When Colluding With A Competitor, Perhaps Don't Send A Direct Email Suggesting You Keep Prices High

from the might-come-back-to-bite-you dept

It's rather rare these days to see collusion lawsuits where there's overt evidence of collusion. Instead, it's usually implicit collusion where a case needs to be made that this is a problem. However, every once in a while you still get those good old fashioned situations where there's evidence of direct price fixing. For example, the Inquirer points us to a case involving questions of collusion in the graphics card market between ATI and NVIDIA, where it appears NVIDIA's VP of marketing sent an email to ATI's president and chief operating officer suggesting that, while the two companies were competitors, they should work more closely to make sure their stock prices each remained high. Apparently, the lawyers in the case tried to hide that document as a "trade secret." If you consider it to be a "trade secret" that the two companies may have been collaborating, then perhaps they have a point. But the judge didn't buy it: "This court is not a wholly-owned subsidiary of your companies. I am against you hiding information from the public."

25 Comments | Leave a Comment..

Do Big Tech Acquisitions Ever Work Out?

from the destruction-of-value dept

With the positively yawn-inducing news over the weekend that Yahoo had rejected yet another offer from Microsoft, Joel West is reminding people that big acquisitions almost never make sense and very often destroy value. As an example, he points to the news that AMD is writing down $880 million on its acquisition of ATI only 8 months after it already wrote down $1.6 billion. That's $2.5 billion wiped out in a very short period of time. As West notes, small acquisitions can make sense for small companies, at least in allowing their founders to cash out -- but for big companies it's usually more about ego: helping them move up the Fortune 500. But those deals almost never work out:

The fundamental problem of acquiring public companies is that you have to pay more than the market price -- so the claim is either you know better than the market (never true) or that you will realize synergies that increase the value of the acquired company (almost never true). So the choice is between buying overpriced good companies, or troubled companies not worth buying at any price. Acquiring a troubled company means you acquire their troubles -- whether it's exposure to an industry past its peak (AOL Time Warner, Viacom-Blockbuster) or a company with a justifiably lousy market position (Daimler Chrysler).

The other aspect that he doesn't touch on is that with big companies, there are always investment bankers crawling all over management trying to convince them to buy up other companies one week, and sell off pieces the next. This "buy 'em up, sell 'em off" strategy almost never works for anyone but the investment bankers who take their fees both coming and going. So as the silly battle continues around Microsoft and Yahoo, rest assure that pretty much whatever happens, you can expect to see a destruction in value rather than any "synergies" revealed.

11 Comments | Leave a Comment..

AMD Finally Admits That ATI Acquisition Didn't Work Out As Planned

from the sorry-about-that dept

Over the summer, we wrote about problems with the merger between AMD and ATI, and folks in the comments insisted we were being too harsh and not giving the deal nearly enough time (along with some words bizarrely suggesting that we were "in bed" with Intel for suggesting any problems at AMD). Turns out that AMD actually agrees with our assessment that the merger has been something of a mess. The company has admitted that it's going to do a material write-down on the merger, though it hasn't yet figured out how much. Either way, it's yet another reminder that merging two big companies isn't a particularly easy process.

5 Comments | Leave a Comment..

Former ATI Chief Quits AMD, Signalling An Unhappy Marriage

from the a-chip-on-your-shoulder dept

One of the biggest losers in the tech world right now is AMD, which has been getting its clock cleaned by Intel. Just a year ago, AMD was taking market share away from Intel, and with its acquisition of graphics chip maker ATI, it was supposed to establish technological supremacy over its much larger rival. But that dream has turned into a nightmare. The company announced today that David Orton, ATI's former CEO, would be stepping down, as plans to integrate the two companies' technology has been going slowly. Orton insists that he's still optimistic about AMD's chances (whatever that's worth), but it definitely appears that the company bit off way more than it could chew, in trying to do a major acquisition while simultaneously getting itself into a brutal price war with Intel.

16 Comments | Leave a Comment..