Google Tech Talk September 11, 2009 ABSTRACT Presented by Jerry Porras. Jerry Porrass research interests are the characteristics of visionary companies in both the United States and Europe; the dynamics of planned organizational change process; organizational vision and its influence on the long-term behavior organizations; and leadership. Jerry I. Porras is the Lane Professor of Organizational Behavior, Emeritus. He received his BSEE from Texas Western College, his MBA from Cornell University, and his PhD from the University of California, Los Angeles. Among the honors he has received are the Brilliante Award from the National Society of Hispanic MBAs, the Silver Apple Award from the Stanford Business School Alumni Association, and the Kanter Medal from the Pacific Graduate School of Psychology. He joined the Stanford faculty in 1972. Professor Porras is author of Stream Analysis: A Powerful Way to Diagnose and Manage Organizational Change (Addison-Wesley, 1987); co-developer of the Stream Analysis Software Package (1999); and coauthor of Built to Last: Successful Habits of Visionary Companies (Harper Business, 1994) and Building Your Companys Vision, Harvard Business Review (1996). He has served on several editorial boards including the Journal of Organizational Change Management, Journal of Applied Behavioral Science, Academy of Management Journal, and Academy of Management Review. About Perspectivas Speaker Series: Perspectivas is a speaker series aimed to empower and ...
SAN FRANCISCO – The Justice Department's rejection of AT&T's proposed purchase of T-Mobile USA will test new federal guidelines on challenging mergers and the companies' resolve in forming the nation's largest wireless carrier.
A courtroom battle is likely and could wring out information that the companies would prefer to keep private. Still, AT&T Inc. has a big incentive to fight: If the deal is called off, the company has to pay a $3 billion breakup fee and surrender some of its unused spectrum for wireless communications.
AT&T is promising to fight the Justice Department's decision. The department filed a lawsuit Wednesday to block the $39 billion deal, saying it would reduce competition and lead to price increases for customers.
If AT&T follows through on that, it could produce the biggest antitrust showdown since business software maker Oracle Corp. squared off with the federal government seven years ago. That dispute, triggered by the government's decision to block Oracle's proposed purchase of rival PeopleSoft Inc., exposed several well-kept corporate secrets and required Oracle CEO Larry Ellison to testify before a packed courtroom.
In the end, Oracle pulled off something few companies have done in the past 30 years: It persuaded a federal judge that the Justice Department didn't have grounds to block its PeopleSoft deal. Oracle closed its $11.1 billion takeover four months after getting the favorable court ruling.
Usually, not even the most powerful companies bother to fight government regulators in an antitrust dispute. Google Inc., for example, backed off in 2008 when the Justice Department threatened to sue to block a proposed Internet search partnership with Yahoo Inc. Microsoft Corp., the world's largest software maker, pulled out of a deal to buy Intuit Corp. in 1995 after the Justice Department objected.
The Justice Department filed 138 antitrust cases in federal courts from 1999 to 2008 and lost just four of them, according to the latest breakdown from the agency.
One reason that the Justice Department has such a good track record is because it rarely challenges a deal unless it's very confident it can win, said Joseph Bauer, a University of Notre Dame law professor and antitrust expert.
Knowing AT&T would probably go to court, the Justice Department may have wanted to signal that it intends to get tougher on corporate marriages between rivals in markets with few other competitors.
A union between AT&T and T-Mobile USA would leave Verizon and Sprint as the only other major cellphone carriers in the U.S. T-Mobile, a subsidiary of German telecom company Deutsche Telekom AG, is currently the No. 4 wireless carrier, while AT&T is second. Combined, AT&T would be the largest.
In a sign of its confidence, the Justice Department decided to strike down the deal even though it could have taken about three more months to study the pros and cons. The timing stunned AT&T, which said it didn't get any advance warning.
"It was an aggressive and impressive move by the DOJ to take the battle right at AT&T," said Daniel Wall, a San Francisco attorney who represented Oracle in its 2004 fight to win the right to buy PeopleSoft. "It sent a statement that the DOJ intends to fight this one all the way to the finish line."
Wall said AT&T may have a tougher time proving its case than Oracle did against the Justice Department. In the PeopleSoft deal, Wall said, antitrust enforcers seemed to be manipulating the definition of the business software market. "This time, it looks to me that they have a pretty solid market definition," Wall said. "They don't appear to be playing games."
University of Iowa law professor Herbert Hovenkamp said the Justice Department is being guided by a set of new guidelines, issued late last year, which make it clearer when mergers should be challenged on antitrust grounds.
"I don't think they are overreaching here," Hovenkamp said. "If there is a broader message here, it's that the government intends to enforce these new guidelines."
Besides being forced to divulge potentially damaging information, AT&T will face other risks if it doesn't settle with the Justice Department. Going to trial will take months, or even years, leaving the company in a legal limbo that could depress its stock price and cause customers and key employees to defect.
There's another risk to going to trial: as they try to prove their case, antitrust lawyers sometimes obtain confidential e-mails that contain embarrassing snippets and present other evidence that can make companies look bad.
Those are some of the reasons why AT&T mayl try to reach some kind of settlement with the government.
If AT&T persists, antitrust experts said that it's better off going up against the Justice Department than the Federal Trade Commission, which also handles antitrust reviews. That's mainly because lawsuits with the Justice Department are contested in federal courts. By contrast, the threshold for the FTC to block deals is generally lower, and the ensuing legal skirmishes occur in administrative law proceedings that drag on longer.
"The merging parties usually have a better shot when they are going up against the DOJ than the FTC," said D. Daniel Sokol, a University of Florida professor specializing in antitrust law.
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HP CEO Leo Apotheker speaks to the press after delivering the keynote address at the HP Summit in San Francisco, California March 14, 2011.
Credit: Reuters/Stephen Lam
SAN FRANCISCO |
Sun Aug 21, 2011 4:23pm EDT
SAN FRANCISCO (Reuters) - Leo Apotheker's credibility as a CEO is falling along with Hewlett-Packard's stock price.
SAN FRANCISCO (Reuters) - Leo Apotheker's credibility as a CEO is falling along with Hewlett-Packard's stock price.
Apotheker, who gained a reputation for sharp business acumen when he headed up SAP, thoroughly flummoxed HP shareholders last week with what some analysts have called a "value destroying" $11.7 billion deal to buy British software maker Autonomy and for sticking a for-sale sign on HP's PC division -- thus scaring off clients for the year or so it will take to decide on the division's future.
In a resounding rejection of Apotheker's grand vision, shareholders sent HP shares down almost 20 percent on Friday, wiping out $16 billion of value in the worst single-day fall since the Black Monday stock market crash of October 1987.
Since Apotheker joined HP early last November, the company has lost almost 44 percent of its value, and he has lost a significant amount of investor support.
"We wonder whether activist investors will -- and should -- begin to exert pressure on the board," said Toni Sacconaghi, an analyst with Sanford Bernstein. "If HP's results don't improve, the company will ultimately restructure its portfolio and/or replace its leadership."
Pat Becker Jr., fund manager at Portland, Oregon-based Becker Capital Management Inc, which owns HP shares, noted that Apotheker has continually failed to instill confidence in his conference calls with investors.
"Every time he has gotten on the call, the stock has gone down substantially," Becker said.
On a conference call last Thursday following the announcements on Autonomy and the PC division, Apotheker failed to fully address key questions from analysts, including why HP was paying a large premium for Autonomy. When asked about the vision for HP's PC unit, he said the decision could range from an outright sale to a spinoff to a "potential "nontransaction."
"That call -- was that an 'A' performance by a CEO on that acquisition?" asked Becker, whose firm holds HP shares.
An HP spokeswoman said the "strategic transformation" is intended to position the company for a new future and drive long-term shareholder value.
While investors applaud Apotheker's long-term plan to get out of HP's commoditized PC business, and the Palm WebOS tablet and smartphone business -- considered a capital sinkhole -- that goes with it, the $11.7 billion bill for Autonomy and haphazard articulation of the spin-off strategy left many shaking their heads.
HP's purchase price is a stunningly rich 10 times sales of Autonomy, a cloud search specialist whose revenues are equal to only about 1 percent of HP's.
HP's Personal Systems Group, which includes the PC business and the now-defunct TouchPad tablet -- faces an uncertain future, which may undermine the business and benefit Dell, whose shares ended up nearly 2 percent on Friday in a broadly weak market.
Even more worrying, HP's new strategic road map marked an about-face on several crucial fronts, signaling a lack of direction. Executives as recently as May had touted how WebOS would be on every HP product from printers to PCs. In March, they had played up the advantages of serving both consumers and enterprise.
In addition, Apotheker has been forced to slash HP's sales estimates three times since he took over last November.
IN BIG BLUE'S FOOTSTEPS
It is not the first time HP seems behind the curve. it agreed to buy Compaq in 2001 in what turned out to be a rocky merger. IBM, on the other hand, transformed itself by selling its PC arm to China's Lenovo in late 2004 and establishing its dominance in enterprise IT. HP appears to be trying to replicate Big Blue's success.
Some analysts and fund managers hold out hope that the company is at least now on the right track and can still catch up by making smart acquisitions.
"Just because they didn't make the move earlier doesn't mean they still can't skate to the where the puck is going," said Tony Ursillo, an analyst with Loomis Sayles Value Fund.
But he added, "HP has overpaid for every acquisition it has made" in the past year.
One thing that could take the sting out of the steep price tag for Autonomy is the sale of HP's PC division, which industry experts estimate could fetch as much as $10 billion.
And Apotheker did make at least one correct decision by retiring the TouchPad. Sacconaghi estimates the business lost about $250 million last quarter, or 9 cents a share.
But the events of last Thursday have done little to build confidence in Apotheker. The afternoon of high drama kicked off with a series of rapid-fire announcements: disclosure of acquisition talks with Autonomy; confirmation a deal had been done; announcement that HP was killing its TouchPad and other WebOS devices.
HP also disclosed its results an hour earlier than scheduled, marking the second straight quarter that the company had to release earnings ahead of schedule. And in another small sign of disarray, TouchPad ads featuring "Glee" star Lea Michele continued to run on CNBC on Friday.
While HP's dire competitive position was in the making well before Apotheker's arrival, shareholders do not view the CEO's track record as impressive.
"I was skeptical coming in about whether he had the right background for the job," Ursillo said. "So far the results are not encouraging."
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