has anyone seen this
By The-Adviser.com - Monday, 3/15/99 originally released on 2/15 updated 3/7 & 3/15
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New York - One of the benefits of being independent is that we are not
subject to those investment banking confidentiality agreements. The story
was broken by The-Adviser.com although we understand that Merrill
Lynch has apparently prepared a brief report that is now being circulated.
Channel reaction with IBM went so well and so smooth - we understand
that both parties are now considering an acquisition/merger/alliance. IBM
is a service company that needs revenue growth. Dell is simply the best PC
manufacturing company and has growth. The parties see synergies,
opportunities and apparently are getting along.
Although we continue to research additional facts and obtain confirmation
on several issues, we feel safe to say that the below business issues have
been sorted out.
The PC business would operate as a stand-alone business. The IBM
manufacturing and marketing groups would be under the umbrella of
the "OldCo" Dell. Exact structure has not yet been defined.
Michael Dell would report directly to Lou Gerstner and be
responsible for all PC business and marketing. He would also be
named as successor to Lou who will continue his current contract.
The channel would be allowed to continue to assemble IBM
machines, although over time - the preferred method would be to
allow the channel to order directly from Dell. Dell would continue to
sell direct to customers.
Although there is some questions and continued debate, current
"agreed upon" name would remain IBM but Dell would be the PC
brand. This would be similiar to the Lotus deal. There is some
concern about dropping the IBM name off the PC.
Major financial issues such as terms, price and structure continue to be
difficult and could prevent the deal from happening. Recent weakness in
Dell has not helped. IBM currently has a market capitalization of $165
billion as compared to Dell's market capitalization which currently is $107.
However, as both sides seem eager to make it work, we will continue to
watch and report. Long term and regardless of the deal, we like both
companies.
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Original Report - March 7, 1999 -New York - This week, we have
changed our investment recommendation on Dell to a Long-Term Buy.
Previously, we recommended that investors short Dell at $89. Although the
stock hit the "high 70's", it reached our short protection number of $85. A
nice $4 profit in two weeks. Let's focus attention on some big news.
We understand that at the last minute, IBM brass nixed a deal that
provided for Dell to begin manufacturing IBM branded PC machines.
Our analysts, who are not affiliated with any investment bank, increasingly
believe that this large announcement from IBM and Dell is forthcoming.
This stunning deal, was apparently nixed over tremendous political
infighting within IBM. Our understanding is that a large block of IBM
management was overly concerned over the potential channel impact of
such a deal. We understand that IBM has decided to wait to judge vendor
and channel reaction to last week's deal whereby Dell is to buy
approximately $17 billion of IBM computer technology.
The deal is bad news for NCR which had announced some service
agreements. Some analysts believed that Dell would purchase the ailing and
remaining large computer services group of NCR.
We are working to confirm additional details. At this time, we are unable to
obtain any official comment from IBM or Dell management.
The preceding report was first delivered to subscribers of The-Adviser.com
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Adviser Corporation.
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IBM + Dell?
Discussions apparently
continue.
Vendors like the deal
and with Dell needing a
large service force, why
not partner with IBM.
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