Tag: buyout

HPE buys high-performance computing outfit SGI

Final-CUBE-GOLD-CMYKHewlett Packard Enterprise has written a cheque for SGI, a company that makes servers, storage, and software for high-performance computing.

The deal set HPE back $275 million in cash and debt.

SGI was started in 1981 by Jim Clark, who later cofounded Netscape. It has been declining for years and was de-listed from the New York Stock Exchange, and filed for Chapter 11 bankruptcy in 2009. It was bought by Rackable Systems, which later adopted the SGI branding.

In a statement a spokesHPE said that by combining complementary product portfolios and go-to-market approaches the two outfits can strengthen the leading position and financial performance of the combined business.

Basically by combining itself with another legacy Silicon Valley brand, HPE is bolstering its enterprise-focused hardware and software with storied HPC gear.

SGI  brought in $533 million in revenue in its 2016 fiscal year and has 1,100 employees, according to the statement. Customers include the Tagged, Sigma-Aldrich, and the United States Postal Service.

HPE thinks buying SGI will be neutral in terms of its financial impact in the year after the deal is closed, which should happen in the first quarter of HPE’s 2017 fiscal year, and will later be a catalyst for growth.

 

 

Foxconn presses ahead with Sharp buyout

sharp2Although it seemed the deal was on the rocks, Foxconn has completed its due diligence into Sharp, but is seeking guidance from the loss making electronics maker on its latest quarterly performance.

Foxconn appears close to finalising a takeover of Sharp, estimated to worth nearly $6 billion and marking the largest purchase of a Japanese tech firm by a foreign company.

The deal may not happen this week as both outfits were working hard to reach a satisfactory agreement as soon as practically possible and have not set a signing date.

Investors are edge about the deal’s prospects after a last-minute hitch  over potential liabilities at Sharp and the display maker’s shares slid 9 percent on Wednesday.

Foxconn, the world’s largest contract maker of electronic goods and a major supplier to Apple is waiting for auditors and accountants of Sharp to confirm whether the liabilities it has uncovered in its due diligence through the end of 2015 are correct.

It is also seeking guidance from Sharp’s team about its latest quarterly performance, the person said.

In early February, Sharp said it expected an operating profit of$88 million for the year ending in March.

 

Unigroup still wants Micron

Tsinghua-Micron-BuyoutUnigroup chairman Zhao Weiguo has packed his bags and headed to the US to try and save a deal where his company ends up buying Micron.

Micron dismissed an informal $23 billion offer by state-backed investment firm Unigroup in July because it thought that the US regulatory committee that reviews foreign acquisitions of sensitive US companies would block the deal on national security concerns.

The US government hinted that Unigroup’s acquisition would be a problem because Micron chips are used in US weapons systems and China might snoop on them.

Republican US Senator John McCain  had raised national security concerns in July from the proposed deal.

But Unigroup chairman Zhao Weiguo’s visit reflects a belief that there is still hope for what would be the largest foreign deal by a Chinese company and a major step for the nation’s modest but up-and-coming chip industry.

Zhao will also make a stop in Washington to meet with policy experts familiar with the CFIUS approval process, one of the sources said. Zhao is expected to return to Beijing next week.

Chinese bid $23B for Micron

Tsinghua-Micron-BuyoutANALYSIS | Tsinghua Unified Ltd. has made a $23 Billion Dollar bid to acquire Boise, Idaho based Micron Technology Inc. If the deal goes through it will be the single biggest Chinese takeover of a US company – and the last remaining US supplier of DRAM memory.

Tsinghua is willing to bid $21 Dollars a share in a letter of intention presented to Micron according to a report in the Wall Street Journal. “While Micron does not comment on rumors or speculation, we can confirm that we have not received an offer,” spokesman Dan Francisco said.

Low Ball Offer
The offer is 3.9 times Micron’s estimated earnings before interest, taxes, depreciation and amortisation for the year ending August, compared with the median 14 times EBITDA for 81 semiconductor deals over the past five years, according to data compiled by Bloomberg. For transactions valued above $10 billion, the median is 25 times EBITDA.

18th Party Congress Decisions
China, at the nations last “Third Plenum of the 18th Party Congress,” in November 2013 made the decision to widen the push to build the nation’s internal sourcing of semiconductors – the planning phase according to sources ended earlier this year in March. China has not been able to develop semiconductor memory technology fast enough to supply their own internal demands let alone export demands and would have to acquire the technology through acquisitions. A Hong Kong source added “that Tsinghua realized that a “decision of opportunity” had evolved after Micron reported a 39% drop in profit for the third fiscal quarter ended June 4. The subsequent fall of Micron’s stock price into the $17 Dollar range provided the necessary enticement for the $21 Dollar per share offer price”. The same source added, “Tsinghua has not lined up any source financing prior to launching the offer”.

CFIUS Approval Requirement
Any subsequent deal will face close scrutiny by U.S. Government officials in Washington. Unquestionably, a review by the Committee on Foreign Investments in the United States would be convened consisting of a panel of representatives from more than a dozen departments and agencies across the U.S. government.

According to the WSJ, “CFIUS, as the group is known, is charged with determining whether any foreign acquisitions or investments pose a security threat. But the process for determining whether a transaction is subject to CIFIUS review isn’t clear-cut. In many cases, firms involved with a transaction that might raise security concerns are expected to notify the committee, which is chaired by the Treasury Department, and that kicks off a review. However, in some cases, when a transaction isn’t referred to the government by the companies involved, government officials can choose to launch an inquiry of their own.

If CFIUS decides a deal poses a security threat, the transaction can be blocked. In other cases, the prospect of a negative CFIUS ruling has caused companies to drop a transaction on their own.”

Linkages
Tsinghua Unigroup is the investment arm of Tsinghua University, which counts the country’s President Xi Jinping and former President Hu Jintao among its alumni.

Beijing-based Tsinghua Unigroup already has links to major U.S. companies. It acquired a controlling stake in Hewlett-Packard Co.’s China networking equipment unit in May. Intel Corp. announced last year it would buy a 20% stake in Tsinghua Unigroup for $1.5 billion.

Tsinghua Unigroup, which was founded in 1988 by China’s elite Tsinghua University, became China’s largest chip design firm in 2013 after acquiring two of the country’s largest mobile-chip firms, Spreadtrum Communications and RDA Microelectronics.

TechEye Take
It is well known that China has been shopping for memory. The story line was that they were gathering up the likes of ISSI which still requires pending CFIUS approval.

If China wanted to get the U.S. Government’s attention they now have it. CFIUS is very concerned about maintaining necessary national defense assets from foreign control and ownership. The almost humorous part of this situation is that CFIUS is even more opaque than the Communist Party is in Beijing.

Conversations with several analysts indicate that the offered bid is far from being acceptable – it is almost insultingly low as if they planned to actually pay more following negotiations. The analysts all felt that Micron’s fair market value was well above the $21 offer.

There is general agreement that Micron is nearing an announcement of several near term technologies that will materially affect the share price and that the timing of Tsinghua’s offer prior to these announcements is highly suspect in several regards.

HP wants to buy the Stairway to Heaven

After announcing results which proved that her restructuring was not fixing HP’s death spiral, CEO Meg Whitman told the world that she wants to go on a shopping spree, buying up companies.

She said she has begun shopping for companies of up to $1.5 billion after a flurry of outsized purchases in past years.

Whitman told the FT  that the company could also do deals in the $100 million to $300 million range.

She did not specify any particular targets but claimed she had her eye on a number of areas.

Acquisitions will become part of HP’s future, to further some of its strategic initiatives and shore up some of the product holes, she said.

Whitman said that HP did not need a five or six billion dollar acquisition, but there might be a few acquisitions in the $100 million, $300 million range and some up to $1-$1.5 billion that the maker of expensive printer ink might be interested in.

She ruled out the idea of breaking up HP or selling assets.

Whitman said that HP was the only company that can go from devices to infrastructure to services to software and this is a huge point of difference.

HP has been building itself up through a series of buys costing at least $1 billion over the past few years. It bought outsourcing firm EDS in 2008, 3Com in 2009, Palm, 3PAR and security software maker ArcSight in 2010; and big-data analytics firm Autonomy in 2011.

It is probably wishing it did not buy EDS, Palm and Autonomy. Whitman said that after the Autonomy deal HP was being incredibly measured and disciplined about what it buys.

“Acquisitions are going to have to be a part of how we turn this company around”, she said. 

HP stays in slow decline

The troubled maker of expensive printer ink, HP has reported its results, which show that even after its restructuring it is still in a slow death spiral.

Shares in HP dropped eight percent in after-hours trading after the company reported a nine percent decline in Enterprise Group revenue. Enterprise is the company’s second-largest division and a major part of CEO Meg Whitman’s cunning plan to transform HP into a provider of enterprise computing services able to take on IBM and Cisco.

The troubled company has been suffering from a morale numbing restructuring for the past two years, and is still stuck with weak IT spending.

HP recorded revenue of $27.2 billion in the fiscal third quarter, down from $29.7 billion a year earlier. That missed the $27.3 billion in sales that the cocaine nose jobs of Wall Street had expected.

According to analyst outfit TBR, HP managed to improve its profits but failed to halt revenue declines.

HP’s plan has been to control expenses and reallocate savings to fund lucrative, unified product, service and solution initiatives that allow HP to grow profit.

TBR analyst Jack Narcotta said that the cunning plan by Whitman and team of misery have not so far not worked,

“HP has yet to prove it can grow its non-PC and server business to offset staunch declines in those two industries, and a hyper-competitive pricing environment that will persist through 2014 will limit HP’s ability to rebound from its downward growth,” Narcotta wrote.

In the second quarter of 2013, HP Personal Systems Group recorded $7.7 billion in revenue, a year-to-year revenue decline of 11 percent.

Notebook and desktop PC product lines, which are a third of HP’s corporate revenue were hit hardest with PC unit shipments falling 11 percent following a steep 20.1 percent annual decline last year.

Narcotta said that HP is in slow decline even though it makes it cash from lots of different sources. But things are getting slowly worse.

Last year HP’s revenues were $127 billion. In 2012, full year revenue was $120 billion.

TBR expects prolonged lukewarm consumer response to HP’s Windows 8 notebook and tablet PCs and things not to improve on that front. Meanwhile HP will suffer from pricing pressure in an increasingly competitive x86 server marketplace.

Narcotta thinks this will shrink revenues to $114 billion in the current calendar year, and $109 billion in 2014.

The only way forward for HP is to continue to reduce the numbers of works HP hires. So far axing employees has been what Whitman does best, but Narcotta thinks that more people are for the chop.

“HP employs more than 300,000, providing it with ample room to cut costs. It can sustain profitability at levels previously attained with higher revenue and not lower expenses,” he said.

HP’s operating income which is one of the highest in the PC and server industries is vulnerable to decline as server revenues shrink due to intense price competition and aggressively-priced rivals Lenovo, Acer and Asus undercut PC unit shipments.

The company appears to be trying to re-establish momentum consumer PC markets, which are lower margin, while protecting its more lucrative enterprise customer base.

Narcotta praised the addition of Chrome OS and Android devices to its portfolio which he thinks reflects a HP’s awareness of the trends that are influencing the PC industry.

But growth will be limited through the rest of the year as more low-cost, APAC-based firms obstruct HP’s efforts to reclaim market share.

Demand for devices such as the Slate 7 tablet and Pavilion Chromebook will be checked by Asus’ Nexus 7, Samsung Galaxy Tab devices and even Apple’s iPad Mini.

HP’s Chromebook is priced higher than devices from market leader Samsung.

Meanwhile weakened PC demand and increasing pricing pressure as a result of fierce competition from Lenovo continue to erode HP’s market share.

“While HP boasts strong PC margins relative to its Windows peers such as Acer, Asus and Lenovo, HP’s hesitation to tolerate lower profit margins will limit its ability to stem attrition of consumers and enterprise PC users to vendors offering lower-price solutions,” Narcotta wrote.

Revenue of from HP’s industry-standard x86 servers declined 7 per cent while its storeage servers fell by 13 percent.

Traditional tape and hard-disk based storage dropped a marked 37 percent to $500 million as enterprises continue to move away from hardware heavy legacy data centres. 

HP built back doors into its storage products

Expensive printer ink venture HP has been forced to admit it built secret backdoors into its enterprise storage products.

The confession follows reports from Technion. The security problem was found in HP’s StoreOnce systems in June before it emerged there were more backdoors in other HP storage and SAN products.

According to HP: “all HP StoreVirtual Storage systems are equipped with a mechanism that allows HP support to access the underlying operating system if permission and access is provided by the customer”.

In other words, HP claims that the back doors are usable only with permission of the customer.

The announcement, coming as it does on the back of the Prism scandal in the US, is raising eyebrows – with good reason. After all if the NSA knows that HP has backdoors in its server it could use a secret court order to demand access.

An HP cloud executive told TechEye last month that there was already a corporate understanding of these privacy questions before the Prism revelations.

“There’s not much you can do if a government has access to your data and is being provided legally, or illegally, depending on the country you’re in, with access via your service providers,” Steve Dietch, VP, worldwide cloud at HP, said.

The entry points consist of a hidden administrator account with root access to StoreVirtual systems and software, and a separate copy of the LeftHand OS, the software that runs HP’s StoreVirtual and HP P4000 products.

But HP points out that even with root access, the secret admin account does not give support techs or hackers access to data stored on the HP machines.  It could, however, use the information to cripple the storage cluster.

A danger is that a business rival could find one of the backdoors and use it as a kind of corporate sabotage.

The backdoor was easy to find. All you have to do is open an SSH client, key in the IP of an HP D2D unit. Enter in yourself the username HPSupport, and the password which has a SHA1 of 78a7ecf065324604540ad3c41c3bb8fe1d084c50. Say hello to an administrative account you didn’t know existed and your father’s brother was someone called Robert.

Technion attempted to notify HP for weeks with no result before deciding to go public.

The hash hiding the login “is easily brute-forced” and has been done so at least 55 times.

HP has said that it will issue a patch by 17 July.

Michael Dell sees more buyout challenges

Michael Dell and his Silver Lake cash cow pal have been dealt a potential blow in their bid to buyout Dell.

The pair, which looked like they had a clear run after rival investor Blackstone gave up on its
challenge to purchase the company, now face competition from Carl Icahn and Southeastern Asset Management.

The pair,  two of Dell s largest shareholders, have proposed an alternative to the $24.4 billion plan laid out by Michael Dell and now want to take an additional $12 a share in cash or stock, claiming the Silver Lake/Michael Dell buyout significantly undervalued the company.

Dell hasn’t had a good run of things of late, which was one of the reasons Blackstone could have pulled out of the bidding war.

The company saw a 14 percent drop in industry PC sales in the first quarter of 2013 and a forecasted operating income drop from $3.7 billion to $3 billion in the current fiscal year.

Shareholder interference has also meant that the buyout, which was predicted to be settled in February, has continued into this month with no sign of anyone signing on the dotted line.

Crunch time for Michael Dell

Michael Dell could today find out if he gets to keep hold of his company.

The founder, who in February made a bid to take the firm private, has put his fate in the hands of a Dell board special committee, which is expected today to announce how it will proceed with the future of the company.

The decision will be made following Friday’s deadline for rival offers to the founder’s bid.

Michael Dell, along with private equity firm Silver Lake Group, said they’d be willing to buy the company for $13.65 a share, putting the value of the business at $24.4 billion. If he gets his way, Dell will acquire increased control over the company.

There has been some speculation as to where Dell will go next: PC sales in general are floundering but its services and related enterprise businesses are doing rather well. IBM exerted financial foresight when it span off its consumer business to Lenovo, however, HP was slammed for a similar approach when Leo Apotheker briefly held the CEO position. The direction of Dell is up for debate.

However, the BBC reports have said that the bid has been met with offers from private equity group Blackstone, which has proposed between $13.65 and $15 a share, as well as billionaire investor Carl Icahn, who has put in a bid of $15 a share.

The announcement from the special committee of Dell’s board may, however, mean that the matter remains static – with predictions that they may only be able to say which of the offers is reasonably likely to lead to a bid greater than Dell’s.

HP director defends chairman from headhunters

While the knives are out for HP chairman Ray Lane and two fellow board members over their handling of the Autonomy fiasco, it seems that they have found an ally.

Lead independent director Rajiv Gupta called on those shareholders demanding the head of Lane, John Hammergren and Ken Thompson, on a spike to sling their hook.

The calls were sparked by proxy adviser ISS which said that Lane and the two directors should be ousted for their role in the botched acquisition of Autonomy in 2011.

But Gupta said the board has laid a solid foundation for HP’s turnaround and warned that ejecting them would de-stabilise the company.

Losing directors in an abrupt and disorderly manner could undermine efforts to stabilise HP, he claimed.

Gupta is a former CEO of specialty materials maker Rohm & Haas.

He said that HP needs stability and consistency of leadership so that the Board and the management team can devote all of their focus and energy towards executing on the strategic plan.

In other words it does not matter what they did in the past to get into the mess any buck should not stop with them, but be sent to another place where it is quietly forgotten.

Responsibility in corporate life seems to be a phrase long since abandoned apparently what HP needs to sort itself out is a bit of stability with the same clowns who got it into the mess in the first place.

Needless to say Gupta did not mention Autonomy, but instead waved the CV’s of the three as proof that they should be still in a job.

According to Reuters, he highlighted Lane’s global and management experience as former Chief Operating Officer (COO) of software giant Oracle.

After all anyone who worked for Oracle is worth keeping,  they might be able to spot that an SAP clone was not what it claimed to be.

Thompson was formerly chairman and CEO of Wachovia, who was forced out when the outfit suffered heavy losses in its loan portfolios during the subprime mortgage crisis.

Hammergren is chairman and CEO of US drug wholesaler McKesson and was the highest paid CEO in the US in 2011 with total remuneration in excess of $145 million which is a useful skill if you have it.

However while Gupta might be a voice in favour of the status quo, his own head is far from safe.

Glass Lewis, another proxy firm, recommended shareholders vote to remove four directors including the venture capitalist Marc Andreessen and Gupta with the others.