According to this story in the Wall Street Journal (it’s subscriber-only, sorry), AIG just got another $37.8 billion from the Federal Reserve. That puts the price tag for just bailing them out at $123 billion. This may be a sign that the $700 billion $850 billion may not be enough.
In other news, the national debt is now so high that the US debt clock has run out of digits. I don’t know if the figure includes the spending on wars in Iraq and Afghanistan.
The reporters who did the Giant Pool of Money story have followed up with Another Frightening Show About the Economy. Like the first show, this one is well worth setting aside an hour to listen to–much more worthwhile than the same amount of time spent watching network or cable news on the same subject. The explanations of precisely what frightened the U.S. Treasury and the Federal Reserve into begging for new legislation are especially worthwhile.
Other worthwhile stories on this topic include:
Having listened to a number of episodes of Planet Money, it’s proving to be a good podcast. Each one is a lot shorter than the stories I mentioned earlier, so they’re especially convenient if you haven’t got a lot of time.
The “Giant Pool of Money” episode of This American Life I blogged about in May has apparently spun off an entirely new podcast called Planet Money. If that first story is any indication, the new podcast will definitely be worth listening to.
For a great explanation of the current meltdown in mortgages, definitely check out this podcast. The two reporters put together a narrative that covers everything from a homeowner with a sketchy loan, up to a Wall Street exec who creates collateralized debt obligations (CDOs).
That’s how much one (1) euro cost me yesterday when I was converting currency with Chevy Chase Bank for an upcoming trip. You know things are bad when even the branch manager is surprised by the rate of exchange. The exchange rate is probably even worse today. Even if I took out the fees they charged, the exchange rate is probably 20-30 cents worse than it was when I first went to Europe in 2005.
It reminded me of economics classes in business school, and what we learned about what countries do to defend their currency. The Fed is doing the opposite of those things right now, so between that and deficits our government runs, I expect the dollar to be worth less and less in the near term.
A very interesting take on Universal offering DRM-free music directly instead of through iTunes. I think the writer is on target in describing the motives of Universal in cutting Apple out as a distribution channel.
If memory serves, the big record companies tried to push Apple into variable pricing not long ago. That move didn’t seem to work, as the 99-cent single is alive and well on iTunes.
The idea of Apple signing artists directly is an interesting one, but I don’t see Apple signing artists anytime soon. Artist management is quite far afield from what they do best. It might violate their recent deal with Apple Corps too. That said, if Apple could make it easier and cheaper for indie bands to put their music out without violating that deal, they’d probably make some money they aren’t currently getting. It might even help them sell more iPods (which is really the whole point of iTunes anyway).
Today’s news brings word that Daimler may be looking to break up with Chrysler. I find this particular merger interesting because it came up more than once in my MBA studies. While the problems we studied had more to do with integrating two different engineering cultures and technology platforms, the financial wisdom of such a merger was always what I questioned.
I have a strong anti-merger bias, having been on both sides of such mergers at each of my last three employers. I’ve written about them in this blog before. Thanks to this transcript of a PBS NewsHour segment, it’s possible to look back at the time when this merger was fresh and new.
I found it interesting to read how positively all the guests viewed the merger at the time. Not until almost the end of the segment do you find much skepticism about whether or not the merger will be successful.
There’s been quite bit of buzz in the press about the possibility of Aston-Martin (and possible Jaguar and Land Rover) being sold lately. It interests me not because an Aston-Martin has usually been what James Bond drives in the movies, but because of a negotiation assignment in business school. My final assignment was to lead a team of my classmates (we represented Ford) in negotiating the purchase Jaguar (another team of classmates). As it turned out, our negotiations failed (Ford and Jaguar stayed separate).
The negotiations failed because we I didn’t account for the interests of a few of the Jaguar execs who would be “redundant” in the new organizational structure (they wanted their golden parachutes). But a few of us, myself included, thought the numbers in the case study alone were a sufficient argument against Ford buying Jaguar. It’s been a couple of years since that class, but the recent sales talk feels a bit like vindication.
An interesting title for this story I read in the Times this morning. The acquisition of my current employer (Aspen Systems) by Lockheed-Martin falls right in the area the story discusses (acquisitions of $100 million or more). The buyout is scheduled to close shortly, so I expect to find out soon enough what Lockheed’s plans are for us.
The idea of M & A activity not always creating additional value has been around for awhile. I remember reading stories like this in magazines like The Economist five or six years ago in the middle of the Internet bubble. I’ve only been working full-time for nine years or so, but I’m sure questioning the value of mergers stretches back far before my time.
Since news of the buyout came to us, I’ve been wondering what Lockheed sees in Aspen that they want. Our annual revenue is a tiny fraction of Lockheed’s. As far as I can tell, the thing about Aspen that Lockheed most wanted was the subject-matter expertise. A lot of the civilian agencies we do work for have essentially outsourced certain government offices to Aspen so we can act on their behalf. So while we aren’t an outsourcing power like IBM or EDS, we do occupy a similar niche.
I think Aspen gets plenty out of being bought Lockheed. The first thing is deep pockets. Even more important than the deep pockets is superior processes. We just achieved CMMI level 2 last month, while parts of Lockheed have been at levels 3 through 5 for years. Only time will tell if we help push the LMT stock symbol up.
Last Friday, just before the end of the day, I found out that my current employer had been acquired. The buyer: Lockheed-Martin, the multi-billion dollar defense contractor and member of the Fortune 50. It’s the second time I’ve been part of a company that was acquired.
When I first heard the news, I thought back to previous employers. At Ciena, we were the buyer. I was there when they bought Catena Networks, Internet Photonics, WaveSmith, ONI Systems, and Akara. I worried less when we were the buyer because it usually meant that any “redundancies” would favor Ciena employees over the acquired company. Our managers and execs would always have meet with us to put the most positive spin on these moves. The acquisitions were revenue plays of course. When I left marchFIRST to join Ciena, it turned out that I had merely traded the Internet bubble implosion for the telecom bubble implosion. We merely delayed the inevitable layoffs a bit longer.
MarchFIRST (the former USWeb/CKS) was a different story. We got to be on both sides of the equation. While I was there, we acquired a strategy firm, and sold out Whittman-Hart. While it was spun as a “merger of equals” by the old CEO and the new one, it was as much a merger of equals as the DaimlerChrysler hookup (and even more of a failure, since not a shred of the combined firm exists anymore).
Since Aspen is so small (1700 employees to Lockheed’s 130,000+), I feel plenty of uncertainty as to what will happen next. Do they value Aspen as a single entity or will we be broken up? Is this acquisition simply a purchase of people and contract vehicles or something more? In the e-mail we got from our CEO, he said everyone would keep their jobs. But I have my doubts that we’ll keep two HR and accounting departments for any length of time. What happens after those duplicated positions go away is what I wonder about. I think it’s likely that after 3-6 months, the best technology people will be cherry-picked for other spots in Lockheed-Martin IT. I’m not sure what that means for me, but I feel better about sticking around to find out than I might have otherwise.