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M&A news:- Lenovo M&A and talent management

Posted by thehrdiary on November 2, 2011 at 3:55 AM Comments comments (0)

Lenovo M&A and talent management

Sumathi V Selvaretnam 14 Apr 2011

http://www.hrmasia.com/news/features/lenovo-eye-on-talent/83154/

Mergers and acquisitions mark a challenging time for HR. When China’s largest PC manufacturer Lenovo acquired IBM’s PC division in 2005, many questions arose. Employees were concerned about job security, changes in work structures and job scope. Another major concern for employees was how they were going to assimilate into the new corporate culture. “Many ex-IBM staff who crossed over were worried about fitting in with new colleagues from Lenovo, since it is a Chinese company,” Tan Aim Sim, HR Director, ASEAN, Lenovo says. Employees also wanted to know if there would be any changes in compensation and benefits as well as HR policies.

United as one

The acquisition by Lenovo saw some 50% of its new workforce coming from IBM. “That’s a large number, given that in 2005, Singapore was also the Asia Pacific headquarters of the new Lenovo company globally,” Tan says. The local office subsequently became its ASEAN headquarters after a period of corporate re-structuring. The HR team at Lenovo had to ensure that smooth transitions were made in different areas during the acquisition. Clear communication was critical during this period. Management and HR conducted sharing sessions with affected staff from both the companies to ensure that actions were being communicated directly to them instead of through a communication chain that might lead to misinterpretations. “These sessions also provided a channel for staff to provide feedback and share concerns,” Tan says. Lenovo decided to adopt IBM’s benefits for employees who were making the cross-over. “We chose to do this to help allay some of the concerns employees felt,” Tan says. This helped to reassure them that they will continue to fit into the new structure. According to Tan, this also showed employees that the acquisition was not about making roles redundant since the company was taking best practices from IBM. Lenovo also created programmes like ‘New World New Thinking’ and ‘Managing Across Cultures’ to help managers cope with the changes as well as give them guidance on managing diversity in their teams. These focused on multi-cultural and cross-cultural differences and ways of handling them. To promote better integration, Lenovo also offered Mandarin classes to new employees so that they could communicate better with their Chinese colleagues. Another HR-related issue for Singapore-based staff was the location of the office, Tan says. Many IBM employees lived in the eastern part of Singapore, close to the IBM office at Changi Business Park. As the Lenovo office is located in Lorong Chuan, which is in the northeast, Lenovo made transport arrangements to ferry employees to their new workplace.

Getting the best talent

Some six years after the acquisition, Lenovo faces a different type of HR challenge today. Its hiring needs are evolving. The opening of a new digital hub is next on the agenda and Lenovo is on the lookout for candidates who have a firm grasp on mobile technology as well as social media. The company expects to boost its headcount by about 20% this year. Stiff competition for talent has made Lenovo adopt a more proactive approach towards recruitment. In a process known as “talent mapping,” Lenovo partners with HR vendors to actively identify new areas where it can source for employees. Using market intelligence, vendors can pin-point top talent in other industries. For example, someone working in the fast- moving consumer goods industry could also be an ideal candidate for an IT sales position. Talent mapping allows Lenovo to create a pipeline of candidates for positions that need to be filled, Tan says. Lenovo also practises hiring through word of mouth. In fact, some 50% of the hiring at the company is done through referrals. Employees are given vouchers or cash rewards for successful placements. The firm also taps on social media platforms like LinkedIn to source for candidates.

Grooming hi-potentials

The economy is looking up and the market is swinging in favour of job seekers. This also means that competitors are on the prowl to attract your best talent, says Tan. Understanding this, Lenovo keeps a close watch over its key talent. The profiles and progress of high-potential employees is regularly discussed at CEO-level meetings to determine how the organisation can help them grow and succeed. To this end, Lenovo conducts the Accelerated Leadership Programme for Hi-Potentials in ASEAN (ALPHA) to groom its top-performing employees. The three-day course focuses on areas like communications and coaching skills as well as change management in an organisation. The ALPHA programme includes a “fireside chat” where employees can have a no-holds barred conversation with the management. Lenovo’s leaders share their own career maps with employees to help them understand how they arrived at their current positions, Tan says. Every employee at Lenovo has an individual development plan that identifies their learning and development goals. The organisation also encourages job rotation so that employees can develop a better sense of their strengths and abilities. Lenovo's efforts in engaging and developing its employees has clearly gone a long way in building a positive work culture. "Some people who leave us re-join us," says Tan.

At a glance

Name of Company: Lenovo

Total Number of Staff in the ASEAN: 350

Key HR focus areas: Proactively building a talent pipeline, leadership development, building a strong employer brand

Keeping employees happy

Lenovo has introduced a number of initiatives at the workplace to promote an employee-friendly work culture.

Lunch and Learn

It organises lunchtime talks on topics requested by employees and orders in packed lunches for attendees. Some past sessions touched on topics like personal grooming, how to invest CPF funds and how to deal with difficult people.

Drop Everything And Run (DEAR) Friday

Employees are encouraged to leave work at 5pm on Fridays so that they can spend more time with their families

Family Leave

At Lenovo, the standard six days of childcare leave is extended to unmarried employees as “family leave.” For example, an employee could take leave to take care of his or her elderly parents

What is Talent Mapping?

When an employee decides to quit out of the blue, it can take anywhere between two to four months to find a replacement. Companies can lose a lot of productivity during this interim period. Talent mapping is a more proactive approach towards recruitment as it enables organisations to build a talent pipeline for future positions. Talent mapping experts normally have a clear understanding of the company’s culture and hiring needs. They actively seek out candidates across a range of industries, widening the talent pool. Companies using this approach need to be clear about their employee value proposition so that the talent mapping expert can “sell” the vacancy to potential candidates.

 

M&A news:- AOL courting takeover by Yahoo?

Posted by thehrdiary on October 13, 2011 at 9:00 PM Comments comments (0)

AOL courting takeover by Yahoo?

CEO dangling billions in cost savings, say sources

07:43 AM Oct 13, 2011

http://www.todayonline.com/Business/EDC111013-0000340/AOL-courting-takeover-by-Yahoo

NEW YORK - AOL CEO Tim Armstrong has been meeting with top shareholders in the past couple of weeks to push the idea of a sale to Yahoo that could wring up to US$1.5 billion (S$1.9 billion) of cost savings, according to sources with knowledge of the discussions.

While Yahoo's own strategic review has bumped AOL to the back burner for many on Wall Street, Mr Armstrong is still trying to drum up shareholder support for a deal with Yahoo, presenting it as an alternative to going it alone as an Internet media company.

"The focus in the meeting has gone from a year ago of being around the fundamentals to now being how could you carve this up, what are separate assets worth, are there ways to sell off the business to extract value from them," said a top 20 AOL shareholder who attended one of the meetings.

Mr Armstrong said a merger between AOL and Yahoo could wring out US$1 billion to US$1.5 billion in savings from overlapping data centres and duplicate news sites, such as sports, entertainment and finance, according to another major shareholder who met with Mr Armstrong.

He is pushing the notion that a combination with Yahoo would appease ad agencies looking for more efficient buys with a bigger audience, said the two shareholders.

In August, AOL reported a surprise quarterly loss and blamed weaker-than-expected advertising growth. Shares plunged 31 per cent. AOL's stock has sunk more than 40 per cent since it was spun out from Time Warner in 2009, ending what is widely regarded as one of the worst corporate mergers in history. REUTERS

Organic Vs Inorganic Growth???which one is for YOU?

Posted by thehrdiary on October 13, 2011 at 8:55 PM Comments comments (8)

Organic Vs Inorganic Growth…which one is for YOU?

By wiseexec

http://www.wiseexec.com/insights/ArticleDetail.aspx?KeyID=111

“Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.” – Steve Jobs. Apple Inc.

Though this is a simplistic view on growth, most business owners are constantly faced with the challenge on how to 'grow their business'. Growth is generally measured in terms of increased revenue, profits or assets. Businesses can choose to build their in-house competencies, invest to create competitive advantages, differentiate and innovate in the product or service line (Organic Growth) or leverage upon the market, products and revenues of other companies (In-organic Growth). Simply put, business expansion with the help of the businesses' core-competencies and sales refers to Organic Growth and is in contrast with Inorganic growth approach where expansion objectives are met through Mergers and Acquisition (M&A).

Apple Inc. is probably an excellent example of Organic Growth. [email protected] is driven by trend-setting product innovation. Macintosh, iMac, iPod and the latest talking point, the iPhone are technological breakthroughs pioneered by Apple. Microsoft, on the other hand is a clear case of In-Organic growth as it has successfully completed more than 100 acquisitions since 1986.

Understanding In-Organic Growth

In-Organic Growth or growing through Mergers and Acquisitions have the following benefits to the business:

1. Helps reduce competition in the market place

2. Instantly adds new brands and product/service lines to the acquiring company

3. Fresh customer base, addition of new geographical locations and any other unique points present in the business

4. In many cases, an established marketing channel also becomes available

5. Economies of scale (but this happens only over a period of time)

6. A fresh breath of management skills

7. Most importantly, time-to-market is substantially reduced which gives businesses a significant competitive edge.

Industry and economic factors play a crucial role in motivating companies to adopt the Inorganic route for growth. Slowing industry growth rate, fragmented industry, too many competitors fighting for the same market share are some compelling reasons which push businesses towards the M&A route. Other than that, economic slump creates opportunities for cash rich companies to get hold of unutilized capacities of loss making competitors at attractive valuations.

Questions to ask yourself before choosing In-Organic Growth

Like all management decisions, In-Organic Growth is not without is pitfalls. Managers, while acquiring a new business, must check for the compatibility of the activities of the target company to the environment that they operate in. The 'Strategic Fit' can be judged based on three parameters:

1. Where are we now?

2. Where do we want to be?

3. How do we get there?

Another soul-searching management question which can be asked before evaluating In-Organic growth is that, “are you acquiring to simply boost reported earnings or to boost competitive advantage and core competencies?”. Having a limited vision of boosting temporary financial numbers might be myopic and the acquisition may turn out to be a strategic mistake.

Mergers can be risky as they usually involve paying huge premiums for deals, the success of which is highly questionable. A quick check on recent M&As show that In-Organic growth has actually REDUCED the value of the two organizations and that might have happened due to no satisfactory response on the strategy part of the deal.

A merger brings with itself the most critical post-merger issues of realizing the pre-conceived synergies between the two entities and also the integration of diverse corporate cultures. Windows-based Microsoft took a few years to seamlessly integrate the functionalities of the UNIX based Hotmail, which it acquired in 1997 and even today, Hotmail continues to exist as more-or-less as an individual service offering.

So is Organic Growth better?

The success of Organic Growth is a sure-fire test of the management skills of the organization. Not only does it test the management's ability to share a common vision, it tests the ability of the business to deliver the vision. Some of the typical characters of businesses which believe in the benefits of Organic Growth are:

1. Customer centricity. Organic Growth businesses will usually sell solutions and not just a product.

2. These businesses deliver unique value propositions. They might not be the World's Greatest Innovators but they identify and articulate value of a new product or service to their customers.

3. Organic Growth helps build brands and marketing channels that can take the product or service to their customers

4. Companies growing organically do not measure their success on financial metrics alone but take careful note of other metrics like customer satisfaction metrics, product quality metrics, logistics and supply chain metrics etc.

5. Discipline and focus for part of all Organic Growth strategies. The management is willing to take risks but they prepare and plan well

6. Organizational efficiency is part of the DNA of the business.

An A.T.Kearney study prescribes a three-pronged strategy for Organic growth that any company can deploy to achieve aggressive growth rates:

1. Capture short-term growth opportunities – This sets the company into a growth mode and builds momentum.

- Pursue attractive customers – Identify potential new customers and high value existing customers.

- Deploy existing portfolio – Transfer established solutions and services to fill any market gaps. Customize, establish unique selling propositions and build a sales team to communicate effectively to the customers.

- Expand geographical footprints – Target emerging overseas markets with high growth opportunities, by either building partnerships with local companies or in case of a mature market by providing advanced and customized solutions to high value customers.

2. Eliminate barriers to growth – It opens up both internal and external avenues to growth that were till now not known. Barriers can take any form ranging from :

- the size of the company leading to lack of communication,

- lack of salespeople’s knowledge about the product,

- Unproductive work environment.

- Too much focus on cost cutting or on improving EBIT creative a disincentive for investment in growth

3. Continually manage for sales and marketing excellence – It’s a continuous process of bench marking till the company reaches world-class levels of performance.

- Measure the sales organization – not merely in quantitative terms like sales per salesperson or the number of new customers but it is also necessary to identify the underlying drivers for example the way marketing partners are selected, is it intuitively or based on strategic and operational criteria.

- Identify and prioritize improvement measures – develop standards for different marketing and sales activities and measure for few of the key priority activities.

- Implement the standards and measures of business productivity.

Conclusion…both work better together!

Both Organic and In -Organic Growth options offer intrinsic value in their own way and the choice is dependant on the market and industry scenario as well as the strategic vision of the business. In fact, a good management principle would be to use a combination of both methods to gain a steady growth pattern in the business.

Using Organic Growth options for things which you do best, and using In-Organic growth measures for expanding the business potential is a potent mix when it comes to gearing up for growth. For example, a business which offers high-end technology consulting should use Organic Growth measures to build on billing and use an In-Organic step (by acquiring a systems integration company or similar) to help increase the service portfolio.

Global examples of Organic and In-Organic Growth

In 2006, when Dell Computers acquired Alienware, it created news, as it was a deviance from Dell’s historical organic growth strategy. In 2007 Dell acquired five companies in a span of four months. The changing market conditions and reduced PC sales made Dell re-think its ideas towards growth without sacrificing their strategy of customer-driven innovation.

Sun Executive Vice President of Corporate Development and Alliances, Brian Sutphin, is of the opinion that In-Organic Growth is not necessarily in conflict with the organic growth. He says that acquisitions are meant to complement the organic growth rather than act as a substitute. They bring in talent and technology that was ‘elsewhere’ and which can now be integrated to boost company performance.

Thus, smaller companies with a low risk taking abilities should establish their presence in the market through organic approach to growth and eventually should look to accelerate their growth rate by strategic acquisitions once they have the financial ability to bear the risks that come along with mergers and acquisitions.

Bigger companies on the other hand should allocate their investment capacity between internal investments on enhancing competitiveness and acquisitions to tap into faster growth options by consolidating within the industry, acquiring presence in other markets and bringing in newer technologies and talents that complement and enhance their competitive position.

M&A news:- Why HP Is Buying Palm And Why It Will Fail

Posted by thehrdiary on October 12, 2011 at 10:10 PM Comments comments (0)

Why HP Is Buying Palm And Why It Will Fail

Dan Frommer|April 28, 2010

http://articles.businessinsider.com/2010-04-28/tech/29971413_1_hp-webos-smartphone

the odds of this working are very low, and HP's plan will probably not be successful.

Simply put, HP wants what Apple has: One operating system, which it completely controls, at the heart of all of its consumer electronics -- phones, tablets, lightweight PCs, perhaps music players, digital cameras, televisions, etc. And HP doesn't want to have to license it from Microsoft anymore, always having to wait for Redmond to make a move before HP can.

So that's what we think HP will do with WebOS, the newish operating system and app platform that it just bought along with Palm. Besides an obvious move into smartphones, we think HP will quickly use WebOS as the basis for its slate tablets, and perhaps eventually release WebOS netbooks and other devices.

The problem is that WebOS, despite its nice user interface and some nice technical qualities, is a failed platform. Consumers haven't found a need to buy Palm devices instead of Apple or Android devices. (For proof, Palm just slashed its guidance by almost half.) And, as importantly, developers haven't found a need to develop for WebOS, either. Without unique apps, there's no reason to have a unique platform.

Meanwhile, the mobile platform industry is becoming a waltz of elephants. Apple's iPhone and Google's Android are running away as the dominant platforms for smartphone apps, and both platforms are being ported to run on tablets. Windows will also be around on tablets, with lots of Windows apps already ready to run on it. So here, too, HP will be starting in fourth place, and trying to improve from there.

To be sure, there's always the chance that HP will do something brilliant, and that its phones and tablets will be wonderful devices that are huge hits with consumers. But that's magic that HP has never found in the consumer electronics industry, and Palm hasn't had in years.

So the odds are likely that HP's big bet will be a flop, and that it'll have to go crawling back to Windows or Android, whichever is the dominant consumer electronics platform in a few years.

Corporate Culture news:- Bell Atlantic-TCI merger failed because after they found their corporate cultures clashed

Posted by thehrdiary on October 12, 2011 at 9:05 PM Comments comments (0)

http://bx.businessweek.com/mergers-and-acquisitions/view?url=http%3A%2F%2Fimages.businessweek.com%2Fss%2F09%2F04%2F0407_failed_merger_talks%2Findex.htm

Bell Atlantic-TCI

1993-94

In 1993, in what was then the largest planned corporate merger, Bell Atlantic, a phone company serving northeastern U.S. states, agreed to pay $33 billion for the nation's largest cable-TV company, Tele-Communications. The deal collapsed in early the next year as John Malone, then-CEO of TCI, and Raymond W. Smith, head of Bell Atlantic, found their corporate cultures clashed. Bell Atlantic is now part of Verizon Communications (VZ). TCI was ultimately was acquired by AT&T (T) in 1999 and sold to Comcast (CMCSA) in 2001.

 

Merger and Acquisition - A Strategy for Corporate Growth

Posted by thehrdiary on October 12, 2011 at 3:00 AM Comments comments (0)

Merger and Acquisition - A Strategy for Corporate Growth

By Dave Kauppi

http://ezinearticles.com/?Merger-and-Acquisition---A-Strategy-for-Corporate-Growth&id=175510

Two companies that are recognized as among the best at making successful acquisitions are General Electric and Cisco Systems. These companies have been star performers in growing shareholder value. The core principal that runs through almost every acquisition is integration. Over the past 10 years Cisco Systems has acquired 81 companies. Their stock price is up a remarkable 1300%. GE outperformed the S&P 500 index over the same period by 300%. There are several categories of strategic acquisition that can produce some outstanding results:

1. ACQUIRE CUSTOMERS - this is almost always a factor in strategic acquisitions. Some companies buy another that is in the same business in a different geography. They get to integrate market presence, brand awareness, and market momentum.

2. OPERATING LEVERAGE - the major focus in this type of acquisition is to improve profit margins through higher utilization rates for plant and equipment. A manufacturer of cardboard containers that is operating at 65% of capacity buys a smaller similar manufacturer. The acquired company's plant is sold, all but two machines are sold, the G&A staff are let go and the new customers are served more cost effectively.

3. CAPITALIZE ON A COMPANY STRENGTH - this is why Cisco and GE have been so successful with their acquisitions. They are so strong in so many areas, that the acquired company gets the benefit of many of those strengths. A very powerful business accelerator is to acquire a company that has a complementary product that is used by your installed customer base. Management depth and skill, production efficiency/ capacity, large base of installed accounts, developed sales and distribution channels, and brand recognition are examples of strengths that can power post acquisition performance.

4. COVER A WEAKNESS - This requires a good deal of objectivity from the acquiring company in recognizing and chinks in the corporate armor. Let me help you with some suggestions - 1. Customer concentration; 2. Product concentration; 3. Weak product pipeline; 4. Lack of management depth or technical expertise and 5. Great technology and products - poor sales and marketing.

5. BUY A LOW COST SUPPLIER - this integration strategy is typically aimed at improving profit margins rather than growing revenues. If your product is comprised of several manufactured components, one way to improve corporate profitability is to acquire one of those suppliers. You achieve greater control of overall costs, availability of supply, and greater value-add to your end product

6. IMPROVING OR COMPLETING A PRODUCT LINE - this approach has several elements from other acquisition strategies. Successfully adding new products to a line improves profitability and revenue growth. Giving a sales force more "arrows in their quiver" is a powerful growth strategy. You take advantage of your existing sales and distribution channel (strength). You may be able to improve your competitive position by simplifying the buying process - providing your customers one stop shopping.

7. TECHNOLOGY - BUILD OR BUY? This is a quandary for most companies, but is especially acute for technology companies. Acquiring technology through acquisition can be an excellent growth strategy. The R&D costs are generally lower for these smaller, agile, more narrowly focused companies than their larger, higher overhead acquirers. Time to market, window of opportunity, first mover advantage can have a huge impact on the ultimate success of a product. First one to establish their product as the "standard" is the big winner

8. ACQUISITION TO PROVIDE SCALE AND ACCESS TO CAPITAL MARKETS - In this area, bigger is better. Larger companies are considered safer investments. Larger companies command larger valuation multiples. Some companies make acquisitions in order to get big enough to attract public capital in the form of an IPO or investments from Private Equity Groups.

9. PROTECT AND EXPAND MATURE PRODUCT LINES - This has been very effectively done in the pharmaceutical sector where a new technology is acquired to repurpose and re patent drugs.

10. PROTECT CUSTOMER BASE FROM COMPETITION - The telephone companies have done studies that show that with each additional product or service that a customer uses, the likelihood of the customer defecting to a competitor drops exponentially. Get your customers to use local, long distance, cellular, cable, broadband, etc and you will not lose them. Multiple products and services provided to the same customer dramatically improve retention rates.

11. ACQUISITION TO REMOVE BARRIERS TO ENTRY - For example, a large commercial IT consulting firm acquires a technology consulting firm that specializes in the Federal Government. The larger IT consulting firm has valuable expertise that is easily transferable to government business if they could only break the code of the vendor approval process. After many fits and starts, they simply acquired a firm that had an established presence. They were able to then bring their full capabilities from the commercial side to effectively increase their newly acquired government business.

Many larger firms have established business development offices to execute corporate growth strategies through acquisition. These experienced buyers search for companies that fit their well-defined acquisition criteria. In most cases they are attempting to buy companies that are not actively for sale. The win for the successful corporate acquirer is to target several candidates, buy them at financial valuation multiples, integrate to strength and achieve strategic performance.

Dave Kauppi is the editor of The Exit Strategist Newsletter, a Merger and Acquisition Advisor and President of MidMarket Capital, representing owners in the sale of privately held businesses. We provide Wall Street style investment banking services to lower mid market companies at a size appropriate fee structure.

Abbott Labs Acquires Piramal Unit

Posted by thehrdiary on October 11, 2011 at 5:50 AM Comments comments (0)

Abbott Labs Acquires Piramal Unit

By Zacks Investment Research on September 9, 2010

http://www.dailymarkets.com/stock/2010/09/09/abbott-labs-acquires-piramal-unit/

Abbott Labs (ABT) recently completed its acquisition of Indian company Piramal Healthcare Ltd.’s Healthcare Solutions business (Domestic Formulations) for $3.8 billion. In addition to an upfront payment of $2.2 billion, Abbott Labs will pay $400 million annually over the next 4 years.

Position Strengthened in Indian Pharma Market

The acquisition of Piramal’s Healthcare Solutions business should catapult Abbott Labs to the top position in the Indian pharmaceutical market, which is one of the world’s fastest-growing. The Healthcare Solutions business, which is now a part of Abbott Labs’ Established Products Division, grew 23% in fiscal 2010 and has a presence in several therapeutic areas including antibiotics, respiratory, cardiovascular, pain and neuroscience.

The Established Products Division focuses on branded generics especially in emerging markets.

Abbott Labs estimates that the Indian pharma market will generate $8 billion in sales this year – this amount is expected to more than double in the next five years. With this acquisition, the company expects its Indian pharmaceutical business to grow 20% annually, with sales slated to exceed $2.5 billion by 2020. The combined Abbott Labs and Piramal business should have a 7% share of the market.

Emerging Markets a Focus Area

This acquisition, which is not expected to affect Abbott Labs’ earnings per share guidance for 2010, is in line with the company’s goal of strengthening its presence in the generics business as well as emerging markets. The company is looking to double its presence in emerging markets, which currently account for 20% of the company’s revenues.

A few months back, Abbott Labs acquired the pharmaceuticals business of Belgian company Solvay Group. This deal has not only helped expand Abbott’s product portfolio, it has also allowed the company to expand its presence in the European market as well as emerging markets where Solvay has a strong presence.

Besides this, Abbott also signed a licensing and supply agreement with another Indian company, Zydus Cadila, for the commercialization of at least 24 Zydus products in 15 emerging markets.

Abbott Labs’ deal with Piramal is the latest in a series of deals signed by global pharma companies to expand their generics portfolio and strengthen their presence in emerging markets. While Pfizer (PFE) has agreements with two Indian companies, Aurobindo Pharma and Strides Arcolab, for the manufacture of several generic drugs, GlaxoSmithKline (GSK) has an agreement with Dr. Reddy’s Laboratories (RDY) for the development and marketing of select products in various emerging markets. Meanwhile, AstraZeneca (AZN) recently entered into a licensing and supply agreement with Aurobindo Pharma.

Neutral on Abbott Labs

We currently have a Neutral recommendation on Abbott Labs, which is supported by a Zacks #3 Rank (short-term Hold rating). Abbott has some very strong business segments and a great late-stage pipeline. We believe Humira will continue to be a strong growth driver in the years to come.

 

Sony in talks to buy Ericsson out of phone venture

Posted by thehrdiary on October 9, 2011 at 9:55 AM Comments comments (0)

http://www.reuters.com/article/2011/10/07/us-sony-ericsson-idUSTRE79553720111007

A Sony Ericsson logo on a smartphone is pictured at a mobile phone shop in Tokyo, October 7, 2011.

Credit: Reuters/Yuriko Nakao

By Tarmo Virki and Reiji Murai

HELSINKI/TOKYO | Fri Oct 7, 2011 12:26pm EDT

HELSINKI/TOKYO (Reuters) - Sony Corp is in talks to buy out Ericsson's stake in their mobile phone joint venture, a source said, in a bid to catch up with rivals.

The move could help Sony recoup ground in the battle against Apple Inc and Samsung Electronics, where it has been hampered by its disparate offerings of mobile gadgets and online content.

Tablets, games devices and other consumer electronics are offered under the Sony brand, while smartphones come under Sony Ericsson.

Sony and Telefon AB LM Ericsson have been talking for weeks about the future of the 50:50 joint venture because the companies must decide this month whether to renew their 10-year-old pact, two industry sources told Reuters.

A source with direct knowledge of the matter told Reuters on Friday Sony was discussing a buyout. The source did not want to identified because the talks were not public.

Yoshiharu Izumi, an analyst at J.P. Morgan in Tokyo, said the deal could be worth upwards of $1.3 billion, depending on what agreement the two reach about the continuing use of Ericsson's telecoms patents.

"Up to now Sony's products and network services have all been separate. Unifying them would be positive," Izumi said.

"If they can leverage their games and other network services I think they can lift their share," he added.

The Wall Street Journal said in a report on Thursday the talks between the two companies were ongoing and could break up at any time, citing people familiar with the matter.

Ericsson and Sony declined to comment on the talks. "We have a long-term commitment to our joint ventures," said an Ericsson spokesman.

"The talks are not something that have been announced by Sony. We are declining to comment," said Mami Imada, a Sony spokeswoman in Tokyo.

DEAL-FINANCING CONCERNS?

Sony's shareholders, however, appeared wary of any deal that would burden the company's finances. Its stock was down 3.3 percent at 1,422 yen on Friday afternoon, compared with a 1.4 percent gain in the benchmark Nikkei 225 index.

"It's not necessarily bad news, but the share is falling, so investors apparently see some minuses, such as concerns about how Sony would finance the purchase, as well as the difficulty of valuing Ericsson's patents," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, which owns Sony shares.

The joint venture, formed in 2001, thrived after its breakthroughs with Walkman music phones and Cybershot cameraphones, both of which leveraged Sony's brands.

But it lost out to bigger rivals Nokia and Samsung at the cheaper end of the market, and was late to react to Apple's entry into the high-end of the market.

It has refocused its business to make smartphones using Google's Android platform, but has dropped to No. 9 in global cellphone rankings from No. 4 just a few years ago.

The joint venture is making some progress and turned in a net profit of 90 million euros last year after booking a loss of 836 million euros in 2009. But it reported another loss for the April-June quarter.

The venture is due to report its September quarter results on Oct 14.

"A buyout would make a lot of sense for Ericsson as I believe their share in the joint venture is worth to them between zero and minus 1 billion euros," said Sanford Bernstein analyst Pierre Ferragu.

"Whatever price they agree on, it would be a positive for Ericsson."

Shares in Sweden's Ericsson gained on the report and closed 6 percent higher at 69.20 crowns on Thursday.

Last month at the IFA trade fair in Berlin, Sony Ericsson's phones were presented inside the Sony hall, mixed with Sony's TV sets and new tablets.

(Additional reporting by Yinka Adegoke, Anna Ringstrom, Sven Nordenstam, Liana Balinsky-Baker, Tim Kelly, Lisa Twaronite; Writing by Isabel Reynolds; Editing by Erica Billingham, Joseph Radford and Muralikumar Anantharaman)

Abbott Labs Acquires Indian company Piramal Healthcare Ltd

Posted by thehrdiary on October 9, 2011 at 9:55 AM Comments comments (0)

Checkout this article for the reason why Abbott Labs Acquires Indian company Piramal Healthcare Ltd - By Zacks Investment Research on September 9, 2010 | More Posts By Zacks Investment Research | Zacks.com

http://www.dailymarkets.com/stock/2010/09/09/abbott-labs-acquires-piramal-unit/

Abbott Labs (ABT) recently completed its acquisition of Indian company Piramal Healthcare Ltd.’s Healthcare Solutions business (Domestic Formulations) for $3.8 billion. In addition to an upfront payment of $2.2 billion, Abbott Labs will pay $400 million annually over the next 4 years.

Position Strengthened in Indian Pharma Market

The acquisition of Piramal’s Healthcare Solutions business should catapult Abbott Labs to the top position in the Indian pharmaceutical market, which is one of the world’s fastest-growing. The Healthcare Solutions business, which is now a part of Abbott Labs’ Established Products Division, grew 23% in fiscal 2010 and has a presence in several therapeutic areas including antibiotics, respiratory, cardiovascular, pain and neuroscience.

The Established Products Division focuses on branded generics especially in emerging markets.

Abbott Labs estimates that the Indian pharma market will generate $8 billion in sales this year – this amount is expected to more than double in the next five years. With this acquisition, the company expects its Indian pharmaceutical business to grow 20% annually, with sales slated to exceed $2.5 billion by 2020. The combined Abbott Labs and Piramal business should have a 7% share of the market.

Emerging Markets a Focus Area

This acquisition, which is not expected to affect Abbott Labs’ earnings per share guidance for 2010, is in line with the company’s goal of strengthening its presence in the generics business as well as emerging markets. The company is looking to double its presence in emerging markets, which currently account for 20% of the company’s revenues.

A few months back, Abbott Labs acquired the pharmaceuticals business of Belgian company Solvay Group. This deal has not only helped expand Abbott’s product portfolio, it has also allowed the company to expand its presence in the European market as well as emerging markets where Solvay has a strong presence.

Besides this, Abbott also signed a licensing and supply agreement with another Indian company, Zydus Cadila, for the commercialization of at least 24 Zydus products in 15 emerging markets.

Abbott Labs’ deal with Piramal is the latest in a series of deals signed by global pharma companies to expand their generics portfolio and strengthen their presence in emerging markets. While Pfizer (PFE) has agreements with two Indian companies, Aurobindo Pharma and Strides Arcolab, for the manufacture of several generic drugs, GlaxoSmithKline (GSK) has an agreement with Dr. Reddy’s Laboratories (RDY) for the development and marketing of select products in various emerging markets. Meanwhile, AstraZeneca (AZN) recently entered into a licensing and supply agreement with Aurobindo Pharma.

Neutral on Abbott Labs

We currently have a Neutral recommendation on Abbott Labs, which is supported by a Zacks #3 Rank (short-term Hold rating). Abbott has some very strong business segments and a great late-stage pipeline. We believe Humira will continue to be a strong growth driver in the years to come.

Seagate buys Samsung hard disk unit

Posted by thehrdiary on October 9, 2011 at 9:50 AM Comments comments (0)

Checkout this article for the reason why Seagte buys Samsung HDD. - By Supantha Mukherjee and Miyoung Kim

http://mobile.reuters.com/article/idUSTRE73I1CG20110419?irpc=932

BANGALORE/SEOUL (Reuters) - U.S.-based Seagate Technology's $1.4 billion acquisition of Samsung Electronics Co's loss-making hard disk drive (HDD) business pits it head-to-head with Western Digital Corp in an industry that has been dogged by price wars.

The sector is battling persistent sales growth declines and faces a longer-term threat from wireless tablet devices such as Apple's iPad that use more power-efficient flash, or solid state, drives (SSD).

However, Seagate Chief Financial Officer Patrick O'Malley downplayed those concerns, saying increasing use of data would drive demand for storage.

"We look at tablets as a good thing as they will spur data-rich consumption, which is certainly good for storage and HDD storage," he told Reuters by telephone.

The rising popularity of tablets is expected to drive demand for external drives and for so-called 'cloud' storage -- or online data storage -- helping companies like Seagate.

"SSD business is primarily in the enterprise space. Today, it is still a small percentage, but longer term it could be 5-10 percent of the total enterprise market," O'Malley said.

"Mainframe enterprises -- the Yahoos and Googles of the world -- have a lot of storage needs."

Both Seagate and Western Digital have been struggling to adapt to a future where fewer consumers have laptops and many view flash drive as the future of the disk drive industry.

The deal will give Seagate access to Samsung's NAND-type flash chips for its solid state drive products.

It comes just a month after Western Digital said it would buy the HDD unit of Hitachi Ltd -- a known price aggressor -- for $4.3 billion.

The acquisition will increase Seagate's market share to 40 percent, while Western Digital and Hitachi combined will have around half the market, Rodman and Renshaw's Ashok Kumar said.

"Hard disk drive is a commodity business. It's very hard to make money if rivals try to undercut each other," said Wedbush Securities analyst Kaushik Roy, noting there should be fewer price wars with only three players left standing.

Toshiba Corp, which bought Fujitsu's HDD unit in 2009, will have around a 10 percent market share.

Seagate had sales last year of $11.4 billion, while Western Digital posted 2010 revenue of $9.85 billion.

For Samsung, the world's largest technology firm by revenue,

exiting the cut-rate HDD industry will allow it to focus on its bread-and-butter memory chip business.

After the deal, Samsung will supply NAND-type flash chips to Seagate, while it will source Seagate HDD for PCs, laptops and consumer electronics products. Seagate will also get access to Samsung's customer base across China and Southeast Asia.

"We are not huge consumers of NAND right now, which has somewhat restricted our access to that (SSD) market because we don't have key supply. Now we have access to technology and supply," O'Malley said.

Western Digital is also looking to reap the benefits of Hitachi's partnership with Intel Corp that allows it access to the chipmaker's NAND flash technology.

"Seagate and Western Digital were late in the SSD space, but they will gain a lot of market share as these guys have scale, relationships and the distribution channels," Roy said.

Analysts expect the entry of Seagate and Western Digital to create headwinds for smaller existing flash chip makers such as STEC Inc and Ocz Technology Group Inc.

Solid-state or flash market is currently dominated by Intel, Micron, Samsung and STEC.

DEAL DETAILS

Samsung will receive 45.2 million Seagate shares -- about 9.6 percent of the company -- worth $687.5 million and the rest will be paid in cash. With the deal, Samsung will become Seagate's second-largest shareholder.

Seagate expects the deal to "meaningfully" add to its earnings per share and cash flow in the first year, and said it plans no material restructuring costs.

Morgan Stanley was financial adviser to Seagate, while Allen & Co was financial adviser to Samsung and Paul, Hastings, Janofsky & Walker was its legal adviser.

Separately, Seagate posted third-quarter profit below market expectations on lower hard-drive shipments, and forecast a fourth-quarter profit below estimates.

The sale should give South Korean giant Samsung more firepower for acquisitions and expansion into new business areas such as healthcare and green energy.

Seagate shares last traded down 1.7 percent at $17.53 on Tuesday on Nasdaq.

(Additional reporting by Himank Sharma in Bangalore; Editing by Joyjeet Das)