Palm hires advisers, explores options – source
NEW YORK, April 12 (Reuters) – Palm Inc <PALM.O> has hired bankers to explore several options, including a sale of the company, whose smartphones sales have suffered badly against rivals like the iPhone and BlackBerry.
Palm, whose shares jumped 19 percent Monday to $6.16, is working with Goldman Sachs Group Inc <GS.N> and investment banker Frank Quattrone’s Qatalyst Partners, according to a source, who spoke on condition of anonymity because the process has not been made public.
Alternatives include the pursuit of additional capital investment or an attempt to reach a licensing agreement for its WebOS phone operating system software, the source said.
News that Palm had hired Goldman and Qatalyst was first reported by Bloomberg, and followed several days last week when the company’s stock swung wildly on takeover rumors. For the week, Palm shares were up 32 percent [ID:nN09112835].
Speculation about a sale of Palm has swelled, as sales of its Pre and Pixi handsets flag amid concerns that it cannot compete against Research in Motion Ltd’s <RIM.TO> <RIM.TO> BlackBerry, Apple Inc’s <AAPL.O> iPhone or phones powered by Microsoft Corp <MSFT.O> and Google Inc <GOOG.O> software.
But analysts cautioned that Palm’s exploration may not end with a sale, given Chief Executive Jon Rubinstein’s optimism – at least publicly — that the company can be turned around.
Last month, Rubenstein told analysts that “the issues we are facing are far from insurmountable” and that the long-term potential for Palm “remains strong.” He reiterated that stance in an interview last week with Fortune magazine, in which he said Palm’s transformation had merely “hit a speed bump.”
MGM could go it alone if bids disappoint: sources
NEW YORK (Reuters) – Storied Hollywood studio Metro-Goldwyn-Mayer may opt for a stand-alone plan if bids disappoint, and creditors are expected to meet early next week as the company sifts through expected offers, sources said.
The studio, struggling with $3.7 billion of debt, said in November it was exploring a potential sale of the company. It said at the time its other options included operating as a stand-alone entity or forming strategic partnerships.
Second-round bids are due on Friday but it was not immediately clear how many firms submitted offers.
At least three parties, including Time Warner and billionaire Len Blavatnik’s industrial holding company Access Industries, have been expected to put in bids, sources familiar with the process said.
Lions Gate Entertainment has also been expected to bid, sources said, but doubt was cast on that by investor Carl Icahn’s offer on Friday to buy Lions Gate, a move designed to forestall its expected bid for MGM.
However, the value of these offers is likely to be below $1.5 billion — far less than the level MGM was initially expecting, the sources said.
A committee of MGM’s creditors is expected to meet on Tuesday and is likely to assess the company’s situation, one source said.
Icahn offers to buy Lions Gate as MGM bid looms
LOS ANGELES/NEW YORK (Reuters) – Billionaire investor Carl Icahn launched an offer on Friday to buy Lions Gate Entertainment Corp <LGF.N>, a move that would hamper the studio’s expected bid for storied rival Metro-Goldwyn-Mayer Inc <MGMYR.UL>.
Shareholders are unlikely to bite, because Icahn’s offer is low, but Icahn hopes to prevent Lions Gate from overpaying for the struggling studio behind the “James Bond” franchise, analysts say.
Sources have said bids for MGM are due Friday. Shares of Lions Gate were up 0.7 percent at $6.01 on the New York Stock Exchange — 1 cent above Icahn’s offer price.
“He has to realize that with the shareholder ownership (of Lions Gate) so concentrated among a few firms, he’s not going to get to 50 percent. Those guys don’t want to sell at $6,” said Matthew Harrigan, an analyst with Wunderlich Securities.
Icahn’s move “certainly makes it more difficult for Lions Gate to mount a bid,” Harrigan said.
Mark Rachesky, Icahn’s former investment chief, and his MHR Fund Management own 20 percent of Lions Gate as its single largest shareholder. He has not expressed interest in Icahn’s offer but has said he supported Lions Gate’s board.
Lions Gate, which backs the “Saw” franchise and critically acclaimed “Mad Men” TV series, is keen on picking up MGM’s library of mostly older hits to bolster its own. Media companies are pondering similar acquisitions in an effort to build content, as movie audiences migrate in greater numbers to on-demand video and Internet streaming.
Elliot’s Novell buyout approach to making money
When activist hedge fund Elliott Associates made its unsolicited offer for business software maker Novell public on Tuesday, the thinking among analysts and reporters was that Elliott didn’t t really intend to buy the company, but rather force it into running a sale process and eventually finding a bigger tech company — like an HP or a Microsoft — to buy it. That may well be how it plays out, but Elliott spokesman Scott Tagliarino said that the firm is dead serious about its offer.
In fact, Elliott is no stranger to this type of deal, having made similar offers to a handful of small tech companies in the past. Typically, it owns large stakes in the companies it goes after. Last year, it was part of a private equity team that acquired MSC Software for about $360 million.
Elliott also offered to buy Packeteer, another small Nasdaq-listed tech company it owned a large stake in, but it was eventually acquired by Blue Coat Systems in 2008. Another company Elliott went after was Epicor Software, but that bid was unsuccessful.
In 2006, Elliott was part of a group led by tech-focused private equity firm Francisco Partners that took bar-code scanner maker Metrologic private. Two years later, Honeywell acquired Metrologic for $720 million.
Novell seems to be the biggest tech company Elliott has gone after. What does the future hold for the company? Clearly, the market is expecting more, given that shares are trading today at $6.02, up nearly 27 percent. Elliott’s offer is for $5.75 per share, or about $2 billion. Expect a lot of back-and-forth on this one.
Palm-reading to gauge what the future holds
Palm Inc’s stock swooned this morning after the smartphone maker said it expects third-quarter and full-year revenue to be lower than expected because not enough people are buying its phones. In Palm’s exact words:
Revenues for the quarter and full year are being impacted by slower than expected consumer adoption of the company’s products that has resulted in lower than expected order volumes from carriers and the deferral of orders to future periods.
Palm launched the Pre last year amid much fanfare, followed by the Pixi, with many celebrity tech columnists ooh-ing and aah-ing about the operating system, webOS, that could run multiple applications at once and perhaps even become the iPhone killer. But that enthusiasm has clearly not translated into sales, as Palm struggles to loosen Apple’s vice-like grip on the consumer smartphone market — even as newer competitors, such as Motorola’s Droid and Google’s new smartphones, based on its Android operating system, crowd the market.
In recent conversations, people close to Palm have said the company is single-mindedly focused on building scale and developing its “app store,” the virtual shop where users can buy small programs for everything from calorie-counting to weather. To that end, Palm is seeking to build its geographic presence and build partnerships with more wireless phone carriers (Sprint and Verizon currently sell its devices, and AT&T also plans to sell them).
“Palm’s just a little peanut with a good operating system,” said T Rowe Price portfolio manager David Eiswert recently, when he stopped by our offices for a chat. Eiswert, whose fund owns about 12 percent of the company, is bullish on Palm, and calls himself a webOS guy. But while he believes that the recent tie-up with Verizon will help it gain “shelf space” from Research in Motion, which sells the BlackBerry device, Eiswert said that Palm has a long way to go.
“Is Palm’s operating system where it needs to be? No,” Eiswert said, adding that an upcoming version of the software could be a big improvement. “The question for Palm is, can they deliver a compelling product? Can they get distribution?” The hardware, too, he said, was just “OK, not compelling.”
So then, do Palm’s big shareholders, including private equity firm Elevation Partners and funds Fidelity, T Rowe Price and Capital World Investors, have a potential sale of the company in mind? The market clearly believes that the company could be sold any day; rumors about a deal have repeatedly driven the stock up and down in recent months.
Microsoft-Yahoo deal means “Yahoo!” for all: Schneider
A day after EU regulators cleared Microsoft and Yahoo’s search partnership, Yahoo Americas EVP Hilary Schneider went “Yahoo!” when asked what the alliance means for everyone. “The deal means more money,” Schneider said at the PaidContent 2010 conference in New York on Friday.
With the unified search audiences of Yahoo and Bing, Yahoo’s sales team can do its job better by making the consumer experience more relevant as well as improving the return on investment for advertisers and publishers, she said. “The more search queries you have in a single marketplace, the more the (search) algorithms can refine themselves… (bringing) more revenue per search for the publisher.”
That’s good news for members of the Yahoo newspaper consortium, Schneider said. Since these dailies are Yahoo’s search partners, the Microsoft-Yahoo alliance increases their returns and revenue as well. She estimated that in 2009, the partnership brought the newspaper industry $100 million in revenue, and “that’s just the tip of the iceberg.” But she declined to say how much Yahoo makes from the newspaper consortium.
MetroPCS hires advisers on Leap sale -sources
NEW YORK, Feb 11 (Reuters) – MetroPCS Communications Inc <PCS.N> has hired advisers to look into a potential purchase of Leap Wireless International Inc <LEAP.O>, days after its rival began to explore a potential sale, sources familiar with the matter said on Thursday.
MetroPCS, a Dallas-based provider of low-cost mobile phone service, has retained JPMorgan Chase & Co <JPM.N> and Credit Suisse <CSGN.VX>, the sources said.
Leap, which also provides low-cost wireless service, has formed a three-member committee to explore a sale of itself, other sources told Reuters on Feb. 1.
The Leap committee hired Goldman Sachs <GS.N> and Morgan Stanley <MS.N> as advisers to gauge the interest of several potential buyers, including AT&T Inc <T.N> and Verizon Wireless, a joint venture of Verizon Communications <VZ.N> and Vodafone <VOD.L>, other sources told Reuters on Feb. 1.
T-Mobile USA, the No. 4 U.S. mobile service, also could be interested in Leap, two of the sources said on Thursday. T-Mobile’s parent Deutsche Telekom <DTEGn.DE> is mulling options for T-Mobile, including a sale, initial public offering or spin-off, other sources have previously said.
Leap has not begun a formal sale process or set a deadline for submission of initial offers, one source said.
The sources spoke on condition of anonymity because Leap has not publicly announced that it is exploring a sale.
Telecoms M&A = Wireless M&A, not much else
Many analysts and bankers who focus on the U.S. telecommunications sector believe that consolidation among wireless carriers is inevitable. There are too many wireless phone service providers already, and the top two — AT&T and Verizon — own the lion’s share of the market, which makes it increasingly tougher for smaller players to survive. Sprint acquired Virgin Mobile USA last year, Leap Wireless has hired advisers to explore a potential sale of itself (most likely to MetroPCS) and Deutsche Telekom is figuring out whether to sell or spin off its T-Mobile unit, which is the fourth largest U.S. wireless operator.
Bankers, telecom company executives and private equity types echoed these views at a Feb 9 event on deal-making in telecoms and media in 2010, organized by the Argyle Executive Forum. Yes, the U.S. wireless sector will likely see some deals born of necessity, but that doesn’t spell the return of M&A to the telecommunications sector as a whole, panelists said at the half-day event in New York. Rural telecoms companies could also see more consolidation, some of the panelists said, as these providers merge to cut costs and keep growing even as they lose traditional phone users.
A combination of Leap Wireless and MetroPCS makes “obvious sense,” said Prem Parameswaran, who heads Deutsche Bank’s telecoms group for the Americas. Because Leap and MetroPCS operate in certain markets that cable operators provide their services in, a cable company like Comcast could potentially be interested too, he suggested. However, Parameswaran didn’t get around to explaining how this might sit with Comcast’s current investment in emerging provider Clearwire.
Parameswaran said that the financing markets have opened up again after the credit crisis, and “a byproduct of financing is M&A,” which means more deal-making in the offing, although he questioned how sustainable current financing levels are.
Julie Richardson, a managing director at Providence Equity Partners, said: “2010 won’t be a banner year for M&A. There is still a lot of uncertainty out there.” But she did list the wireless sector as likely to be the most active. “It is going to be a really tough business in voice mobile telephony… those who don’t have differentiated positions will have to ask themselves, ‘How do I make myself stronger?’.”
Even in such a competitive market, Davis Terry, a former UBS banker and founding partner of Tap Advisors, saw little possibility of M&A activity. “The four big guys (AT&T, Verizon, Sprint and T-Mobile)… (it’s) unclear whether any of them could do anything with each other… the smaller guys, with the exception of Leap and Metro, (there are) not many of them left,” he said. “In the U.S., it’s going to be lean for a while, a few deals here and there but nothing like the old days.”
International markets offer some hope, at least for private equity. Recently, a group led by Quadrangle Capital, the buyout firm co-founded by Steven Rattner, invested $300 million in India’s Tower Vision, a manager of wireless towers. In general, mobile infrastructure investments in developing countries is an attractive area for private equity, the panelists said.
Tech turns to security for next wave of dealmaking
NEW YORK, Feb 3 (Reuters) – As tech spending stages a comeback, industry giants like Hewlett-Packard Co <HPQ.N> and IBM <IBM.N> are expected to scour the security software market for acquisitions that will boost their share of corporate IT budgets.
Security software is a critical component of the “stack” of applications used by companies to store and manage networks and data, making software makers from McAfee Inc <MFE.N> to upstart Sourcefire Inc <FIRE.O> attractive targets.
“There is a clear trend toward convergence of technologies in the data center, and security is front and center,” said Daniel Ives, an analyst at FBR Capital Markets.
He and other analysts said security spending by companies held up well during the recession even as overall IT budgets shrank — a mark of resilience that only adds to the lure of security companies. “Security really has the attention of CIOs (chief information officers),” Ives said in an interview.
Faced with slower growth in traditional businesses, major tech companies have stepped aggressively into new markets and on each others’ toes, particularly in the data center.
Analysts and bankers said the next round of dealmaking will be driven by the desire of companies such as HP, International Business Machines Corp and EMC Corp <EMC.N> to package software, services and hardware for corporate clients.
With a market value of $6 billion and a business focused purely on security software, McAfee is a prime takeover target, they added.
AOL posts profit, but subscribers dwindle
NEW YORK (Reuters) – AOL Inc beat Wall Street’s profit and revenue expectations for the fourth quarter, but its top officers said that revenue from subscriptions and online search-related advertising would fall further in coming months.
AOL, which became an independent company once again in December after Time Warner Inc spun it off, is trying to reshape itself as an online content and advertising company under chief executive Tim Armstrong, a former Google Inc executive.
AOL executives said on Wednesday the company will exit some international markets as it invests in the creation and distribution of blogs, videos, photos and other online programing. It is also building its related Web search and advertising business.
The company said it is likely to sell assets outside its focus, even as it buys up businesses in its chosen markets.
Last month’s $36.5-million acquisition of StudioNow Inc, a video production company, is an example of the types of deals in which AOL is interested, Armstrong said on an earnings call.
NET INCOME, REVENUE
Net income for AOL’s fourth quarter was $1.4 million, or a penny a share, compared with a loss of $1.9 billion, or $18.52 a share, a year ago when Time Warner wrote down its value through a $2.2 billion charge.
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