuses.

seven

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lastmile 12/5/2012 | 1:59:58 AM

re: Let's Make a Deal 'They have single handedly killed the components market, by selling below material cost, let alone zero gross margin.'

With 1.6 B in hard cash they will continue to do that for another 5 year's till the competition drops dead.

But that's JMHO

LM

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whyiswhy 12/5/2012 | 1:59:58 AM

re: Let's Make a Deal JDSU is run by a bunch of monkeys that 1) have no experience in optics, 2) didn't make it into management in the bubble. They have single handedly killed the components market, by selling below material cost, let alone zero gross margin. Go for the top line, screww the bottom line. Bookeeping tricks have kept their internal balloon of writeoffs hidden. Selling the near-to-burst balloon to Huawei would be par for the course for those losers. And it couldn't happen to a nicer bunch of ex-military dictators.

But that's JMHO

-Why

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