Someone had mentioned 'Compell' earlier today. The term must have come from this article in today's WSJ. Here are a couple excerpts. Don't know about Pepsi and Coke - 'Poke'???
John
If Exxon and Mobil Can Merge,
What Else Is on the Horizon?
Exxon and Mobil! Daimler-Benz and Chrysler! Where will it all end?
Just a few weeks ago, the prospect of a $75
billion merger of the nation's two biggest oil
companies would have struck many as
outlandishly improbable. Now, we seem to be
living in an era where no megadeal is too strange to contemplate.
So let's take look at some really sexy deals. In the spirit of rotisserie
baseball leagues that build imaginary teams out of real players, The Wall
Street Journal took a look at what some imaginary mergers would look
like on paper, and the hurdles they would face in the real world.
Intelsoft
The Fantasy Deal
They already get most of the profit from the personal-computer industry.
So why bother with two separate bank accounts?
And what bank accounts they are. Microsoft Corp., the software
colossus, had $17.8 billion in cash on Sept. 30. Intel Corp., king of chips,
had $8.7 billion.
Microsoft's hoard could grow even faster if it got another couple of
hundred dollars per PC -- the price Intel's chips frequently command.
Intel, in turn, could keep those prices higher if Microsoft tailored its
software to run better on Intel chips than on those of competitors.
Taxpayers might even benefit. Justice Department
antitrust lawyers, battling Microsoft, could join
forces with their Federal Trade Commission
counterparts investigating Intel, sharing costs of
executive depositions, photocopying and takeout
food.
Reality Check
First there's price. Intel's market capitalization is
some $191.7 billion -- less than Microsoft's $322.9
billion, but still a huge hurdle.
Almost as problematic are Intel's gross profit margins -- at 53% of sales,
the envy of most businesses, but a horrendous dilution for a software
company with gross margins above 90%.
Investors clearly prefer the Microsoft model, and wouldn't likely approve a
change. Microsoft's price-to-earnings ratio is 57; Intel's is 33.
"Bill Gates has said for many years that he thinks hardware is a commodity
and the real value in the computer industry is from software," notes
Michael Cusamano, a professor at the Sloan School of Management at
Massachusetts Institute of Technology. "I don't see why Gates would ever
want to take on the hardware business."
In short, Mr. Cusamano asks, why mess with a relationship that is making
both sides so much money in its current form?
Spokesmen for both companies, after they stopped chuckling, declined to
comment.
Don Clark
Pferck
The Fantasy Deal
Envision a one-stop medical shopping mall for middle-aged males.
"Merck-Pfizer: Fixing your head (Merck & Co.'s Propecia grows hair and
Pfizer Inc.'s Zoloft fights depression) and your heart (Merck's Zocor and
Pfizer's Norvasc treat heart disease), among other parts (Merck's Proscar
shrinks prostates while Pfizer's Viagra fights impotence).
The merger of these pharmaceutical Goliaths would produce a
supercompany with a market value of more than $330 billion at today's
stock prices. Together, Merck and Pfizer control about 10% of
drug-industry market share. And a union would boost each company's
ability to exploit current medical advances.
The companies' combined research into emerging
biomedical science would likely tackle the toughest,
most common diseases such as depression, arthritis,
cancer and heart disease. With a research budget
dwarfing all others, the drug giant's scientists would be
encouraged to take greater risks tapping into the
rocket-fast developments in genetics, cancer and
neuroscience.
Merck and Pfizer are each run by pragmatic chairmen
-- Merck's Raymond V. Gilmartin, 57 years old, and
Pfizer's William C. Steere, Jr., 62 -- who seem likely to
get along until one or both retire. And the management bench on both
sides is deep with strong successor candidates.
"Merck is the best innovator and Pfizer is the best marketer," says Hemant
Shah, an independent drug-industry analyst in Warren, N.J. "If something
like this happens, the stock of the combined company would rise 50%
easily. There are so many synergies, the combined company could be the
best at everything."
Reality Check
Each company is doing very well alone and doesn't have a compelling
reason to upset the status quo. There are some product overlaps -- each
sells a hot cholesterol-lowering drug, for example -- that might cause
antitrust regulators' hearts to palpitate.
Merck, about twice Pfizer's size in revenue and about a quarter bigger in
market value, would reasonably expect to dominate in a combined entity.
But Pfizer has the hotter product line and wouldn't be likely to accept a
subservient role. And while merging two huge research organizations
makes for some exciting scientific possibilities, managing such a behemoth
would be a nightmare.
Mr. Shah may be willing to fantasize about synergies, but he is also a
realist. When asked about the probability of a Merck-Pfizer merger
actually happening, he answers: zero.
Elyse Tanouye
Poke
The Fantasy Deal
Coca-Cola Co. now commands 50% of the world's soft-drink market.
PepsiCo Inc. has 21%. Put them together and what have you got? Poke --
and almost three-quarters of the world's soft-drink sales.
A Coke-Pepsi combination would send shivers down Madison Avenue,
not to mention everyone else who makes a living feeding off the cola wars.
Coke and Pepsi, which also owns Frito-Lay, together spend $3.4 billion in
advertising and billions more in other marketing expenses. Who needs to
advertise when there's no competition?
"A revolting prospect," says John Sicher, publisher of Beverage Digest, an
industry publication that reports the twists and turns of the cola wars. "Two
fierce competitors would become one giant sloth -- and I'd probably go
out of business."
Thanks to its giant Frito-Lay business,
PepsiCo is larger than Coke -- $21
billion in revenue, compared with Coke's
$19 billion. But for Wall Street, Coke is
it, with a market value of $174 billion,
against PepsiCo's $60 billion.
Another impetus to unite: Coke managers
who shun Frito-Lay products as a matter
of pride would be able to start munching
on Doritos, Ruffles, Lay's, Cheetos and a
host of other salty snacks. Says a Coke
spokesman of Pepsi: "They do have an excellent snack-food business."
Coke, incidentally, missed its chance to buy Frito-Lay in the 1960s.
Reality Check
There may be no merger on earth less likely than a Coke-Pepsi deal.
"Hillary Clinton adopting Monica Lewinsky is a more likely scenario," says
Mr. Sicher.
Aside from the animosity the two armies have for each other, the deal
would be laughed out of Washington. "Your only hope for getting that one
through would be to argue that everything but contaminated D.C. tap
water and river streams were part of the market," says William Baer, head
of the Federal Trade Commission's Bureau of Competition.
Also, the two CEOs would first have to talk to each other. Coke's M.
Douglas Ivester and Pepsi's Roger Enrico may both be veteran cola
warriors, but they don't exactly fraternize. They bumped into each other
for the first time ever -- in Shanghai, China -- a few weeks ago.
There are big logistical hurdles as well. Coke and Pepsi bottlers are
independent businesses that have franchise contracts that last "in
perpetuity." That means a Pepsi bottler has a contract to bottle and
distribute Pepsi and another company in the same area bottles Coke. So
even if Coca-Cola and PepsiCo merged, they couldn't force their bottlers
to merge, so any deal would be moot.
And there's little doubt that Coke and Pepsi thrive on the competition.
Roberto Goizueta, Coke's late chairman, often used to remark that if Pepsi
didn't exist, he'd have had to create it.
COMPELL
The Fantasy Deal
This merger would combine the services and breadth of Compaq
Computer Corp. with Dell Computer Corp.'s ultralean manufacturing and
create a Texas-based and Texas-size computer company accounting for
28% of all U.S. PC sales and 22% of world-wide sales. That's better than
twice the share of the nearest rival. Combined revenue this year would be
nearly $50 billion, and the stock-market value would be $140 billion. And
putting Dell's 34-year-old chief executive, Michael S. Dell, atop the
combined companies would solve the knotty issue of succession for
Compaq's board.
Reality Check
The two computer makers are longstanding, acrimonious rivals. "There's
too much bad blood between these two companies," says Piper Jaffray
Inc. analyst Ashok Kumar. Mr. Kumar also says PC makers are
increasingly asked to provide more services -- an area where econom |
