Bill Gates the activist?

August 1, 2008

gates1.jpgTech titan Bill Gates appears to be making the transition from head of the biggest software company in the world to a man comfortable taking out the trash. His investment company, BGI, which owns 2.3 percent of Waste Management, is telling the company its unsolicited $6.2 billion bid for Republic Services is ill-advised and that it should walk away. While his investment vehicles have stakes in dozens of companies, they have kept low profiles over the years and Gates has not traditionally been known as an activist investor. But BGI didn’t mince words in its letter to Waste Management’s CEO and board, disclosed on Thursday. “We can only assume your ill-timed and poorly conceived pursuit of Republic is designed to disrupt what you perceive as a competitive threat to your position in the market,” wrote BGI. “An acquisition of Republic will most certainly burden the company with excessive debt, distract your management, result in significant regulatory burdens, and thereby reduce shareholder value,” it said.

Yahoo‘s annual investor meeting today will be a magnet for discontent over the company’s failure to reach a merger deal with Microsoft and complaints about the company’s past performance. But any real action to reshape Yahoo’s course is likely to take place only after the meeting, once activist investor Carl Icahn and two outside nominees join an expanded 11-member board as part of a deal with the company to avoid a proxy battle. Far from a showdown over control of Yahoo, the annual meeting has the makings of a noisy media circus where the issue of whether Yahoo should remain independent or not competes with older protests over executive pay and human rights policies. For while the exercise of shareholder democracy will allow investors small and large to vent over what might have been, the outraged speeches are likely to have only symbolic effects since Icahn withdrew his overt challenge to Yahoo’s board. “I am sure that Yahoo management will take a verbal beating,” Jim Friedland, an analyst Cowen & Co, said. “I just don’t think that the annual meeting is where the debate over Yahoo strategy is going to take place.” In a blog post on Thursday, Icahn downplayed the importance of the event, saying he plans to skip the meeting himself.

Spanish solar power company Fotowatio said that General Electric‘s Energy Financial Services unit had bought 32 percent of the company for 150 million euros ($233.5 million). Grupo Corporativo Landon — a holding company for the Gallardo family, which owns Barcelona-based pharmaceutical group Almirall — also bought a 17.5 percent stake for 75 million euros, the company added in a statement. Fotowatio said that together with its new partners, it had earmarked 2.5 billion euros to invest by 2012 in photovoltaic and thermosolar plants in Spain, Italy, the United States, and other countries. Currently, the company has four installations, with a total installed capacity of 60 megawatts, which it plans to expand to 800 MW by 2012. Photovoltaic (PV) power has boomed in recent years in Spain due to generous government subsidies, but these will be slashed next year.

Other deals of the day:

* French power giant EDF walked away from a 12 billion pound ($23.8 billion) deal to buy British Energy early on Friday in a dramatic U-turn that could delay Britain’s plans to relaunch its nuclear program.

* Kingfisher, Europe’s biggest home improvements retailer, has agreed to sell its Castorama Italy business to French DIY firm Groupe Adeo for 560 million euros ($871.9 million) in cash.

* Spanish bank Banco Sabadell said its fully owned BIDSA unit has agreed to acquire 4.9 percent of broadcaster Antena 3 from Grupo Rayet for about 85 million euros ($132.3 million).

* French bank BNP Paribas will buy a stake in Anglo-Dutch private bank Insinger de Beaufort, and merge it with its Dutch and UK operations, creating a 10-billion-euro ($15.6 billion) asset manager.

* German investment group Arques Industries has agreed to buy an 80.2 percent stake in Siemens‘ cordless phone unit SHC, closing the chapter on Siemens’ telecoms business.

* Germany’s BMW agreed to sell 72.9 percent of its IT consultancy Cirquent to NTT Data of Japan for an undisclosed price, the luxury carmaker said.

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Reuters: “We can only assume your ill-timed and poorly conceived pursuit of Republic is designed to disrupt what you perceive as a competitive threat to your position in the market,” wrote BGI. “An acquisition of Republic will most certainly burden the company with excessive debt, distract your management, result in significant regulatory burdens, and thereby reduce shareholder value,” it said.

It’s a good thing there is a “?” after the title of this web log article, Mr. & Mrs. Reader.

Mr. Gates must be bored with his $billions and is apparently looking for some other way (besides throwing around the weight of his UNTAXED philanthropic trusts) to make himself relevant in a recession-plagued U.S. economy where even FNMA/FHLMC is being bailed out by the federal government. Mr. Gates has apparently found that he fits the Andrew Carnegie (of library fame) mold very well, i.e., tax the little guy, but don’t tax my $billion dollar trusts.

Of course, Mr. Carnegie intended that the privileged class be taxed…not the middle class and working class of 1913…when the first personal & corporate income tax-related revenue act was passed by congress and signed into law by the president (subsequent to ratification of the 16th Amendment to the Constitution).

What BGI is said by Reuters to have stated about the “competitive threat to (Waste Management’s) position in the market…” is precisely what Mr. Gates managed to avoid during his time at the helm of Microsoft (and likewise Mr. Carnegie in the realm of steel manufacturing where low working class pay was the traditional norm of the time). If Mr. Carnegie’s steel workers had been able to hold stock in U.S. Steel, perhaps a few of them would have become privileged class $multi-millionaires, as did several of Mr. Gates’ employees.

In other words, Mr. Gates cornered the market on PC graphical user interface operating systems (GUI OS), and then through various aggressive anti-competitive means kept the Windows OS monopoly from having to face any real “competitive threat to (Mr. Gates’) position in the market…”.

Beginning with Windows 3.0, Mr. Gates’ bureaucratic behemoth (on its huge Redmond, Washington campus outside Seattle) repeatedly came out with bug-plagued Windows GUI OS whose tens of millions upon tens of millions of unlucky domestic & foreign purchasers were persuaded had less bugs with each succeeding version. On the contrary, however, each version of Mr. Gates’ GUI OS was more prone to bugs than the last. I know this from personal experience, having been one of the tens of millions. Microsoft leaves it to its consumers to find the bugs and report them (with no feedback, of course).

Without open GUI OS competition, consumers were left holding the bag (and still are). Major PC manufacturers such as Dell (and most others) have deals with Mr. Gates to sell their hardware only with Mr. Gates’ GUI OS and other software preloaded. No other GUI OS manufacturer has a ghost of a chance of competing with Microsoft under the circumstances.

Subsequently, Mr. Gates became the wealthiest member of the super privileged class club of under taxed $billionaires…in part due to 1) his MONOPOLISTIC practices and in part due to 2) the UNREALISTICALLY LOW top marginal rate on personal income, corporate profits and capital gains instituted during the Ronald Reagan administration between 1981 and 1986. That’s when the top marginal rate was cut from 70% to 28% (now 35%…said top rate close to 40% by the time Bill Clinton’s administration balanced the budget in 1999).

It didn’t hurt Mr. Gates that TRUST-SYMPATHETIC “borrow & spend” republicans have resided at the White House for 20 of 28 years (R. Reagan – 8; G.H.W. Bush – 4; G.W. Bush – 8). A major antitrust suit brought by the federal government against Microsoft by the Bill Clinton justice department (ruled against Mr. Gates’ corporation in 2000) was settled by the George Bush justice department in 2001.

Mr. Gates is certainly not an “activist” in the traditional sense. I equate “activism” with something that is good for the future of the middle class and working class.

OK Jack


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