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Discussing a Private Buyout of Microsoft 315

Posted by Zonk
from the that's-quite-a-deal dept.
PatriceVignon writes "Are private buyout companies setting their eyes on Microsoft? The Financial Times claims exactly that in an article called 'Private equity folk could do wonders with Microsoft', as ZDnet reports: 'Consider Microsoft, which has a balance sheet so inefficient that it would make a private equity investor weep ... The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure. The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions.' Business Week, though, begs to differ: 'practically speaking, it's not going to happen,' and quotes Daniel Primack: 'Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms.' What do you think?"
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Discussing a Private Buyout of Microsoft

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  • by TripMaster Monkey (862126) * on Friday August 25, 2006 @03:00PM (#15981067)

    "Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms."
    Daniel Primack
    "I have HAD it with these muthafsckin' LBO firms tryin' to acquire my muthafsckin' company!".
    Steve Ballmer
    (The funny thing is, I can easily imagine him delivering this diatribe as he swings a chair menacingly...) ^_^
    • by Anonymous Coward
      Ah, for Pete's sake! Why couldn't you just go away? We had a nice lull fron your karma-whoring. Now we once again have to deal with your inane diatribe, uninsightful comments, idiotic anime smile (which you obviously use because you know it pisses people off), and immediate modding up by your moronic fan boys.

      Wondrful. Just wonderful.

      Yeah, yeah, I'm going to get modded as a troll. That doesn't mean that what I've said isn't true.
  • by davevt5 (30696) * on Friday August 25, 2006 @03:02PM (#15981093) Homepage Journal

    The largest LBO ever completed was RJR Nabisco in 1989 for $31.3 billion. Microsoft's market cap is $260 billion. Slap on that a 20% premium and you're looking at $312 Billion.

    Do you think that an LBO of 10X the previous record is going to happen? I think not.

    I like the comparison of Best Picture Oscar and Snakes on a Plane. Seriously though, I wouldn't be surprised if that film actually wins best film.

    • by Red Flayer (890720) on Friday August 25, 2006 @03:07PM (#15981143) Journal
      I like the comparison of Best Picture Oscar and Snakes on a Plane. Seriously though, I wouldn't be surprised if that film actually wins best film.
      I'd like to thank the motherf***ing Academy for this got-damn award. I'd also like to thank my motherf***ing wife, my motherf***ing agent, and the motherf***ing director.
    • 312 Billion? That's invade-a-country-in-the-middle-east-for-a-couple-o f-years money. Now I am concerned about microsoft invading somewhere for 2 years, as if CNN didnt give me enough to be afraid of!
    • On Surprises (Score:5, Insightful)

      by panaceaa (205396) on Friday August 25, 2006 @03:39PM (#15981446) Homepage Journal
      I wouldn't be surprised if that film actually wins best film.

      Are you a constant victim of practical jokes or something? Do people pop-out from behind corners and scream "AHHH!H#$!" five times a day? Does your girlfriend leave out pregnancy tests in the bathroom with two lines hastily drawn with a Bic pen? I'm guessing so. Dave, for your own sanity, fix your life so that if SoaP wins Best Picture it surprises you!!!
    • by sp3d2orbit (81173) on Friday August 25, 2006 @03:40PM (#15981454)
      Exactly. Any reasonable person can see that its 100% infeasible for this to ever happen. I would think that a professional journalist for the Financial Times wouldn't be so blind, but I stand corrected. At least it will sell some subscriptions.

      Google stands a better chance of a buyout than Microsoft (I'm not saying this would happen either). Google has a smaller market capitilization (around $120 billion) and has unrealized revenue in the form of "evil". Seriously, an "evil" Google would be much more profitable than an non-evil version because evil is just so lucrative. On the other hand, no has ever accussed Microsoft of not being evil enough -- I doubt there is much room for growth.
      • by packeteer (566398)
        Microsoft does not need to be more evil to make money. They just need to quit working on security updates. They have proven that you do not need to sell a secure OS to make money so why even make it more secure at all?

        The fact of the matter is that MS has been working on security for a long time now and makiong real progress. Windows 2000 was a huge leap over its predecessors in security. Windows XP was even more secure than that. Vista is looking to be even more secure than XP and for strictly desktop
  • Interesting... (Score:3, Informative)

    by creimer (824291) on Friday August 25, 2006 @03:02PM (#15981098) Homepage
    Let the free market do what the anti-trust efforts failed to do? Interesting... except the only people who will benefit are the legal eagles. It sure as hell won't get Windows Vista out the door any sooner.
    • by Frymaster (171343)
      It sure as hell won't get Windows Vista out the door any sooner.

      and it will get the release after windows vista to you probably not at all. if a private buyout aims to increase ms's profitability by slashing its 'wasteful' r&d budget (as the article states) then you can expect a bought-out microsoft to offer less compelling products less frequently.

      ultimately such a manoeveur would be a long term disaster. but, of course, if there's one thing the free market excells at, it's sacraficing long term in

      • you can expect a bought-out microsoft to offer less compelling products less frequently

        And the difference between that scenario and now is....? How could they get any *less* productive/innovative than they already are?


  • SoaP (Score:5, Funny)

    by just_another_sean (919159) on Friday August 25, 2006 @03:02PM (#15981101) Homepage Journal
    I think Snakes on a Plane won't win an Oscar.
  • by twofidyKidd (615722) on Friday August 25, 2006 @03:03PM (#15981112)
    I think...

    "...tak[ing] the axe to Microsoft..."

    is a good start.
  • by Anonymous Coward on Friday August 25, 2006 @03:04PM (#15981115)
    If Titanic can get one, anything is possible.
    • Re: (Score:2, Funny)

      by niceone (992278)
      And if it can't there's always a chance for the sequel: Snakes on a sinking ship.
  • And then... (Score:5, Insightful)

    by The MAZZTer (911996) <megazztNO@SPAMgmail.com> on Friday August 25, 2006 @03:04PM (#15981117) Homepage

    "The new management could take the axe [sic] to Microsoft's $6.6bn of wasteful research and development expenditure."

    And then Apple will produce wondrous innovations, and replace Microsoft as the leading OS supplier, and Microsoft will go under and LBO will write it off as Microsoft's fault somehow.

    • Re:And then... (Score:4, Insightful)

      by Rix (54095) on Friday August 25, 2006 @03:18PM (#15981247)
      Apple could do that *now*, if they'd sell MacOS for commodity systems.
      • Re:And then... (Score:5, Insightful)

        by 99BottlesOfBeerInMyF (813746) on Friday August 25, 2006 @03:25PM (#15981315)

        Apple could do that *now*, if they'd sell MacOS for commodity systems.

        You're both wrong. MS's monopoly is not dependent upon the quality of their OS compared to other vendors as much as it is upon lock-in and market position. Apple can't compete outside its vertical monopoly unless they can get OEMs to pre-install. OEMs won't pre-install because MS will kill their entire Windows business with discriminatory pricing and that means they're betting the company on the single, unlikely possibility that all the lock-in strategies MS has built into Windows won't work. At the same time Apple is betting their company on the same since they are then decapitating their hardware business and most of their profits.

        In short, for both Apple and at least two other, major companies to all take such a huge risk is highly unlikely and could very well get whoever made such a risky decision sued to oblivion.

      • Re: (Score:2, Insightful)

        by BalkanBoy (201243)
        somehow i dont see that happening either. introducing a thousand new drivers for all commodity hardware out there into OSX is probably going to make OSX suck just as hard as Windows (or at least, increase the likelyhood of destabilizing OSX by orders of magnitude). What does OSX support nowadays - only a few video cards, chipset never changes, and some other hardware that apple makes - nothing else gets plugged in unless it's 'apple-blessed'.... makes apple's job a lot easier, wouldnt you say?
    • Re:And then... (Score:5, Insightful)

      by Coryoth (254751) on Friday August 25, 2006 @03:29PM (#15981342) Homepage Journal
      Microsoft research is a little wasteful, at least in as much as the amount being spent doesn't compare very well to shipped product improvements. The problem, as far as I can see as a complete outsider, seems less to do with MS Research not doing a lot of interesting work (just have a look at some of the people working there, and some of the research papers they put out), and more to do with the gap between MS Research and shipping products. I have no idea if its a communication thing, a management thing, or what, but the end result is that a lot of great research work seems to struggle to find its way into products. It seems that's the real difference between MS and Google or Apple in terms of innovation. MS has the ideas, but sometimes I wonder if there's anyone in the "product development" side actually listening.
      • Re:And then... (Score:5, Interesting)

        by Vicissidude (878310) on Friday August 25, 2006 @03:43PM (#15981482)
        Having worked at Microsoft, mostly because I desperately needed the money rather than actually wanting to work there, I can honestly say they do have some cool stuff used internally which they SHOULD push out to the general public.

        Some of the best are their test automation tools which made it a breeze to do work there. With a push of a single button, I could automagically reinstall Windows on 100 machines simultaneously, have it automatically start different automated tests on each machine, upload the results to a central server, and have those results parsed for any problem that came up in the tests.

        Of course, the public will never see tools anywhere near like that. Even if they could make it so that Windows wouldn't be pirated, their management is so dense and top-heavy that they can't manage their way out of a paper bag. Mini-microsoft is right, they should thin out their management.
      • Re: (Score:3, Insightful)

        by pilgrim23 (716938)
        XEROX PARC. it sure didn't help Xerox's bottom line that much, but I seem to see a few products that came out of that effort. Watching the Pencil Pusher Legions drooling over the possibility of Goose soup, then wondering why the golden eggs stopped is always entertaining, never of value....
    • Re:And then... (Score:5, Insightful)

      by dslauson (914147) on Friday August 25, 2006 @03:35PM (#15981408) Journal
      Seriously. I can't stand people who call having a big R&D budget wasteful. There are a lot of things I don't like about Microsoft, but spending money on Research and Development isn't one of them. I'd rather see them spending money there than just lining the pockets of investors.
      • Re:And then... (Score:4, Insightful)

        by shmlco (594907) on Friday August 25, 2006 @04:08PM (#15981723) Homepage
        Agreed. The second a company kills off it's R&D program and/or manufacturing and becomes a "marketing" company is the second you should dump the stock. They're now on a slow, painful, declining road to oblivion...
      • Re: (Score:3, Interesting)

        by jonadab (583620)
        > I can't stand people who call having a big R&D budget wasteful.

        Indeed. The attempted hostile buy-out back in the eighties that forced Goodyear to sell off large portions of their R&D (in order to finance a stock buy-back to evade the buyout) was one of the worst things that had ever happened to that company, and similar R&D cuts would be even worse for Microsoft, since they are after all inherently a technology company, making R&D even more important.

        Microsoft does have plenty of waste
    • Re: (Score:3, Insightful)

      by Tim C (15259)
      I don't know about US English, but in UK English, that's the correct spelling of axe, and the Financial Times is an English newspaper.
  • but of course! (Score:2, Insightful)

    by MarcoAtWork (28889)

    The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure. The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would

    why not just fire everybody (including the R&D department) and, why stop there, why not also sell all the buildings, liquidate all the infrastructure, think of the additional savings! think of just how much cash flow you could get with 0 expenses in your P&L statement!

    • Re: (Score:3, Funny)

      by Red Flayer (890720)
      Dear Marco,

      Thank you for your timely suggestion regarding the future fate of Microsoft. Based on your idea, we have calculated that maximal profits over the next 10-year period can be achieved by doing exactly as you suggest.

      And of course, even that is considered long-term planning in today's corporate world.

      Sincerely, Preston Winfield
      CEO, AAA LBO Company #2
    • back in the good 'ole days of Sci-Fi monthlies, somebody happened to notice that the company that distributed their books had accumulated a ton of equity in real estate over the years. So he bought out the company and sold everything off, shutting it down in the process. He's a millionaire now. As a side effect, several monthlies went out of business in the resulting chaos when their distributer just disappeared overnight. You can thank the current state of Science Fiction on asshats like that.
    • This is the same point I was focussed on as well. There are countless examples of this in the tech world. Someone with a lot of money buys a company, cuts back the research and development spending, many engineers are laid off and the good ones leave to other companies. Then, after a year or two, the new management wonders why their product is losing market share. Then they realize that they probably shouldn't have bought a company that they really didn't understand and make decisions about cutting back on
  • by nicolaiplum (169077) on Friday August 25, 2006 @03:05PM (#15981124)
    Microsoft's R&D spending might make a private equity investor weep, but private equity investors are around to buy distressed or underperforming companies, make them lucrative, and sell them. They don't care about long-term R&D or having a product pipeline further out than when they cash in their investment by selling the company.
    Of course you could starve and loot Microsoft and make a lot of money, but only if your plan is to dispose of the carcase before it begins to rot.
  • the solution (Score:2, Interesting)

    All the software companies in the world, and the FOSS communities, should buy Microsoft, free all its IP under a FOSS license, and dissolve the company. This will at last allow real innovation to take place in the industry.
  • Umm, okay... (Score:2, Insightful)

    by Tim_sama (993132)
    "...to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions."

    Yes, because the highest aspiration of any company is to BORROW lots of money, not to, I don't know, turn a profit. Seriously, what are these people smoking?
    • What's more - MS already has $30 billion in cash in the bank. They don't need to borrow mega-billions, because they already have them. Besides, what the hell would MS do with the Mega-billions? Buy Apple? Oracle? The US government? This article is trash - though it does give an interesting insight into why companies are bought and sold: short-term profit.
  • Wha? (Score:5, Insightful)

    by The Angry Mick (632931) on Friday August 25, 2006 @03:09PM (#15981160) Homepage
    The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions

    Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!? I thought capitalism was about maximizing profit. When did things change?

    I guess I really need to brush up on my economics . . .

    • Re: (Score:3, Insightful)

      by TubeSteak (669689)
      My thoughts exactly.

      If they cut R&D spending, what are they going to use all that borrowed cash for?
      Buyouts of smaller companys?

      Microsoft already has ~$35 billion floating around that they could spend on buying up other software outfits.

      The only people who would benefit from this are the guys making the buyout. They cut MS to the bone, sell off assets, borrow money, issue dividends, then sell the stock before it can tank. After that, what do they care? They already got their dividend & sold off the
      • The only people who would benefit from this are the guys making the buyout.

        Mod parent up.
        I think you hit the nail on the head with this one. These guys aren't looking to turn MS' financials around because they want to see it become some better company, they want to take those slashed salaries as profits for themselves. If doing this to an $X billion company nets them $Y billion in profit, then doing this to MS at 10X valuation should net them 10Y. And with all the cited bloat there's likely lots of place
      • Count me in! (Score:4, Insightful)

        by MarkusQ (450076) on Friday August 25, 2006 @03:37PM (#15981422) Journal
        The only people who would benefit from this are the guys making the buyout. They cut MS to the bone, sell off assets, borrow money, issue dividends, then sell the stock before it can tank. After that, what do they care? They already got their dividend & sold off the stock at some inflated price.

        I'm sold. Put me down for $200 worth, and let me get back to you on Monday after I check to see how much more I can kick in.

        --MarkusQ

        P.S. And, unlike the hypothetical pure-greed investors others were talking about, I'm also doing this for the good of humanity. So I expect a proportionately larger cut when we liquidate Microsoft (God, I love the sound of that)

    • by chill (34294)
      Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!? I thought capitalism was about maximizing profit. When did things change?

      Never, it has always been this way. The idea is if you can borrow money at x%, and invest your money and get >x% return, then by all means borrow and invest yours! You come out ahead of the game.

      As the richest company in the world, they most likely have an excellent credit rating and can borrow cheaply. And
      • Re:Wha? (Score:4, Interesting)

        by jhfry (829244) on Friday August 25, 2006 @03:43PM (#15981484)
        As the GP said... he needs to brush up on his economics. The parent is exactly right, the only things that typical companies that show profits can do with their money are:

        1. give dividends to investors (boosts stock appeal and encorages stable pricing which...)
        2. improve the companies credit rating so that the company can...
        3. borrow money at extremely low rates so that they can...
        4. lend the money at higher rates and...
        5. make more money so that they can...
        6. GOTO 1

        The benifit of this system is that it keeps the money circulating in the economy. If MS did not borrow and lend, their billions would be out of circulation and our economy would suffer far more than most people realize.

        Essentially what huge companies with great credit ratings do is provide extremely low risk investments for lenders and thier customers. So if I buy a low risk (low yeild) CD or bond, the bank I bought it from would then lend that money to someone like MS for a slightly higher rate than they are paying me. Without large, stable, profitable companies like MS taking loans, the returns of my low risk investments must drop as the bank cannot afford lend my money out at those low rates due to increased risk in the loans they issue. Therefore I lose.

        If I could stand being any nerdier than I already am, I think I would have gone into econ. Econ is like an infinately variable application... make one minor change then predict how the ripples will effect something completely unrelated.

        For example, there are many economists that belive that outsourcing our jobs is actually going to improve our economy and employability once the system has run its course? Sure it's counter intuitive... but with a clear mind and some creative thinking you can see how this might occur.
    • by Tracer_Bullet82 (766262) on Friday August 25, 2006 @03:29PM (#15981343)
      To the buyout firms that is.

      What happens in a Leveraged Buy Out is the firm/s would loan money from the bank, making the FUTURE possesion as collateral. Thus the debt will be sadled by the target firm. Meanwhile the raiders/vultures as they usually called(especially KKR) will strip the company, sell it's asset and then sell the firm. Pocketing profits, while the firm itself pocket the debts, not them. These of course has destroyed companies and unnnecessary slashing jobs.

      Lately, their newest tactics is they will loan even more money from banks.. to PAY THEMSELVES as FEES for buying the firm. Pocketing up t hundreds of millions. Guess who's taking the debt..And it's all completely LEGAL.

      There's been some rumbling within the EU Adminitration about well reviewing the law. So far its up to nought.

      While the EU politician aren't in the pocket of businessman/ corporations unlike "some" paragon of "freedom" and "fair play", it is encredibly beraucratic.

      There's 8% free float of MSFT in the market.. which the buyout firms can easily buy. 52% in instituition, this is harder to buy but still institutional managers are'nt going to say no to 15% or 20% premiums. Thats quite enough to override the minority shareholder.

      Lest you think 300 billion plus is a big number, the trends these days are for buyout firms to gang together. And getting the money wouldn't be hard.

      That said though I'll doubt there's going to be a buyout. (Purely my assumption) Gates and Co certainly will have Class B shares. Class B shares are shares that have higher voting previlege/power than normal shares. E'g GOOG class B shares have 10 times voting power than Class A/normal shares.
      • by SerpentMage (13390) <ChristianHGross@ya[ ].ca ['hoo' in gap]> on Friday August 25, 2006 @05:04PM (#15982169)
        I think you are getting this wrong. The LBO comes in a buys the firm using leveraged money. Typically these firms are like Microsoft that have very good, but conservative books. You could call them cash-cows. Their stocks tend to be undervalued, eg Microsoft.

        In comes the the private equity firms and buy the company outright. They usually do this with the investors money and not banks. Usually these are hedge funds that have a huge pocket book with money to burn. So they buy this undervalued company. The first thing they do, like the article says is issue a dividend. The dividend is given to the investors and thus they have a good return. The dividend is added as debt to the company, but because the company is a cash cow it can support the debt without flinching.

        The company that is a cash cow has debt, and is issuing dividends. This is interesting for investors because investors like good dividends. Thus the stock price increases, and the original hedge fund begins to sell their original investment making yet another profit for the investor. People would buy the stock for the dividend and the perception that the company is going to grow.

        So does that mean that the stock investor that bought in at a higher price has been shafted? No, it depends what the cash cow company does. Cash cow companies do not need to be slow, but can be dynamic and grow. What the hedge funds are doing is forcing that growth. While many hate hedge funds they do force companies to work for the investor.

        Here is what many people forget. If people hate hedge funds then those companies should not be on the market in the first place. The stock market has no love and thus anybody who likes the market for the employee options also has to live by the hedge fund rules.

    • Re: (Score:3, Insightful)

      Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!?

      No, some private equity firm thinks the private equity firm would be better off using MS to borrow money, while gutting the long-term investments in order to inflate the stock, before said firm bailed on MS, leaving MS in rough shape and the private equity firm swimming in money. You've made the mistake of thinking investors and executives are acting in the best interests of the com

    • by xenocide2 (231786)
      Well, there's a couple of motivations behind that. First is the leveraged buyout, which was made rather popular in the 1980s before it degenerated into what's known as the "junk bond" scandal. Basically, you buy a company out, using the company you just bought as colateral. The financing behind it is much more complicated, but that's close to what it is underneath. Given the context of the situation (LBOs), this is mostly what they're referring to.

      The other idea is that companies are supposed to seek above
    • not you (Score:4, Insightful)

      by Quadraginta (902985) on Friday August 25, 2006 @03:32PM (#15981377)
      No, generally speaking it's the silly geese at the Financial Times who do. Or not. This is probably just one of those outrageous speculations that journalists do to provoke outraged responses and boost circulation. Not unlike...uh...never mind.

      But the proposition that a rich company would be better off in a borrowing state is not without merit. People forget companies are not people, and the same intuitive "rules" about sensible financial decisions do not apply. It's good as a person to have a lot of cash in the bank. Makes you secure. Not so for a company. A company is not an end-user of wealth, the way people are, but merely an engine for transferring wealth from one group of people (the customers) to another (the employees, investors, and subcontractors) [Value flows the other way, of course, but we're talking cash money here.] The goal is to do so as efficiently as possible. Money received from customers should be "invested" as soon as possible, i.e. transferred to new hires, new capital equipment, et cetera. It's doing nothing useful sitting in the bank. The only money a company should keep lying around is a small cushion for unexpected fluctuations in the market, the price of resources, et cetera.

      But why borrow? The reason is that you don't have to wait until you've accumulated enough cash from present operations to invest in the capital expansion necessary to undertake future, more profitable operations. You borrow the money immediately, then start the new more profitable operations immediately, and pay back the loan. Presumably the fact that you start earning bigger money earlier pays for the cost of the loan. Everybody wins.

      It's not the same as an individual borrowing money to buy a car, which is more nearly pure consumerism. It's more like borrowing money to go to college. It's much more sensible to borrow the money and go to college at 18, graduate, then pay the loans back over 5 years with a high-paying college-graduate job, than it is to work for 15 years at a low-paying menial job, save up, and finally go to college at age 33.
    • by Chaffar (670874)

      Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!? I thought capitalism was about maximizing profit. When did things change?

      Nah, capitalism is about maximizing growth. Growth is the cure to everything, since as companies grow, higher more people, spend more money, they grow the economy as a whole.

      Whether you agree with this or not (I don't think this is true any more), it's the idea of growth for the sake of growth that has driven

    • by tsotha (720379)
      Yeah, that was my reaction. Microsoft is one of the few companies that has so much money they literally don't know what to do with it. Normally when you have extra cash you buy other businesses, but in Microsoft's case they can't really do that for anti-trust reasons. That's why their research is so "bloated", and why they're willing to sink so much money into markets with a long-long-term payoff (like MSN and xbox). The only other option is to give money to the shareholders in stock buybacks and divide
  • by ant-1 (120272)
    Cut the workforce ? Cut the R&D ? Make billions more ? Why do the black suits only want more money ? Humans can't eat it, dammit !

    Please let my shiny Microsoft live like that, with their beautiful innovations, solid products and work schedules respectful of the family. *grin*
  • ...and leave a massive vacuum?

        What the hell would happen to all the PCs out there and users that are so reliant on MS Products that even thinking of switching causes people to break out in hives?
    • Believe it or not the current versions of all the Microsoft products work just fine now. Someone could buy the rights to the office suite and someone else could buy the OS. Sure theyd probably charge you for updates, but it wouldn't "destroy the PC industry as well know it"
  • Is This a Joke? (Score:5, Insightful)

    by susano_otter (123650) on Friday August 25, 2006 @03:14PM (#15981209) Homepage
    How does cutting R&D and the workforce = good business plan?

    And why would Microsoft need to borrow "megabillions" anyway, let alone at the cost of their workforce and R&D?
    • Re: (Score:2, Interesting)

      by kirun (658684)
      How does cutting R&D and the workforce = good business plan?

      The plan would be to bleed them dry for a few years, pocket the cash, and by the time the no R&D's caught up with them, they've stripped and sold the carcass and moved on. This happening to Microsoft sounds too good to be true, really.
      • This happening to Microsoft sounds too good to be true, really.

        Oh, totally. All those jobs aren't really necessary in today's economy anyway.
    • by Otter (3800)
      Is This a Joke?

      It's lost on everyone, including the ZD columnist, but -- yes, the original FT piece is supposed to be tongue in cheek. (At a minimum, it explains to what use the borrowed money would be put, for the benefit of everyone throwing up their hands and asking "Why would they need to borrow money? If only there were some sort of linked article that explained it!")

  • Someone wants to MS to borrow money, fire everyone, and put snakes in the OS? /didn't read TFA, didn't read TFSynopsis
  • Stock repurchase (Score:3, Interesting)

    by Johnny Mnemonic (176043) <mdinsmore AT gmail DOT com> on Friday August 25, 2006 @03:16PM (#15981234) Homepage Journal
    Is Microsoft defending against this notion through it's stock buy back plan? I would presume that would give more voting shares to the current Board of Directors, who could then vote against new management; but perhaps that is an oversimplification.

    What other reasons does MS have to repurchase it's stock? I don't understand the benefit that this gives to a company.

    Do they feel that their stock is undervalued now, so by repurchasing it they can sell it later at a better price, and thereby acquire more financial resources?
  • And monkeys are going to fly out of my butt before M$haft gets purchased by any private equity leverage firms. I find it sad that /. has become so desperate for articles they will even let a topic like this make believe hit on a Dry News Friday (tm). Have a nice weekend, with or without /.
    • This is the sort of thing that happens when institutional investors start to become "unhappy" with a company's management. Microsoft is sitting on a pile of money that's not getting very good returns. Heck, you could put Microsoft's cash pile in an index fund and do better. About the only thing that's keeping the route from being more general is the hope that new versions of MS Office and Windows will improve profitability dramatically. If this doesn't happen (and new versions of MS Office and Windows h

  • "Wasteful" (Score:5, Interesting)

    by TheNumberless (650099) on Friday August 25, 2006 @03:18PM (#15981258)
    That $6.6 billion of "wasteful" R&D is one of the few things I like about Microsoft. Long-term research without a guarantee of short-term returns is a good thing, and Microsoft is one of the only companies that does it anymore.

    Think about all the advancements that came out of Bell Labs, before it had a need to be more "efficient".

    • by rlp (11898)
      hink about all the advancements that came out of Bell Labs, before it had a need to be more "efficient". Hmmm, very similar to what Lucent actually did with Bell Labs. But, it helped to make Lucent the company it is today. Oh, wait ...
    • Re: (Score:3, Insightful)

      by pipingguy (566974) *
      But what exactly are they inventing with that R&D money? New GUIs and MP3 players? Oooh, yeah, important stuff indeed.
  • by Dracos (107777) on Friday August 25, 2006 @03:23PM (#15981294)

    Aside from the insane value of the buyout (as previously commented), the simple fact remains that MS' management is too egotistical to allow this to happen. If anyone did put forth any effort on a buyout, the MS spin machinery would immediately set its sights on their own shareholders to dissuade them.

  • by ewhac (5844) on Friday August 25, 2006 @03:24PM (#15981306) Homepage Journal
    Don't you remember? Michael Milken went to prison. Your "junk bonds" and leveraged buy-outs were disasterous for American industry and productivity.

    The 1980's are over, and good riddance. Get over it.

    Schwab

  • absurd (Score:3, Insightful)

    by deuterium (96874) on Friday August 25, 2006 @03:25PM (#15981309)
    It seems like every time some hack reporter or "inside" blogger comes up with stuff like this, it ends up on Slashdot. It's not news, it's speculation, and dodgy speculation. It reminds me of other invented news, like groundless top ten lists [futureguru.com] or supposedly new trends [businessweek.com]. Nothing more than one person's interpretation of a mixed bag of news and opinions. Real news is something like this [bbc.co.uk]. An event or fact of some sort is related. It's discrete. Stories such as this Microsoft takeover are simply conjecture. There's certainly a place for conjecture, and some is more informed than others. Rumors about the AMD/ATi deal were correct, and were also more plausible. That the Microsoft post itself acknowledges how entirely unlikely it is, I have to wonder... why then was it passed on?
  • That's one of the stupider ideas I've ever read.

    So the plan is to kill the part of MS that's doing the best work, their R&D people?

    This would take shortsightedness to heights dreamed of only by teenage boys ten seconds away from orgasm.

    (Not to mention that the amount of capital required to even begin to entertain the thought that there might be a chance of MS tanking hard enough in the near future to make this possible is so high the only organizations that could afford it wouldn't care to.)
  • by RyoShin (610051)

    The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions

    If a company can make a profit of a billion a year, yet still be able to afford all of that "bloat", then why cut the costs?

    Why have 10,000 people lose their job just so that some investor's porfolio can go up a quarter of a percent? (veiled Office Space reference)

    It's a wonder I'm not more cynical.

    Bush isn't the reason for unemployme

  • To get a good idea of what junk bonds and leveraged buy-outs are all about, and the effects they can have, go to your library and check out a copy of Storming the Magic Kingdom [biblio.com], by John Taylor, which details the attempted LBO of the Walt Disney Company in the early 1980's. An absolutely riveting and illuminating story into the excesses of "corporate raiders" of the time and how Disney managed, just barely, to fight them off.

    Schwab

  • "Private equity folk could do wonders with Microsoft"

    Odd, I've seen that exact phrase used earlier this week with regards to Ford. Hoax? Seems likely.
  • Without its R&D deparment and its incubation projects that take years of loss to get right MS would have no place to go right now when its windows and office profit centers are starting to level off and possibly even decline. Balmer once said that you have to have 3 types of projects happening in a company to sustain long term growth, the projects you are making money off right now, the projects you will make money on in 5 years and the projects that you will try to eventually make money on.

    Windows mobi
  • Actually, MSFT - even in theory - isn't a candidate for an LBO. Even if MSFT was a company with a USD 2-3 billion market cap, it wouldn't be possible to get financing and maintain it. Microsoft's topline revenue is USD 44 billion http://finance.google.com/finance?fstype=ci&cid=3 5 8464 [google.com] and free cash flow is USD 14 billion http://finance.google.com/finance?fstype=ci&cid=35 8464 [google.com].

    Microsoft's current market cap is USD 263 billion. Based on comments made by Ballmer and Gates they see Microsoft as substant
  • by Zigurd (3528) on Friday August 25, 2006 @03:55PM (#15981598) Homepage
    The simple answer is that this scenario won't happen. It is ridiculous.

    So what does getting this into a Business Week article accomplish (apart from selling copies of BW, which always gets a boost from companies like Microsoft on the cover)?

    It's called "positioning:"

    It suggests management could turn a few financial knobs and create a ton of shareholder value.

    It creates an artificial boogie man in the form of extreme changes that will never happen, so when the financial knobs get adjusted it is seen as very conservative.

    It paints Microsoft as a kind of "sleeping giant."

    The real question for Microsoft is "Why did you stop using the 'creative destruction' model of delivering customer value?" Microsoft used be the terror of the technology business by putting workstation, minicomputer, and mainframe capabilities into PCs. Now they cosy up to Hollywood instead of being disruptive, and they wonder why the old magic no longer works.

    Microsoft is dong some things right, but these follow the established model: Microsoft Office Live Communications Server will replace PBXs. Big old expensive machines out, Windows servers in. If Microsoft was that disruptive to the media businesses, then they would have their groove back.
  • "The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure."

    The management could just axe absolutely everything and get some short term cache by:

    - charging extra for support,
    - make patches paid,
    - bump up the price of XP to "it's true value of $1000"
    - sue the hell of everyone using its collection of patents (previously obtained for protective purposes)

    Ridiculous? So is calling R&D wasteful.

  • Microsoft is a dinosaur and the comet has already hit. Time to get out while the gettin' out is still possible.

    I was unsure about the conclusion until I used Vista, but it now is fairly clear: Windows 2000 will be the best OS they ever made.

    The best thing that could happen for the human race is if MS were to get bought out by a cabal of private billionaires who fired almost everyone, put an idealist at the helm, and rebuilt the comapany and all the systems on an open source model.

    This would end the absurd
  • 60,000 Too Many? (Score:3, Insightful)

    by mark99 (459508) on Friday August 25, 2006 @04:14PM (#15981780) Journal
    12 billion profit with only 60,000 people? That is like 200,000 dollars per head profit. How many other firms with over 10,000 people can do that? Considering the average salery is bound to be like 100k or less, they are doing great on that front. Whatever those guys are doing, from the aspect of profit they are doing it right.

    I think IBM makes like 8 billion with 200,000+ people (or like 40k profit per head). That is nearer the industry average.

    I don't think MSFT has far too many people, though any firm in the world that is as old as MSFT is bound to have some fat.
  • Slashdot (Score:4, Funny)

    by Enrique1218 (603187) on Friday August 25, 2006 @04:24PM (#15981866) Journal
    Fantasies for nerds. Stuff that will never happen.
  • by WillAffleckUW (858324) on Friday August 25, 2006 @04:39PM (#15981982) Homepage Journal
    Given fluctuations, you'd need not only around $300,000,000,000.00 dollars USD to buy up the shares, you'd need a majority of shares, which means both Bill Gates and most of the major shareholders would have to sell (or want to).

    It's much more likely that Gates et al would decide to take Microsoft private instead, lowballing income and increasing expenses to make it look less profitable, so that other shareholders would sell to them at a discount, then after a few years bring it out for a public IPO again, after spinning off various units.

    But since much of Microsoft is in literal cash (short term debt notes, corporate, Canada treasuries, etc.), even that is not that likely.

    If I thought they were going to go private, I'd be buying them up. I made the money for the downpayment (20 percent) of my first house by buying and selling MSFT on publicly available information in trade magazines, after all.

    And I'm not. Buying that is.

    Much more likely that Intel would be LBO'd, IMHO.

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