About this I mean. I doubted that the top tier IT firms would have much to do about pending tax plans. How wrong I was as one of the biggest ones — Microsoft — rattles the tax saber. –
Microsoft Corp. Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.
“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”
Obama on May 4 proposed outlawing or restricting about $190 billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.
U.S. tax rules let companies defer paying corporate rates as high as 35 percent on most types of foreign profits as long as that money remains invested overseas. Obama says he wants to end such incentives to keep foreign profits tax-deferred so that companies would invest them in the U.S.
Microsoft reported an overall effective tax rate of 26 percent for 2008 in its last annual report. “Our effective tax rates are less than the statutory tax rate due to foreign earnings taxed at lower rates,” the report said.
Barry Bosworth, an economist in Washington at the Brookings Institution research center, said many software companies such as Microsoft have exploited tax and trade rules in the U.S. and other countries to achieve a low overall tax rate.
No Microsoft won’t go over lock, stock, and barrel but they will shift as much of their labor force as possible to sites other than US. Which means that if MS is thinking it, you can bet the CFO’s of ALL the top IT suppliers have been given the order by the CEO to run the numbers and make a recommendation.
Bottom line. If they up the tax, more jobs will be lost, the recession deepens and tax receipts fall. Obama, good move dude. If you wanted to destroy the economy of the US that is.
[Update]: The political blog HotAir give its tongue-in-cheek coveted ‘Louis Renault Award’ to Ballmer for his blatant shock of the implications of being a big Obama contributor. Link.
Sun shares are as of this posting hovering at $6.31 a share. That is down from the $8.50 close on Friday. Rumors are the talks are in break down over issues related to ‘guarantees’ –
People familiar with the situation said Sun’s board rejected a formal acquisition offer by IBM on Saturday, sending a notice terminating Sun’s agreement to negotiate exclusively with IBM. IBM on Sunday withdrew its offer to buy Sun, said a person informed about the situation. Another person familiar with the negotiations suggested the situation was “fluid” and that advisers to the parties were still in touch by telephone.
The news sent Sun shares down $1.90, or 22%, to $6.59 in Monday trading.
Sun’s board is split over whether to do the deal, with a faction led by Sun’s chairman and co-founder, Scott McNealy, opposing the transaction and a group led by Chief Executive Jonathan Schwartz in favor, said two people familiar with the talks. While the price of IBM’s offer remained unclear — some placed it at $9.10 a share, others at $9.40 — some people familiar with the talks say price wasn’t the biggest issue.
Sun argued that the offer gave IBM too much “optionality,” or leeway to walk away from the deal, according to one person familiar with the talks. IBM believed that under the proposed framework, it would be fully committing to a deal.
I have rarely found a what amounts to a merger of equals. Have seen that up close and personal and it is far from that. The presumption that Sun wishes to dictate an assumption of guarantees as part of the deal is laughable at best. Companies aren’t guaranteed to be in existence tomorrow let alone that a merger deal will not fail. Which appears to be bad planning on Sun’s part. Had they wanted those kind of provisions they should have built themselves a series of poison pills years ago as a fall back.
As it is I am thinking there are some shareholders that are rather ticked about the current situation. After all the stock has lost 22% of its value in just 48hrs.
BOSTON — IBM Corp. withdrew its offer to buy Sun Microsystems Inc. for about $7 billion this weekend, clouding the prospects for a deal that would have shaken up the computing industry, The Associated Press has learned.Talks were in their final stages in recent days, but IBM took its offer off the table after Sun terminated IBM’s status as its exclusive negotiating partner, according to two people familiar with the situation, who spoke on condition of anonymity because they were not authorized to disclose the negotiations.
One of these people said the two sides were still meeting Sunday.
Typical theatre at this point. Considering that the HP-Oracle is just a little over half of IBM’s tender, not much worry so far. Especially since the stock price is at the $8.50/share range. Way over HP-O’s tender.
HP and Oracle are also tendering an offer for Sun. We reported on IBM’s offer here. The deal would have Oracle taking the Software assets and HP taking the manafacturing, firmware and OS components. The interesting piece is this offer appears to be a defensive postured affair and undervalued compared to IBM’s tender –
A potential deal between the three is understood to have been blocked by IBM, in the middle of talks to buy the whole of Sun for a reported $6.5bn.
Oracle, HP, and Sun declined to comment on what they called rumors, while IBM was unavailable for comment at the time of going to press.
A source, who didn’t want to be identified, told The Reg that Oracle and HP had gone in to meet Sun to discuss the possible deal.
It’s already been reported that Sun had been shopping itself around Silicon Valley, with HP named as a potential buyer.
This, though, is the first indication that HP had teamed with Larry Ellison’s M&A beast Oracle – which has bought 50 companies in four years – to take only what they wanted from Sun. At $2bn, this would have been one of Oracle’s large purchases, slotting behind PeopleSoft and BEA Systems.
HP, Oracle know that to permit the IBM deal to go through would make it rough on them on multiple liines of business. But are they any better fit than say IBM? Probably not and here is why.
Consider HP, why buy the Sun Sparc line? If you look at their product mix, HP has been better at keeping the products separated in the market than IBM. So to buy Sun hardware seems counter intuitive to their overall product plans. The counter argument is that like IBM, HP assumes it is cheaper to buy Sun market than compete against it. If both companies would intended to keep Sun manufacturing going then the key is their view on the value of the longtail.
Looking at Oracle I have even bigger concerns. To Sun’s credit they were trying to move to the Open Source model on the software side. That is something that Oracle practices, but I would not say it is with relish. IBM on the other hand has literally had to breath Open Source. If they had not done so in the 1990′s good chance they might not be here today. It’s part of their culture. The saving grace with Oracle doing so is that there is not much overlap with what they provide and Sun provides. Most projects would be able to continue without the redundancy review factor in play like with IBM.
The bottom line of course is will the shareholders be willing to settle for less than IBM is offering. When it’s cash, usually not.
IBM has opened acquisition talks with Sun Microsystems, raising the prospect of a massive consolidation of the software, server and storage markets.According to the Wall Street Journal IBM has mooted a price of $6.5bn. Sun is currently capitalised at $3.7bn ($4.97/share), but its share price has persistently fallen since the heady days of the dot com boom and has under-performed that of its computer systems competitors over the last few years, making it a much less expensive purchase now that it would have been three or four years ago. Legions of long-term Sun investors who have seen the value of their Sun holdings decline drastically will breathe a huge sigh of relief as they see the potential to make some money at least.
Any deal would likely bring very close scrutiny from regulatory authorities, given both firm’s roles in the server, storage and systems software markets.
With that will signal the end of a nearly 28 year Sun history. Will it pass regulatory muster? In a different time it would not. Today? It might. Sun would probably have to try and find buyers for some pieces to get the past the regulators. Probably the same pieces that IBM would not want anyway.
What’s in it for IBM? Market share. At Sun’s current stock price it is cheaper to buy their market base than it is to develop and compete against them. With the acquisition IBM could pull some tricks –
For Sun’s customers? Well confusion of course. But it will probably not be that bad in the short term. IBM will either directly or through outsourcers make sure they meet contractual warranty obligations. Systems developed today are much less dependent on the hardware layer than they were just 10 years ago. That being said there will probably be a minor rush to either acquire as backups or displace older Sun devices. Any good size IT installation that has used Sun in the past probably have a bevy of old Sun Sparc stations sitting in closests doing a couple of one trick pony services that nobody felt worth porting. A mini version of the y2K thing.
Long term there is probably no effects in the market. Sun was being squeezed at the top of their range by the Z class devices as they improved their price points. At the bottom end the Intel multicore processors were doing the same thing to Sun on the low end. Sun’s share of the midrange was shrinking. (As was HP’s and IBM’s by the way.) Given the current trajectories, Intel will own all the midrange in probably 10 years.
Which poses the question — does IBM’s buy hasten the process and force HP and IBM to rethink their midrange offerings? For if they do a write down on Sun’s manufacturing because they know Intel’s dominance is the future why not do it once? That is, also do a write off of the old AS/400 and the newer Power series line using non-Intel chips. Two write downs in one. The advantage of course is that the market will not react negatively to a write down of Sun assets as it will be expected. So doing so with the other assets will be favorable. It provides the boardroom cover.
Stan Beer, Microsoft fan boy extraordinarie takes another shot with Why the IBM Linux desktop will fail. The reason he is in error should be obvious. He is actually believing the IBM press on the offering and not looking at what is being offered specifically. Stan is just doing a MS Office shoot out comparison and not looking at the market this offering is targeted for. —
In fact, the only practical way for IBM to accomplish their goal of wooing enterprise users over to the virtual Linux desktop is to embrace Microsoft. Instead of trying to convince users to be Microsoft-free, IBM should be encouraging them to run their “legacy” Microsoft applications on a virtual Windows desktop side by side with their new Linux desktop applications, including Lotus.
Unfortunately for IBM and other Linux advocates, after nearly a decade and a half of trying, they still don’t seem to have got the message that in most cases trying to get enterprise Microsoft users to go cold turkey simply doesn’t work.
Last things first. Sorry Stan but the Linux crowd has only been after the desktop since about 2003. That’s 5 years not 15. The first 5 years was spent getting the Linux kernel to near parity with Unix class product. The next 5 were spent loading up server suite (eg LAMP) to head to head with Microsoft. Which by the way, they seem to be doing a fair job at. So you are comparing 5 years of effort by the Linux crowd to the nearly 30 years of hegemony of the Windows crowd. That Linux is at about 80% of what a std Windows load can do in 5 years is a damn good track record.
On to the first. Stan ole boy, quit reading the pink sheets dude. As much as this is touted as a ‘MS desktop killer’ it is not. That spin was put on to salve the two other partners — Canonical and Virtual Bridge. It is the only way IBM would have been able to get them on-board.
So what is IBM really doing here? Well look at the application suite — Symphony, Lotus Notes, and Domino R5/R6. Who is that? Why large IBM embedded multinationals — Verizon, AT&T, GM, etc. So why would such companies be interested in this? Risk mitigation. For the same reason that Stan offers that MS products are deeply embedded, so are products like Lotus Notes and Domino. Deeply so. Now look at the marketplace. Microsoft stumbled on Vista. Corporate adoption has been abysmal. The Corps are holding off till they see what is in W7. If MS stumbles again then what is in the mind of the CIO’s? But some companies feel they can’t wait. These Corps are bringing in new hardware but the port costs of moving all the IBM legacy apps is killing them.
So you look at that landscape and this ends up being IBM’s sandbox edgeline –
Well to make it portable it makes sense to consider a virtual desktop. Doing so also eliminates the porting costs. Adding the existing application base targets IBM current customers, not new ones. Being virtual, there is a level of decoupling on the base OS decision. The CIO/CFO can safely recommend the solution letting the MS-Linux war continue unabated. It makes old look new again in a gilded virtual cage. The fact that the partners were the ones doing most of the effort afforded IBM the chance to offer its existing product suite cheaply. Under $300 for the entire suite is cheap compared to their have-to-install counterparts.
As an MS Office killer? Never. Or almost so. But twist the crystal ball around. IBM is hedging against the MS – Linux OS battle not the MS Office – OpenOffice battle. IBM’s MF Office Suite has not been pitted against PC products in years. Nor is it likely to now. Its a defensive play pure and simple. The OS war is a battle that is far from certain as nobody has beaten free in the marketplace.
Linky.
Cross Post, Tightwad Technica
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