Why Sprint's Softbank Deal Is Good for Yahoo!
NEW YORK (TheStreet) -- SoftBank (SFTBY:OTC) just dropped $20 billion to buy control ofSprint Nextel (S).
Showing posts with label Sprint. Show all posts
Showing posts with label Sprint. Show all posts
Monday, October 15, 2012
Wednesday, August 31, 2011
Why the DOJ was Right and Pro-Capitalist to Block AT&T - T-Mobile
Wednesday, April 06, 2011
Don’t Tell Mom, Cisco’s Board is Dead Asleep
John Chambers has got to go as Cisco CEO. For the last 4 years, he's been paid $56 million while the stock has dropped 35%. Here's what shareholders should do.
Read my full post at Forbes.
Monday, August 02, 2010
Research In Motion Needs Some Buzz
By Eric Jackson
RealMoney Contributor
8/2/2010 5:21 PM EDT
Click here for more stories by Eric Jackson
Research In Motion (RIMM - commentary - Trade Now) will make an announcement in New York tomorrow, along with AT&T (T - commentary - Trade Now).
The companies could potentially make three product-related announcements at the event:
Sphere: Related Content
- They could unveil a new version of the standard BlackBerry (improving on the 9700) using a new operating system which is supposed to enable the BlackBerry to surf the Web and toggle between applications better than Apple's (AAPL -commentary - Trade Now) iOS andGoogle's (GOOG - commentary - Trade Now) Android.
- They could provide details about the rumored Slider device from Research In Motion, which is supposed to combine a large touch-screen device like the iPhone's with the tactile Research In Motion keyboard that slides out at the bottom for email.
- They could provide details about the November launch of the "BlackPad" - Research In Motion's entry into the tablet market.
Research In Motion is under enormous pressure to deliver buzz and excitement at the event. Last quarter's earnings were disappointing for investors -- overseas revenue was up because U.S. revenue was down. Investors are concerned that the company has hit an inflection point and that future growth will be much more tepid than what the company delivered from 2005 through 2008.
In the last earnings call at the end of June, Co-CEO Jim Balsillie seemed very confident that the company had exciting new devices on tap that would sell like hotcakes once they were introduced to the market. We will start to see if his optimism was justified or if it was more delusion.
If you review any of the top Web sites for the major wireless carriers, it's clear that BlackBerries are no longer the major draw. They are typically far down the list -- sometimes even after lower-end devices from LG and Samsung. Prices for BlackBerries are much lower than what you see for the high-demand devices, and this should continue to affect Research In Motion's margins in the current quarter.
It's amazing how quickly the mobile landscape can change. How many of us took HTC seriously even eight months ago as a major player in the space, as opposed to regarding it as a second-tier alternative? Yet, now, it's got two very hot devices, the Incredible and the Evo, that are making major revenue contributions to Verizon Wireless and Sprint Nextel (S - commentary - Trade Now) respectively.
And two years ago, Motorola (MOT - commentary - Trade Now) was floundering, supporting multiple operating devices and trying to replace its multi-year hit phone, the Razr. The newly installed co-CEO, Sanjay Jha, made a major bet on the Android operating system, which looked risky at the time but now appears to be starting to pay dividends.
....
Monday, April 06, 2009
Activist Investors Sidelined by Brutal Market
From TheStreet.com
By Eric Jackson
04/06/09 - 12:12 PM EDT
S , HD (Cramer's Pick) , MOT , WEN , TIF , CSX , TGT , YHOO
Earlier this year, Ken Squire, who runs the consultancy 13-D Monitor, which follows those filings with the SEC, wrote an article in Barron's predicting that 2009 would be a "golden age" for activists (which I also predicted recently).
His article made several strong points for why this should happen, including the low valuations, a favorable political climate likely to ease hurdles for activists to challenge companies, and shareholder discontent at record levels. Yet, this activist activity has yet to materialize. Why and when will this change?
There is a finite set of large activist investors in the world today with the assets to take on large public company battles. Some of the biggest have included: Relational Investors (active in Sprint(S Quote - Cramer on S - Stock Picks), Home Depot(HD Quote - Cramer on HD - Stock Picks), and National Semiconductor(NSM Quote - Cramer on NSM - Stock Picks) last year), Trian (active in Wendy's(WEN Quote - Cramer on WEN - Stock Picks) and Tiffany's(TIF Quote - Cramer on TIF - Stock Picks) last year), Carl Icahn (active in Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) and Motorola (MOT Quote - Cramer on MOT - Stock Picks) last year), The Children's Investment Fund (or "TCI," active in CSX(CSX Quote - Cramer on CSX - Stock Picks) last year), Jana Partners (active in Cnet last year), and Pershing Square (active in Target(TGT Quote - Cramer on TGT - Stock Picks) last year).
Like most investors, they had terrible results last year, although their previous 10-year returns have been outstanding. These activists suffered more in 2009 than other hedge funds because of two reasons: (1) they typically run long-only or long-biased funds and therefore had very little hedged going into last fall and (2) they have concentrated portfolios of typically fewer than 15 holdings, which can work very well in up years but terribly in down years.
These large activist funds have seen heavy redemptions in the last six months, and there is no reason not to believe they won't see more for the balance of this year. Even Jana Partners, which had relatively positive returns in 2008, has been hit with large redemption requests reportedly affecting 20% to 30% of assets.
As a result, all of them have pulled in their horns on potentially new activist campaigns, in favor of working out existing investments. Some activists are even exiting existing investments, after spending significant time and money on winning board seats (e.g., Relational exited its Sprint investment and TCI plans to exit its CSX investment later this year), in order to focus on a smaller set of investments within their portfolio.
To meet redemption requests, large activist founders have had to inject significant personal capital into their funds. Carl Icahn, whose fund was down 36% last year, put $500 million in. Bill Ackman recently invested a further $25 million in his Target-only fund Pershing IV.
Christopher Hohn, founder and head of TCI, who was recently regarded as one of the top activist investors in the world (and who some former employees cattily referred to as the "Sun King" made waves recently when he indicated he is considering turning his back on activism.
He complained at a recent investor day that activism was too "expensive and unpredictable," citing the recent $10 million spent by his firm on a bitter proxy battle with CSX last year (which he ended up winning, taking four board seats. He plans to give up those seats at the next annual meeting, possibly signaling an intent to sell CSX shares later).
The redemption siege mentality gripping large activist managers (which carries over to other hedge fund managers as well) is, in my opinion, the biggest reason for the drop in large activist battles. The New York Times recently reported that new activist campaigns dropped by nearly 80% in the fourth quarter of 2008 compared to a year earlier, according to data from Thomson Reuters, and activists made 59 new investments last month, compared with 87 a year earlier, according to Hedge Fund Solutions.
Of course, the evaporation of credit has taken away one "quick fix" strategy out of the quiver of some activists: Call on the company to take on an unhealthy amount of debt in order to buy back shares to artificially boost EPS and immediately dividend out this cash to shareholders -- all in the name of "creating shareholder value."
Marty Lipton, who has been corporate America's top watchdog against activist investors, recently attacked these kinds of practices, asking: "Can the global economy afford to allow institutional investors, who are seeking to maximize the price of their shares on a daily basis, determine industrial business, policy and strategy of major corporations?"
Of course, there are examples of bad behavior at both ends of this spectrum: greedy, short-termist activists enriching themselves at the expense of long-term holders, and greedy, out-of- touch boards and CEOs filling their own pockets out of the company till while driving a company's value into the ground. There can be highly effective boards and CEOs, as well as highly effective activist investors who advocate actions that are in the company's and its long-term shareholders' interests.
The fact is that Ken Squire's thesis is still correct that the broader environment has made it much more favorable for activist investors to launch campaigns. There are many companies today trading at or near their cash levels. Some of these companies are in this situation due to the wash-out of the broader market, but many are there because of their boards approving poor capital allocations (buying back stock at the top of the market or taking on large amounts of debt which cannot be rolled over), poor acquisitions, excessive compensation, or simply leading their company to value-destroying mediocrity.
A year from now, the SEC is likely to approve a new "proxy access" rule making it much less expensive for activists and other shareholders in general to challenge boards doing a poor job representing their interests in overseeing the company's direction. It's likely that many smaller activist investors will be involved. The most active activists today are the firms going after companies below $2 billion in market capitalization -- on the assumption that they can have more sway over these companies because they can hold a larger percentage of shares than would be possible if they went after the larger public companies.
Yet even the most favorable conditions will promote activist campaigns against large-cap companies if the current generation of large activists continues to be inwardly focused by their redemption and performance problems.
This could be a generational succession moment for activist investors, where the elders give way to a next generation of activist investors taking on the largest companies in corporate America.
For this next generation of activists to successfully take over this mantle of their industry, they must do the following:
- Hedge, in order to preserve partner capital in the event of terrible years like 2008. The days of long-only are over.
- Build a reputation for always doing right for shareholders (especially long-term holders). Some of the "quick fix" activists of the last five years never won the trust of large mutual funds and pension funds, who tend to be the biggest holders of stock of the large-cap companies. As a result, proxy contests failed to win over the support of this important constituency, for fear of how these activists would represent their interests properly.
- Focus more on strategy and operations, less on single events. There will always be a place for activist investors to go after a company, advocating they sell a single division, or do a quick dividend to shareholders. However, these situations tend to be more prevalent in small-cap companies. Large-cap companies, by definition, have more complex problems and require more complex solutions. The next generation of top activists will understand this and have deep expertise in their firms on strategy and operations.
- Use the tools of the Internet and social networking. In 2007, when I ran a successful activist campaign against Yahoo!, which resulted in unseating Terry Semel as CEO after a large "no" vote at the annual meeting, I owned 96 shares of Yahoo! However, I was able to get my message out to large and small shareholders via my blog, YouTube, wikis, Facebook and Twitter. More than calling attention to my ideas, these social networking tools allowed fellow shareholders to pledge support to my group and encouraged them to suggest additional ideas for how Yahoo! could improve. I was most surprised and pleased with how many existing Yahoo! employees participated. Yet, their interests were perfectly aligned with our groups: We were all stockholders of Yahoo! and wanted to see the stock price go up through needed changes, which the current board and management were not making. The next generation of large activist investors will be masters at using the Internet to conduct their campaigns.
- Be more collaborative, less combative with target companies. It will always be necessary to run successful -- sometimes nasty -- proxy contests against entrenched boards and management. In my opinion, the Yahoo! board, for example, will never respond to a "nice guy" activist approach. It is so entrenched and disconnected from the opinions of shareholders that it would be impossible to reason with them. There's a time to knock heads. However, some activists only knock heads. They only know how to hit one key on the piano. The next generation of activist investors will be able to play hard ball but tend to be much more collaborative with the board and the CEO -- at least at the beginning, until reasonable dialog leads nowhere. Such an approach is also far less expensive than an "all-negative, all-the-time" approach.
There is a job opening in the activist investor industry. Wanted: the next generation activist investor leaders to take the lead in waging successful campaigns against large cap companies. Who will assume the mantle? We'll see over the next few years.
At the time of publication, Jackson was has no positions in stocks mentioned.
Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.
Sphere: Related ContentThursday, December 11, 2008
TheStreet.com: Why 2009 Will Bring More Activism
From TheStreet.com:
By Eric Jackson
12/11/08 - 09:59 AM EST
With the market's tumultuous last few months driving down the price of equities, activist investors around the world have seen their stock investments take major hits.
- Carl Icahn has watched the value of his Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) stake drop in half since May;
- Ralph Whitworth of Relational Investors recently resigned from the board of Sprint Nextel (S Quote - Cramer on S - Stock Picks) but kept his stake in the company, even as shares have dropped 80% this year;
- Chris Hohn of The Children's Investment Fund exited his J-Power position at a loss earlier this year, after his calls for change were beaten back by the Japanese utility. Some market-watchers suggest that after 10 to 12 years of growth as a strategy, investor activism is dead. Why? Poor returns, they say, and because the freezing-up of the credit markets prevents activist shareholders from calling on companies to lever up with debt to fund stock-buyback plans or increase dividends.
1. Obama will look favorably on pro-shareholder measures. Republican Securities and Exchange Commissioners have typically supported pro-management/Business Roundtable policies. Democrats have been much more supportive of shareholder activists. The Business Roundtable and other pro-management groups have portrayed shareholder-friendly measures -- such as making it easier to run alternative board candidates on the company's proxy -- as moves that empower fringe, or special interest, shareholders such as the AFL-CIO and Teamsters at the expense of plain-vanilla investors (retail or institutional).
Obama supports a different view and will likely equate more shareholder rights that promote better governance with better shareholder returns over time.
2. The new SEC Chair will sponsor several new shareholder-friendly measures. Obama will appoint an SEC chairman in the image of the last Democrat to hold that position, Arthur Levitt -- someone who will fight for openness, fairness and rights for all shareholders.
"Proxy access" was an initiative supporting the rights for shareholders to put forward alternate names of directors to be elected at the annual meeting proxy vote. Instead of having to fund a proxy contest themselves (vs. an incumbent board funding their re-election with the shareholders' money), "proxy access" would have allowed for these alternate names to appear on the company's own proxy and let the shareholders simply vote for the most qualified people to represent shareholder interests. This initiative died when the two Democratic SEC Commissioners retired and were not replaced.
Expect "proxy access" to return in the new administration in some form, helping to ensure the best possible people are serving as directors on our boards.
3. Valuations are on the floor. Activist investors are typically value investors who layer their activist efforts on top of a buy-and-hold approach to an undervalued stock. Value investors have been especially hard hit this year. Fortunately, the mass selling appears to have stabilized. While cheap should never be confused with value, it's likely that valuations will rise over the next 12 months and take the fortunes of activist investors with them.
4. A flight to quality in hedge funds will benefit activist investors. The hedge fund industry is going through a remaking of itself and will no doubt be a much smaller industry two years from now. The biggest and most successful ones will grow in a flight to quality. Activist investors with long and successful track records will benefit, even if their returns in 2008 are poor. Institutional investors can understand the activist strategy and how it's executed. It's not a black box and that is going to be helpful to activists in raising capital over the next few years.
5. Management and corporate boards will not want to be viewed as anti-shareholder. After seeing their market capitalizations decimated over the last 12 months, boards and management teams at public companies are sensitive to criticism. Lavish pay and executive perks are out. Assuming activists have legitimate arguments about actions that will unlock shareholder value, it will be much easier for them to get the ear of managements and boards in the next 24 months.
6. There will be a wave of industry consolidation. M&A has dried up in 2008 as corporate acquirers and targets kept their heads down in the foxhole. That's about to change. With valuations so low, there's never been a better time for stronger players to pick off the weaker ones in their industry.
At the same time, no board wants to make the mistakes that Yahoo! and Take-Two (TTWO Quote - Cramer on TTWO - Stock Picks) did this year by playing hard to get when a rich buyout offer came along. Activist investors will play a background role. For example, look for Bill Ackman of Pershing Square to push together Barnes & Noble (BKS Quote - Cramer on BKS - Stock Picks) and Borders (BGP Quote - Cramer on BGP - Stock Picks) (as he has a stake in both companies).
7. Activists have the longest lock-up periods of any hedge fund class, so they can put fresh capital to work. With hedge funds reeling from heavy redemptions, the funds in the strongest position this year are the ones with the longest lock-up periods. A lock-up is the amount of time a hedge fund investor must keep his/her money invested in the fund before being able to redeem.
Activists, at least the most successful ones, have among the longest lock-ups in the hedge fund industry, at 3-5 years. The logic for asking for such a lock-up is that activists understand that their hold period in a particular position might be many years, comparable to a private equity holding period. Unlike private equity, though, activist investors have their positions marked to market every day.
Activists know a six-month investment return in Sprint is likely to differ from a three-year investment return. With these long lock-ups, activists will be less affected by heavy redemptions this year than most other hedge funds. This means they'll have more money to put to work next year.
8. Limits on short-selling will benefit activists. As previously mentioned, the SEC is about to become more shareholder-friendly under the new administration. The agency also will likely seek to promote growth in the stock market. Short-sellers could come under more restrictions, promoting long-biased investors. Although no outright ban on short-selling will occur, a return of the uptick rule is likely. Any limits on short-selling like this will help long-biased investors like activist investors.
9. Activists will become more balanced on the long and short sides. Even though activists have typically been long-biased or long-only before 2008, the only investments that have made money this year are short bets. Activists will learn from this year's action to have a more balanced portfolio of investments on the long and short sides. Some activist investors like Greenlight Capital and Pershing Square have always taken this balanced approach. Expect others to follow their lead. This will improve performance and provide them with more capital to put to work in additional activist campaigns.
10. There's more to get "active" about than ever. Even post-Enron and post-Sarbanes-Oxley, 2008 has shown shareholders that there is more than ever to get outraged by in the actions and inaction of corporate boards.
Where was the oversight at Bear Stearns, Lehman, Citigroup (C Quote - Cramer on C - Stock Picks) and GM (GM Quote - Cramer on GM - Stock Picks) this year?
We hear a lot of CEOs and boards refer to a "perfect storm" occurring this year, an attempt to place responsibility for their companies' results on events outside of their control. Bob Rubin, director at Citigroup, recently said it wasn't realistic to expect a year ago that housing prices would drop as precipitously as they have. Although no omniscient board has yet been found, there are many that did an excellent job at protecting and growing capital in the last year.
As activists challenge the poorer-performing boards, the result will be stronger companies and better performance in the future. If these shareholder representatives are not questioned and are allowed to continue rubber stamping the will of management, we will have learned nothing from the debacle of the last 12 months.
At the time of publication, Jackson and his fun had no positions in stocks mentioned.
Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. Sphere: Related Content
Subscribe to:
Posts (Atom)
