November 2006 Archive
Thanks to its aggressive acquisition strategy, Marvell Technology Group is getting a lot more scrutiny these days, and that’s not necessarily a good thing for this previously obscure firm.
The fabless semiconductor company may be one of the biggest chip vendors that you’ve never heard of. It posted sales of $1.67B in fiscal 2006. With the billion-dollar buying binge Marvell has been on for the past year, fiscal 2007 should see the company comfortably ensconced in the Multi-Gigabuck Club for chip makers. (I wish I could say I was not only a member of that club, but the president – alas.)
To review briefly: Marvell just wrapped up its $600M purchase of Intel’s processor line for mobile devices. Intel had the option of being paid with $500M in cash and $100M in Marvell’s stock; in the end, the world’s biggest chip maker said “I’ll take it all in Benjamins, please.” Marvell previously acquired the printer chip business of Avago Technologies for $240M and the drive controller chip business of QLogic for $228M, among other, smaller deals.
Marvell has built a small empire of semiconductors that can be found in those darn BlackBerrys, Xbox 360 game consoles, Cisco switches, the Sony PSP, Nokia mobile phones, and other electronic products. Sounds good, right? Wrong! The company has stumbled its way through this year, reporting lower-than-expected sales, issuing profit warnings, finding trouble with its past practices in granting stock options and having to restate six years of financial statements, and attracting shareholder derivative lawsuits. And there was this unflattering article on Forbes.com. Ouch!
When it’s all done, this Marvell may wish it was in the comics business, where superheroes overcome villains and everyone makes a lot of money from the movie rights. Marvell’s example once more proves the verity of that classic adage: Be careful what you wish for.
Novartis, hardly the stodgiest member of the Big Pharma pack, has made good on promises to expand its research and development business in China. Last week the company announced plans to build a $100 million biomedical research center in Shanghai’s Zhangjiang Hi-Tech Park that will employ some 400 research scientists. (The company and its predecessors have operated dye, chemical, and pharmaceutical factories in China since 1938.)
Novartis joins fellow multinational drug companies Novo Nordisk, Roche, Eli Lilly, Pfizer, and AstraZeneca — all of which either have research facilities in China or have announced plans to invest in operations there.
Lax Chinese patent laws have understandably kept Big Pharma from making any big plays in what could be one of the world’s largest drug markets. However, the quality and the relative bargain-basement price of the country’s scientific talent apparently have finally tipped the scales. Additionally, though many Chinese still utilize traditional homeopathic remedies, Novartis sees an increased need for products specifically aimed at the country’s health care needs. According to Novartis CEO Dr. Daniel Vasella, research at the Shanghai facility will “combine modern drug discovery approaches with those of traditional Chinese medicine that have been used to treat patients in China for thousands of years.” These include the study of the infectious causes of cancer, such as the link between Hepatits B and liver cancer. Other research will focus on developing mechanism-based therapies (a tactic that attempts to identify how drugs work in order to streamline the R&D process) with Chinese universities and research centers.
Novartis’ revenues in China slipped about 5% last year, so it’s easy to understand why the company is looking to find new and innovative ways to make money in that market. The company claims the move into China won’t initially be a cost-saving effort. Most of the leading scientists staffing the facility will come from Novartis’ existing team of Chinese expats (including Dr. En Li, formerly based at the company’s Boston facility), in order to train native scientists in the finer points of working for a multinational corporation.
However, the Wall Street Journal points out that the salary of a Chinese scientist working in Shanghai is about $25,000 per year, as compared to the $250,000 salaries pulled down by research chemists in the US. (registration required)
If this investment pays off for Novartis, industry analysts predict that China could become “the next India” for outsourced pharmaceutical research and development.
Cue the bass and bring in the horns: It’s the Return of the Pink Panther. After six years in Chapter 11, Owens Corning is back. The building materials company, best-known for its PINK FIBERGLAS® insulation and iconic brand image was brought low by asbestos lawsuits; it declared bankruptcy in 2000. (Aside: What other company has a wily swinging ’60s mascot with a theme song and a Saturday morning cartoon? Owens Corning had to make a comeback.)
Per the reorganization plan, the company has established a $9 billion trust for victims, which gives it additional protection against lawsuits as well as a few advantageous tax breaks.
So it’s all good, right? Well, in business, as in comedy, timing is everything. Like the impeccable Peter Sellers as Clouseau, Owens Corning could not have picked a worse time to come back. The housing market has tanked and the major home builders are suffering as they struggle to sell their existing inventory, while facing vastly decreased demand brought on by a rise in interest rates and some conflicting economic indicators.
It’s not just Owens Corning: Rival building materials manufacturer USG, which came out of an asbestos-related bankruptcy after a five-year sojourn, is facing the same tough market.
Still, there are bright spots on the horizon for Owens Corning. For one thing there was surprisingly little opposition to its reorganization plan, which had to be okayed by asbestos-victim claimants. Even bondholders, who had been cranky about previous plans, were mostly okay with it. This bodes well for smooth sailing here on out.
The company has also been busy during the past six years, steadily expanding sales in markets outside the housing sector, which is still its biggest segment. It has a joint venture with French glassmaker Saint-Gobain and is buying another French company, stone veneer manufacturer The Modulo/ParMur Group. So long as they don’t let Clouseau in the glass factory everything should be okay.
So strike up the theme song and exit humming — The Pink Panther’s back and he’s pinker than ever.
Election season is finally over. Newspapers, whose headlines heralded the Democratic takeover of both the US House and Senate, are already kindling in fireplaces across the country. The majority of the newbies in the House are stepping up to the fed level after working for state and local governments or agencies. But others are influential private business executives who will be getting their first taste of government work in January. They include:
Tim Mahoney (D-Florida) is founder, chairman, and COO of Florida-based venture capital firm vFinance Inc. Mahoney, who took the seat of disgraced Congressman Mark Foley, is a proponent of publishing the minutes of meetings between lobbyists and lawmakers on the Internet. He also favors investing in the Canadian oil and natural gas industry – not in drilling off the coast of Florida.
Vern Buchanan (R-Florida) serves as chairman and president of Buchanan Automotive. A self-made millionaire and small business advocate, Buchanan opposes stem cell research, abortion, and gay marriage. He favors increasing intelligence and counterterrorism programs.
John Yarmuth (D-Kentucky) served as an executive in the U of L’s university relations office during the early ’80s before taking a position with home health provider Almost Family, Inc. During the ’90s, Yarmuth founded LEO Weekly (purchased by Times Publishing in 2003) and was a regular columnist until launching his campaign. Yarmuth favors troop withdrawal from Iraq and improving health insurance coverage.
Jason Altmire (D-Pennsylvania) resigned as VP Government Relations and Community Health at the University of Pittsburgh Medical Center’s to run his 2006 campaign. Altmire favors national health care reform and the development of alternative energy resources. He’s against privatization of Social Security.
Gabrielle Giffords (D-Arizona) worked for Pricewaterhouse Coopers in the ’90s before taking over her family’s tire company, El Campo Tire. In 2000 she formed Giffords Capital Management. Giffords favors full inspections of all international cargo, immigration reform, and border security. She also want to focus on tracking al-Qaida and bringing US troops home from Iraq.
Jerry McNerney (D-California), an authority on wind turbine systems, was a contractor for Sandia National Laboratories in the early ’80s. A decade later, he served as an energy consultant for PG&E, FloWind, and Electric Power Research Institute. McNerney favors banning gifts from lobbyists, increasing fuel efficiency in new vehicles, and developing alternative energy sources. He also is pushing for health care reform and withdrawing troops from Iraq.
Freshly plucked from the legal profession are new Reps Kirsten Gillibrand (D-New York) of Boies, Schiller & Flexner; Patrick Murphy (D-Pennsylvania) of Cozen O’Connor; John Sarbanes (D-Maryland) of Venable; and Keith Ellison (D-Minnesota) of Lindquist & Vennum.
Late last month, buried in an announcement from NBC Universal that the company would be laying off 700 workers across its television operations and shifting resources to online content, was this juicy nugget: NBC would be abandoning scripted entertainment in the first hour of primetime in favor of game shows and reality programming.
The announcement from programming head Jeff Zucker was greeted with a collective, “Whuh..?” from both journalists and the industry, and with good reason. This is a questionable business decision, and it does little to reverse the ratings slide that NBC has taken (from first to fourth) since Friends left the air. Plus, it seems unlikely to help NBC Universal’s bottom line. In addition to the job cuts and programming changes, the company is cutting $750 million in expenses. So let’s see, NBC Universal would have us believe that those meager moves will help plug the holes of a $14 billion a year corporation? Riiiiiiiiight.
Since it doesn’t make much fiscal sense, let’s look at the programming ramifications. Sure, game and reality shows are cheap to produce and when they hit big, as has been the case for NBC with Deal or No Deal, they are boons to the networks. But to completely turn over your first hour of primetime, the critical slot when you pull in all the eyeballs and set the tone for the rest of the night, to copycat game shows? NBC’s problem isn’t production costs, it’s ratings. The network’s been virtually unable to find any breakout hits (this season’s fantastic Heroes being the one exception, but its primary appeal to fan boy geeks like me keeps it from being bigger), and thus has no platform to promote other shows. NBC’s never going to find their behemoth on par with Grey’s Anatomy or Desperate Housewives by banking on Howie Mandel and the world’s most unfunny man, Bob Saget, host of Deal companion 1 vs. 100. Advertisers won’t throw money into that pit for very long, especially when the next big scripted show pops up on another network.
NBC’s new strategy also ignores the lessons of oversaturation that it should have learned from rival ABC, as well as its own recent programming moves. ABC also once had a hit game show, a little program called Who Wants to Be a Millionaire. It exploded in popularity, prompting ABC to air it four…nights…a…week. Viewers quickly lost interest and ABC spent the better part of the next five years trying desperately to make a comeback. NBC only has to look at The Apprentice for further warning signs. Remember Donald Trump’s sad horror show? NBC loved it so much that it plopped it into a plum Thursday night slot, TV’s most competitive night, where it promptly died as bored viewers tuned to CSI on CBS. I can relate. I’d rather watch gorey reenactments of bullets ripping through flesh than Trump’s comb-over ripping through good fashion sense any day.
What’s hilarious is that I don’t even think NBC itself is sold on its plan. My Name Is Earl and The Office already air in the early timeslot on Thursdays, and Zucker said they have no plans to move the shows. And do you really think if NBC found that elusive hit and they were convinced it would perform best in the early hour that they wouldn’t drop Howie in a heartbeat?
Don’t believe me? Well, then let’s make our way to the model with the suitcase and make a deal.