General Instrument Corp.'98 (GIC) Message Board

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Technology Stocks : General Instrument Corp.'98 (GIC)

GIC 30.87

-0.1%

Jan 9 9:30 AM EST

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To: Daniel Fisher who wrote (196)	3/29/1998 10:55:00 AM
From: kech	Read Replies (2) of 615

Daniel- It may be pocket change to Sony but what does Sony get from buying that they don't get from the alliance? Besides, there is not a great history of Sony buying into U.S. companies and managing them successfully. Didn't they buy one of the movie studies to fuel their vision of convergence of hardware and software and hasn't it been an anchor around their necks? Besides, if the capital flows are going anywhere now it is more in the direction of U.S. companies buying cheaper asian companies to bail out the capital problems there than Asian companies buying U.S. companies. The exchange rate is no longer a wind at their back. Besides it isn't really pocket change to GIC. At $50 per box this is a substantial cost reduction on a $300 box - about 17%. That is $750 million when multiplied by the current orders of 15 million boxes. In addition, this could just be the beginning of other similar deals as the article indicates. But more importantly, it seems that GIC has a very close relationship with TCI. How would TCI react to Sony buying GIC? I get the feeling that TCI likes the position they have now where they can be the dog wagging GIC (the tail). Would they have this much control over GIC? Would they continue to throw 15 million set-top box contracts to Sony? You saw how they maneuvered to keep Gates and Microsoft out of the picture. Why would Malone trade Sony for Gates. Out of the pot and into the fire? There are two sides to any exchange. TCI and GIC wanted Sony's brand, distribution, etc. In return, Sony gives them high priced equity which is essentially capital which allows GIC to make investments. In other words they are helping to finance the investment in set-top boxes - in addition they are providing other capabilities. If they weren't involved in the financing, why buy 5% at 25? They could have bought it at market for much less. In other words, they are getting something from TCI and TCI is charging an above market price for the stock. It seems like they are helping the financing to me. Don't get me wrong - I wouldn't mind of Sony bought the whole thing - I would hope for more like 30 or 35 though. I just don't see why Sony wants to get into the cable infrastructure business to sell their appliances - they don't have to do it. GIC is using their capabilities already.

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